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Tax rebates for donations to schools may be tightened because of concerns that some ‘‘donations’’ may actually be fees for services.
The Inland Revenue Department has confirmed it is preparing new guidelines for schools after changes last year which stopped private schools describing some of their fees as ‘‘donations’’.
‘‘Inland Revenue is aiming to provide more clarity in this area and is currently considering in what circumstances payments made to state and state-integrated schools will attract a donation tax credit,’’ a spokesman said.
‘‘However, we are not currently in a position to put out a draft consultation document.’’
All genuine donations to schools and state kindergartens qualify for a 33.33% rebate ‘‘as long as they go to the general fund and you have a receipt with the word ‘donation’ written on it’’.
The rebate is not allowed for fees for schools, tuition, tertiary education or private early childhood education because they are purchases of services rather than ‘‘donations’’.
Charity lawyer Sue Barker said last week some private schools were running a ‘‘rort’’ by describing fees as ‘‘donations’’ until the rules were tightened last year.
The new rules say, for example, that ‘‘a payment that places the recipient under an obligation to do or provide something in return for the payment is not a gift’’.
The department said several submissions on last year’s guidelines ‘‘requested specific guidance on how the principles set out applied in the context of schools’’.
Rebates claimed for donations to schools have declined steadily in the past five years, from 88,000 rebates in the year to March 2012 to 74,000 in the year to March last year, probably because most parents pay tax out of their wages and do not have to file annual tax returns.
There were 787,960 pupils in New Zealand schools last year, so the vast majority of parents were not claiming the tax rebate for donations even though they were entitled to it.
However, the amount of the rebate has been stable over the past five years at about $22 million a year, so parents are claiming rebates on donations totalling $66 million.
The Ministry of Education has said that donations to schools totalled $124.9 million in 2015.
The new Labour-led government has promised to abolish ‘‘donations’’ for all schools which accept a state grant of $150 per pupil per year.
The estimated cost of $70 million a year is based on schools with 60% of all 787,960 pupils taking up the offer.
Other schools raise more than $150 per pupil per year from parental ‘‘donations’’ and are expected to keep collecting them.