Jenee Tibshraeny: NZ Herald Wellington business editor on thousands of clubs, societies, trade associations and industry councils facing a significant tax bill

New reports indicate over 9000 clubs, societies, trade associations and industry councils could be looking at a significant tax bill.

Inland Revenue has changed the way it interprets a law - and they're keen to crack down on businesses they believe are 'masquerading' as charities to reduce their taxes.

NZ Herald Wellington business editor Jenee Tibshraeny explains what this law change could mean going forward.

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Episode Transcript

Speaker 1 (00:00):
Bryan Bridge.

Speaker 2 (00:01):
Your news Talk to Big Time is seventeen after six.
Around nine thousand clubs, societies, trade associations and industry councils
are in line to possibly be slapped with a tax bill.
Inland Revenue has changed the way it interprets the law
and they're keen to crack down on businesses they think
are masquerading as charities in order to reduce their tax bills.

(00:22):
Jane Tips Trainey is The Herald's Wellington Business editor. She's
with me tonight. Hey, Jana, Hey, Ryan. What are these
changes going to look like for these clubs and associations? Potentially, yes,
So look.

Speaker 1 (00:34):
At the moment, if you're a sports club or any
sort of member society, there are special exemptions which means
you don't need to pay tax, for example, on the
subscriptions that you receive from your members. But Inland Revenue
has been looking to change this. So it actually it
releases guidance that say this is how you interpret the law,

(00:57):
but it's updating that guidance to say, actually a bunch
of these club societies are going to have to pay tax.
So Inland Revenue is doing that, you know, on one side,
but then on the other side, you have the governments
which has come in and said we want to crack
down on charities and make sure that, as you said before,
businesses that are actually masquerading as charities, we want to

(01:19):
make sure they are paying tax. So you've got two
separate things ID doing it's thing, government wanting to achieve
something else. And what is happening now is that the
IID is saying, actually, we'd still like to change the
way we treat clubs and societies, but we're going to
put this work on hold while we wait for the
government to sort out what it does with charities just

(01:41):
more broadly. So it's kind of a messy situation. What
it basically does is create quite a bit of uncertainty
for these nine thousand club societies, trade associations, professional and
regulatory bodies, industry councils, and so on, because on the
one hand you have IOD wanting to tax them, but
then IRD saying we'll put this work on hold and

(02:03):
wait for this broader charities thing that the government's doing
to iron itself out.

Speaker 2 (02:08):
Goodness may it sounds like a bit of a rollercoaster
for these poor organizations. How much of a burden will
the you know, an admin burden of potentially doing tax
be for these organizations.

Speaker 1 (02:18):
Well, I think it'll be quite a bit. I spoke
to the independent tax specialist Jeff Nightingale earlier today and
he said, you know, some of these clubs and things,
they don't really have a lot of profit, so that
the tax burden might not be that big. The issue
is going to be the compliance, in Jeff Nightingale's view,
so he thought that actually, ID probably wouldn't push on

(02:41):
with this, but you know, we're going to have to
to wait and see. Now, we'll probably find out at
some point after the budget, which is on May twenty two.
That's when the government will release what it's going to
do with charities, and after that point, the assumption is
that we'll we'll find out a bit more what's in

(03:02):
store for these clubs and societies. I mean, nine thousand
of them is a lot, and I suspect a bunch
of them probably don't even know that Inland Revenue is
thinking about changing their tax treatment because actually it's sort
of buried this little detail in a long consultation document
it released earlier this week. So bit of uncertainty there,

(03:24):
but I think Ultimately, the idea that the government has
to relook at the way all these things attaxes is
probably a positive thing and should bring us more in
line with what other countries do.

Speaker 2 (03:37):
Right, And so just to clarify, so this is not
this particular part that IOD has been looking at, is
not part of the pushback against Destiny Church. This is
a separate issue they've been looking at separately.

Speaker 1 (03:48):
Yeah, it is a separate issue. I mean it's related.
So IOD was doing this work and it's putting this
work kind of on hold while we figure out what
we're doing with charities more oddly, because you know, these
rules are pretty complicated and they interlink. But it is
just interesting that iod's position is actually that these clubs

(04:09):
and things need to be taxed.

Speaker 2 (04:11):
Yeah, it is interesting, but I mean give them an inch,
they'll take a mile. That text everything if they could.
Thank you so much for that donation of training with
us the Zeland Herold Wellington Business Editor. For more from
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