Around 9000 clubs, societies, trade associations, professional and regulatory bodies and industry councils are in line to possibly be slapped with a tax bill.
Inland Revenue has changed its interpretation of the law, and now believes the subscriptions and levies members pay to some not-for-profit organisations should be taxed.
Independent tax expert Geof Nightingale joined the Afternoons team to explain further.
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Speaker 1 (00:09):
You're listening to a podcast from News Talks B follow
this and our wide range of podcasts now on iHeartRadio
and land.
Speaker 2 (00:17):
Revenue is setting at sites on taxing nine thousand club
societies and other not for profits under changes that could
be implemented. To chat about this further, we're joined by
independent tax specialists Jeff Nightingale, who's on the line now. Cheff,
very good afternoon to you.
Speaker 3 (00:34):
Good afternoon.
Speaker 4 (00:36):
Hey, So Jeff, how does tax on clubs and societies
currently work?
Speaker 3 (00:41):
Yes, so, at the moment they have one thousand dollars
tax free threshold for interest income from investments and things.
But all of their transactions with their members, subscriptions in
any trading amongst the members that they generally have been
seen to be not taxable tax free because they are
mutual transactions. They're not about making a profit, but just
(01:03):
about sharing the costs around around the members. And it's
that that ideas suggesting might have to change.
Speaker 4 (01:12):
So we're talking subs at a bowling club, for example.
Speaker 3 (01:17):
Yeah, probably not a bowling club. So there is a
specific exemption for pure sporting amateur sporting bodies. We're talking
maybe subs at a bridge club. We're talking contributions to
your local residents association, body, corporate, you know, a myriad
of you know, non profit making mutual associations where people
(01:41):
organize themselves together and share the costs.
Speaker 4 (01:43):
Right, so you could say, like on the most sort
of lowest level of it, even though they are a
great time, especially when they're up in a nightclub. But
say you're running a book club with your friends, and
you will put some money into the book club. The
ID thinks it should take some of that.
Speaker 3 (01:58):
Well, yes, but a bit more confidence in that. What's
happened is that they have they've reached an interpretation internally
that changes their view of the law, and that changes
the view from those subscriptions or levees were non taxable,
and now they're saying it's possible that they're taxable, and
so now they're consulting on that before they change their view. Formally,
(02:21):
they're saying, hey, what does everyone think about this? And
I think the answer is we don't like change and
we want to stay the status quiet. I mean, I think,
to be fair, the subtext is they are collecting evidence
to go back to the Ministry of Revenue and say
we don't want to make this change. Here's a whole
bunch of reasons on our consultation, So let's tweak the
(02:43):
law so we don't have to make this change. I
think that's what's happening.
Speaker 4 (02:46):
And is this looking at churches and businesses like sanitarium
for example, Is this under this whole scope of this investigation.
Speaker 3 (02:56):
Yes, that's right. So we were expecting a discussion document
on the taxation of charitable businesses and that's the sanitariums
and others of this world tacked onto that was a
chapter dealing with this not for profit. So that bit
caught us by surprise. So we were expecting the government
to do some work on whether they should tax the
(03:18):
business operations of charities.
Speaker 2 (03:22):
The unintended consequences of changes to text legislation, and it
worries me when they are, you know, they change their
interpretation of the law. For most people, you'd think the
law is the law and interpretation shouldn't come into it.
Is that just the complexity when there are changes to
these particular tax laws.
Speaker 3 (03:42):
Yeah, you're absolutely right. Certainty of tax law is an
important thing and changes are very unsettling and to be avoided.
Sometimes it's unavoidable, and you know, I've advised many clubs
and associations over the years, and we've always dealt with
it in the way that IOD accepted, and so this
(04:03):
change is a surprise and creates uncertainty. I think IOD
in their own way attempting to cure it, but at
the moment we are left with uncertainty if you are
the treasurer of a club or a little association.
Speaker 4 (04:20):
So just to make this clear, because I'm a little
bit confused on that. So they're planning to target around
nine thousand clubs. What's the difference between a club, a
society and a trade association.
Speaker 3 (04:30):
Well, they might be formed under different laws like incorporated
societies or not. They might just be unincorporated. The unifying
factors they are not about making a profit. So if
you think of the Bridge Club, the Bridge Club is
about helping people play bridge. If you think about the
(04:51):
Residents Association, it's act as a voice for the residents.
So they're not about making profits, and they share their
costs amongst the members. That's how they operate. And so
that's the nine thousand and some of these very big
So if you think about a trade union, that's an
association that's not about MA a profit. It's about as
members and some of the professional association's trade associations could
(05:16):
be caught up in all of this. So this is
a big issue. It has up to now been a
very settled area of tax law, and they've kind of
thrown the cat amongst the pigeons. But I think the
purpose of the discussion document is to try and find
good reasons to fix the problems.
