As the school year nears to a close, school fairs are in full swing. As a parent, you will no doubt be tirelessly working to raise funds through the school fair to assist the school and your children, to cover the cost of school trips and events. You will have already sold wraps and cheese rolls by the dozen. At this time of year, you will be frantically looking for things to donate, and baking to make.
While as the donee of the goods you give to the fair or the baking you make for sale you do not get the benefit of having made your donation from a taxation perspective, you have at least helped the school. The school receives the funds from the sale of your donated items, does not have a GST liability because of those sales, and does not have a cost of acquiring the items for sale.
For you to gain a tax credit for your donation, you would need to consider giving money instead. The rules around obtaining a tax credit are clear. It must be a “charitable or other public benefit gift” which is a monetary gift of $5 or more made to one of the organisations listed as a donee organisation, including a school board.
It would also be possible for you, and/or any of your employees to make a payroll donation. A payroll donation may be made only if the person’s employer files the employer monthly schedule and PAYE income forms electronically under the Inland Revenue ir-File service and has agreed to offer payroll giving to employees. The benefit of payroll giving is that the tax credit is applied to offset part of the employee’s PAYE tax for the pay period. The credit is available immediately rather than being sought after the end of the tax year.
While the giving of money does not assist the school in holding its fair, it does still help the school to raise money for its desired project and could take the pressure of you and other parents when school fairs come around.
For more information, please contact your Crowe Horwath tax adviser.