Big charities will have to be more transparent about their funding, after a government review recommended changes to the law.

Photo: RNZ / Samuel Rillstone

The changes will require charities, which are not required to pay tax, to account for any large sums of money, assets and other resources accumulated if they have operating expenses above 140,000 $.

Administrative burdens for small charities will also be reduced and it will be easier for charities to appeal decisions.

The Charities Services, which administers the sector, and the Charities Registration Board, which makes decisions about registration, will also have increased powers.

Community and Voluntary Sector Minister Priyanca Radhakrishnan announced the changes this morning, saying New Zealand’s approximately 28,000 registered charities have made a great contribution to New Zealand, but legislation needed to be adapted to his goal.

It follows an Internal Affairs (DIA) review, ordered by the government in 2018 following Destiny Church’s deregistration as a charity.

The church had not produced financial reports for two years and had ignored several warnings from the Charities Registration Board, which went so far as to say delisting was in the public interest.

The council’s failure to punish uncooperative charities prompted the new Labor-led government to order a review of the Charities Act, but the scrapping of the tax exemption for charities did not was not considered, despite public requests.

Radhakrishnan said the past two years of the Covid-19 pandemic had highlighted the important role played by charities. The changes would improve transparency and build trust, she said.

“Many of New Zealand’s largest charities have accumulated large unexplained funds. It is important that they are transparent about why they are holding onto a large amount of funds, including donations.”

Very small charities could also obtain a financial reporting exemption.

“This will free up resources for volunteers to spend more time focusing on communities and doing the mahi they are passionate about.”

Charities would also find it easier to appeal decisions affecting them, with responsibility shifting from the High Court to an expanded Tax Review Authority. Some $1.7 million has been set aside in this year’s budget for this purpose.

Charities could represent themselves before the Authority, which would reduce the costs of filing these appeals, which would also have longer submission times.

“It’s important that our system doesn’t just work for those who have the resources to navigate it. The same service and access must be available to everyone.”

Proposed Amendments to the Act:

  • Charity requirements – maintaining a charitable purpose, having a rules document and having qualified officers – will be made explicit.
  • Large charities (with operating expenses greater than $140,000) will be required to report the reasons for accumulated funds. This requirement will be included in an updated annual declaration form designed in consultation with the industry and iwi.
  • Very small charities can obtain financial reporting exemptions through Charities Services. The threshold for this remains to be developed.
  • The number of members of the Charities Registration Board will be increased from three to five.
  • The board will now have the power to disqualify an officer for “serious wrongdoing” or for significant or persistent failure to perform their duties, without having to deregister the charity. Part of the definition of “serious wrongdoing” will be clarified, replacing a reference to an offense with “an offense punishable by imprisonment for two years or more”.
  • The Commission will be required to publish decisions regarding the refusal of an application for registration and the deregistration of a charity. Council and Charities Services will also publish information on decision-making policies and procedures, and Council and Charities Service major decisions will have a clear process for charities to raise objections.
  • Significant decisions of Charities Services and existing decisions of the Board of Trustees may be appealed. Appeals under the Act will now be taken to the Tax Review Authority, before being taken to the High Court.
  • Charities Services will be required to consult with the sector when developing important guidance documents.
  • Deadlines for submitting objections, administrative information and appeals will be extended from 20 working days to two months
  • DIA will review Charities Services performance measures and operational practices

Radhakrishnan said an amendment bill was to be introduced this year, with consultation through the select committee process, and that this would be followed by a process to consider more fundamental concerns raised by the review.

Destiny Church’s deregistration was stalled in court for years, during which it continued to pay no tax, and it regained its tax-exempt status in 2019.

However, several of its guns were written off again after failing to meet the requirements. A petition last year also called for the church to be deregistered after leader Brian Tamaki staged several protests against Covid-19 lockdowns, which the petitioners said promoted “unfair views.” charitable”.