Speaker 4 (05:33):
We're talking to independent tax specialists. Jeff Nightingale, So you
said before that there's different provisions for a sports club,
and you see it might be different from a sports
club as opposed to a bridge club. Is that correct?
Speaker 3 (05:47):
Yes, yes, So there is a specific tax exemption for
the promotion of amateur sport and that's been there for
years and there's no suggestion that that's going to change.
That's not being mentioned. So that should take out all
of the sports clubs that the pure sports clubs. You
(06:08):
do get into definitional the challenges. What's the sport and
what I'm going to.
Speaker 4 (06:13):
Say so because because someone might say bridge, you know,
is kind of a sport. Is chess considered a sport?
Speaker 2 (06:20):
Bingo? That's on the.
Speaker 3 (06:21):
Line exactly, Yeah, walking bingo yeah.
Speaker 4 (06:25):
Yeah, well, I mean, well, I've got kids that try
and claim that Fortnite is a sport.
Speaker 2 (06:32):
Jeff, thank you very much for having just.
Speaker 1 (06:35):
Before we go.
Speaker 4 (06:36):
Do you think that seriously in this in this look
that things like, I guess, musical clubs, you know, pastime clubs,
motor clubs, I'm just pulling clubs out of my oment court.
That would that would be that would seem terrible to me,
because because in my opinion that clubs. We need more clubs,
We need more people in the community getting out and
getting together. And I feel very sorry. I see club houses,
(06:58):
I see people trying to organize these things, and there's
a lot of stress on these people. Everyone's really really busy,
and they're trying to put these things together that are
good for the community, and I would just hate to
see another level of admin or another level of difficulty
put on these people to the point where they just
throw up the hands in the air and go, I
can't be bother doing this anymore.
Speaker 3 (07:18):
I completely agree, but I also suspect that I do
agree with you, and they're trying to get enough feedback
to go back to the Minister of Revenue and say, hey,
this isn't a good idea to make this change?
Speaker 4 (07:30):
Okay, so this is my feedback. It's not a good idea.
There's a feedback. Write your submission, yeah yeah, and look,
you can have your feedback on this on eight hundred
eighty ten eighty and nine two nine two, and also
write a submission. Hey, thank you so much. That was
independent tax specialist Jeff Nightingale.
Speaker 1 (07:49):
For more from News Talks ed B listen live on
air or online, and keep our shows with you wherever
you go with our podcasts on iHeartRadio
You're listening to a podcast from News Talks B follow
this and our wide range of podcasts now on iHeartRadio
and land.
Speaker 2 (00:17):
Revenue is setting at sites on taxing nine thousand club
societies and other not for profits under changes that could
be implemented. To chat about this further, we're joined by
independent tax specialists Jeff Nightingale, who's on the line now. Cheff,
very good afternoon to you.
Speaker 3 (00:34):
Good afternoon.
Speaker 4 (00:36):
Hey, So Jeff, how does tax on clubs and societies
currently work?
Speaker 3 (00:41):
Yes, so, at the moment they have one thousand dollars
tax free threshold for interest income from investments and things.
But all of their transactions with their members, subscriptions in
any trading amongst the members that they generally have been
seen to be not taxable tax free because they are
mutual transactions. They're not about making a profit, but just
(01:03):
about sharing the costs around around the members. And it's
that that ideas suggesting might have to change.
Speaker 4 (01:12):
So we're talking subs at a bowling club, for example.
Speaker 3 (01:17):
Yeah, probably not a bowling club. So there is a
specific exemption for pure sporting amateur sporting bodies. We're talking
maybe subs at a bridge club. We're talking contributions to
your local residents association, body, corporate, you know, a myriad
of you know, non profit making mutual associations where people
(01:41):
organize themselves together and share the costs.
Speaker 4 (01:43):
Right, so you could say, like on the most sort
of lowest level of it, even though they are a
great time, especially when they're up in a nightclub. But
say you're running a book club with your friends, and
you will put some money into the book club. The
ID thinks it should take some of that.
Speaker 3 (01:58):
Well, yes, but a bit more confidence in that. What's
happened is that they have they've reached an interpretation internally
that changes their view of the law, and that changes
the view from those subscriptions or levees were non taxable,
and now they're saying it's possible that they're taxable, and
so now they're consulting on that before they change their view. Formally,
(02:21):
they're saying, hey, what does everyone think about this? And
I think the answer is we don't like change and
we want to stay the status quiet. I mean, I think,
to be fair, the subtext is they are collecting evidence
to go back to the Ministry of Revenue and say
we don't want to make this change. Here's a whole
bunch of reasons on our consultation, So let's tweak the
(02:43):
law so we don't have to make this change. I
think that's what's happening.
