Budget 2026 included a package of tax changes for charities and not-for-profits. Inland Revenue's information sheet on charities and not-for-profits lists ten changes, with start dates running from April 2027 to the 2028–29 income year. None of them is an insurance change, but several affect income, administration and the way organisations engage volunteers, and those are the things an insurance programme has to fit around.
The information sheet notes that the proposals may change as the legislation moves through Parliament, so treat the details below as the policy as announced.
The Ten Changes in Brief
- A cap on donations eligible for the donation tax credit at the lower of $100,000 or the donor's taxable income, for donations made on or after 1 April 2027. The 33⅓% rate is retained.
- Membership subscriptions and levies to remain non-taxable for taxable not-for-profits, maintaining the existing position, from 1 April 2027 for most taxpayers.
- The effective tax-free threshold for smaller not-for-profits raised from $1,000 to $10,000, from the 2027–28 income year.
- Taxable not-for-profits with income of $10,000 or less not required to file a return unless Inland Revenue asks, from the 2027–28 income year.
- Financial institutions to report interest paid to customers exempt from resident withholding tax, from 1 April 2028.
- Optional in-year donation tax credit refunds for people with reportable income such as salary and wages, from 1 April 2028.
- An option for donors to transfer their donation tax credit refund to the charity, paid anonymously to the charity's nominated bank account, from 1 April 2028.
- An option for not-for-profits to treat volunteer honoraria as salary or wages rather than schedular payments, from 1 April 2028.
- Repeal of the income tax exemption for non-resident charities on income sourced here that is not business income, from 1 April 2028.
- A requirement for trusts allocating income to tax-exempt beneficiaries to pay it in money within a specified period, or have it taxed at the trustee rate, from the 2028–29 income year.
Donation Income for Charities With Large Donors
Inland Revenue's regulatory impact statement on the donation tax credit estimates the cap affects about 350 donors, around 0.1% of claimants, but that those donors account for about 10% of all donations claimed. It rates the impact on donee organisations as unknown and notes that arts and similar charities may be most exposed to reduced high-value giving.
Most charities will see no change. For the minority that depend on a few very large gifts, income from April 2027 is less predictable, and income uncertainty is when boards are most tempted to trim insurance. The right response is to review sums insured and limits against actual exposure, not to cut cover by a flat percentage. A smaller reserve means less capacity to absorb an uninsured loss, not more.
Smaller Organisations and the $10,000 Threshold
Raising the effective tax-free threshold to $10,000 and removing the filing requirement below it will reduce compliance work for many small taxable not-for-profits, such as clubs and societies that are not registered charities. Less contact with Inland Revenue does not change their liability exposure. A club with modest income can still run events, hold a lease on a clubroom and rely on volunteers, so public liability and volunteer accident cover remain as relevant as before.
Volunteer Honoraria
The option to treat honoraria as salary or wages from April 2028 is intended to simplify volunteers' tax obligations and reduce PAYE and ACC compliance. Because the change touches PAYE and ACC compliance, organisations that pay honoraria should take advice before adopting it, and confirm that their volunteer personal accident policy still describes the people who receive honoraria correctly.
Receipts and Refund Transfers
From 1 April 2028, donors would be able to transfer refunds to the charity through myIR, and refunds would be claimed through receipt upload. Charities should make sure their receipts meet Inland Revenue's requirements and that a nominated bank account is in place. Our guide to donation receipts and donee status covers the detail, including the controls that matter for fidelity cover.
Reviewing Cover in Light of the Changes
The Budget 2026 package is a good prompt for a review because it changes the financial picture many organisations will be working with over the next two years. A specialist will ask about current income, assets and activities and make sure limits reflect where the organisation actually is. To arrange that, Get a Quote and a Registered Financial Service Provider who works with not-for-profits will be in touch within one business day.
Sources: Inland Revenue Tax Policy, Budget 2026 charities and not-for-profits information sheet and regulatory impact statement on the donation tax credit (12 May 2026). Checked 10 October 2026.
About the Author
The CharityInsurance Crew — the CharityInsurance crew are your friendly insurance geeks on a mission to make specialist cover simple and accessible for every NZ charity, sports club, and community organisation.