School tax issues
School boards, school trusts and parent teacher associations (PTAs) need to know about how the Charities Act 2005 affects them and whether they need to register with the Charities Commission.
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All boards must adhere to tax regulations by law. PTAs who register as charities or non-profits must also adhere to legal regulations.
- The legislation
- State and state-integrated school boards
- Trusts associated with schools
- Parent teacher associations
State and state-integrated schools don't need to register with the Charities Commission to be exempt from income tax for school operations.
Income tax — state and state-integrated schools are exempt from income tax under the Education Act.
Donee status — state and state-integrated schools have approved donee status from Inland Revenue. This means that people or organisations that make cash donations to them qualify for tax rebates. State and state-integrated schools don't need to register with the Charities Commission to obtain donee status.
Your school may choose to register with the Charities Commission for other reasons that aren't tax-related. Some organisations are only permitted to make donations to charitable organisations and may require your school to be registered with the Charities Commission before it can make donations. You can find out more on the Charities Services website.
Trustees of trusts associated with schools will need to register their trusts with the Charities Commission to qualify for tax exemptions based on having a charitable purpose. The Charities Services website explains the registration process.
Your PTA needs to decide whether to:
- register with the Charities Commission
- apply to Inland Revenue for a tax exemption
- be a committee of the board.
You can register your PTA with the Charities Commission to qualify for tax exemptions based on having a charitable purpose. The Charities Services website explains the registration process.
There's no cost to register with the Charities Commission.
Each registered charity needs to have written rules. The Charities Commission has information to help you develop these rules.
The PTA national body has a template constitution, which will help you develop your own PTA constitution. You can find this on the NZPTA website.
Once registered, your PTA will need to file an annual return with the Charities Commission. If you register with the Charities Commission, and your PTA was also registered as an incorporated society, you'll no longer need to file annual returns with the Registrar of Incorporated Societies.
If your PTA records income over $10,000 per year then there will be a fee of around $50 per year for filing the annual return electronically ($75 if it's filed as paper).
Your accounts don't have to be audited, but the PTA national body recommends PTAs obtain an independent review.
If your PTA doesn't register with the Charities Commission you can apply to Inland Revenue for non-profit status, which gives it an exemption from income tax on the first $1,000 of net income.
A non-profit organisation is any society, association or organisation, incorporated or unincorporated, that:
- is not carried on for the profit or gain of any member, and
- has rules that don't allow money, property or any other benefits to be distributed to any of its members.
To apply for non-profit status you need to send to Inland Revenue your PTA’s:
- IRD number (apply for one if it doesn’t have one already)
- rules, constitution, trust deed or other founding documents
- Certificate of Incorporation (if applicable).
Incorporated non-profit organisations are taxed at 30 cents in the dollar (the company tax rate) on all income over $1,000.
Unincorporated non-profit organisations (and many PTAs are likely to be unincorporated) are taxed at the same rate as individuals. You can find these tax rates and calculate the tax payable on the Inland Revenue website.
Your PTA could discuss with its school board the possibility of relinquishing its activities to the board. This means the PTA would be replaced by a fundraising committee of the board. The committee’s fundraising activities would have the same income tax exemption as the school. As a part of the board the fundraising committee would use a school bank account, and be included in the school’s GST returns and annual financial statements.
Clause 8 of the Education (School Boards) Regulations 2020(external link) allows a school board to delegate any of its functions or powers by resolution and written notice in its minutes. Note that this means that the fundraising committee must have a board member on it unless special approval is granted by the Minister of Education.
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