Speaker 4 (02:46):
And is this looking at churches and businesses like sanitarium
for example, Is this under this whole scope of this investigation.
Speaker 3 (02:56):
Yes, that's right. So we were expecting a discussion document
on the taxation of charitable businesses and that's the sanitariums
and others of this world tacked onto that was a
chapter dealing with this not for profit. So that bit
caught us by surprise. So we were expecting the government
to do some work on whether they should tax the
(03:18):
business operations of charities.
Speaker 2 (03:22):
The unintended consequences of changes to text legislation, and it
worries me when they are, you know, they change their
interpretation of the law. For most people, you'd think the
law is the law and interpretation shouldn't come into it.
Is that just the complexity when there are changes to
these particular tax laws.
Speaker 3 (03:42):
Yeah, you're absolutely right. Certainty of tax law is an
important thing and changes are very unsettling and to be avoided.
Sometimes it's unavoidable, and you know, I've advised many clubs
and associations over the years, and we've always dealt with
it in the way that IOD accepted, and so this
(04:03):
change is a surprise and creates uncertainty. I think IOD
in their own way attempting to cure it, but at
the moment we are left with uncertainty if you are
the treasurer of a club or a little association.
Speaker 4 (04:20):
So just to make this clear, because I'm a little
bit confused on that. So they're planning to target around
nine thousand clubs. What's the difference between a club, a
society and a trade association.
Speaker 3 (04:30):
Well, they might be formed under different laws like incorporated
societies or not. They might just be unincorporated. The unifying
factors they are not about making a profit. So if
you think of the Bridge Club, the Bridge Club is
about helping people play bridge. If you think about the
(04:51):
Residents Association, it's act as a voice for the residents.
So they're not about making profits, and they share their
costs amongst the members. That's how they operate. And so
that's the nine thousand and some of these very big
So if you think about a trade union, that's an
association that's not about MA a profit. It's about as
members and some of the professional association's trade associations could
(05:16):
be caught up in all of this. So this is
a big issue. It has up to now been a
very settled area of tax law, and they've kind of
thrown the cat amongst the pigeons. But I think the
purpose of the discussion document is to try and find
good reasons to fix the problems.
Speaker 4 (05:33):
We're talking to independent tax specialists. Jeff Nightingale, So you
said before that there's different provisions for a sports club,
and you see it might be different from a sports
club as opposed to a bridge club. Is that correct?
Speaker 3 (05:47):
Yes, yes, So there is a specific tax exemption for
the promotion of amateur sport and that's been there for
years and there's no suggestion that that's going to change.
That's not being mentioned. So that should take out all
of the sports clubs that the pure sports clubs. You
(06:08):
do get into definitional the challenges. What's the sport and
what I'm going to.
Speaker 4 (06:13):
Say so because because someone might say bridge, you know,
is kind of a sport. Is chess considered a sport?
Speaker 2 (06:20):
Bingo? That's on the.
Speaker 3 (06:21):
Line exactly, Yeah, walking bingo yeah.
Speaker 4 (06:25):
Yeah, well, I mean, well, I've got kids that try
and claim that Fortnite is a sport.
Speaker 2 (06:32):
Jeff, thank you very much for having just.
Speaker 1 (06:35):
Before we go.
Speaker 4 (06:36):
Do you think that seriously in this in this look
that things like, I guess, musical clubs, you know, pastime clubs,
motor clubs, I'm just pulling clubs out of my oment court.
That would that would be that would seem terrible to me,
because because in my opinion that clubs. We need more clubs,
We need more people in the community getting out and
getting together. And I feel very sorry. I see club houses,
(06:58):
I see people trying to organize these things, and there's
a lot of stress on these people. Everyone's really really busy,
and they're trying to put these things together that are
good for the community, and I would just hate to
see another level of admin or another level of difficulty
put on these people to the point where they just
throw up the hands in the air and go, I
can't be bother doing this anymore.
Speaker 3 (07:18):
I completely agree, but I also suspect that I do
agree with you, and they're trying to get enough feedback
to go back to the Minister of Revenue and say, hey,
this isn't a good idea to make this change?
Speaker 4 (07:30):
Okay, so this is my feedback. It's not a good idea.
There's a feedback. Write your submission, yeah yeah, and look,
you can have your feedback on this on eight hundred
eighty ten eighty and nine two nine two, and also
write a submission. Hey, thank you so much. That was
independent tax specialist Jeff Nightingale.
Speaker 1 (07:49):
For more from News Talks ed B listen live on
air or online, and keep our shows with you wherever
you go with our podcasts on iHeartRadio
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