Inland Revenue looks at ‘donation’ payments made to a handful of private schools

Inland Revenue has issued a Revenue Alert regarding payments being made to a small number of private schools and private childcare centres. The payments are being re-characterised as donations to charitable trusts, enabling people to make false claims for donations tax credits.

This issue applies to a very small number of private schools and private early childhood care/education facilities, Inland Revenue Group Tax Counsel, Graham Tubb said today.

“This is not about donations paid to state or integrated schools,” he said.
“The large majority of people and organisations do the right thing in regard to making donations and claiming tax credits.

“But Inland Revenue is aware of cases where fees paid to private education centres or the charitable trust that owns them, are being characterised incorrectly as donations or gifts.

“A payment of five dollars or more to a charity qualifies for a donation tax credit, but it must be made voluntarily, benefit the particular charity, and provide no material benefit in return.

“The Commissioner’s view of the arrangements identified so far is that such payments are not a gift or a donation. They are a fee that parents or caregivers pay for receiving education or childcare services and the centres often rely on these fees to meet their business costs.”

Mr Tubb said the payments are incorrectly described as donations in order to allow those paying them to claim a donations tax rebate to which they may not be entitled.

Another outcome of such an arrangement is that the educational centre does not return the GST on the fees.

“It is important that both parties involved in these arrangements understand the rules and that Inland Revenue will take action in cases where they have been broken.

“If a taxpayer has claimed donations tax credit, or taken a position which is incorrect for GST then that position should be corrected. Our message is that we encourage our customers to talk to us or their tax advisor if they are unsure of the rules or make a voluntary disclosure if required. We have set up an email address -RevAlertEducationCentres@ird.govt.nz – for people to ask for donations tax credit claims to be changed so they can repay any over-claimed tax credits or for the education centres to make voluntary disclosures regarding any unpaid GST. ”

The Revenue Alert is online at http://www.ird.govt.nz/technical-tax/revenue-alerts/revenue-alert-ra1401.html

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