Many donors don’t claim tax credit, review finds

An Inland Revenue regulatory stewardship review of the donation tax credit (DTC) regime showed that only 57 per cent of people surveyed knew about the donation tax credit. This number dropped to 36 per cent for those aged under 30.

Only one in five donors claim for all their donations, but almost a third don’t make any claims at all.

The IRD review tested the DTC regime, asking whether it was effective and efficient, fit for purpose and the future, operating as intended and achieving intended outcomes.

The review looked at several important aspects: public awareness, ease of use and take-up of the regime, its effect on charitable giving, as well as compliance by donors and donee organisations.

Survey results found 45 per cent of those questioned said that the DTC makes them more likely to donate, while 22 per cent said that the DTC makes them donate more.

IRD processes 350,000 claims annually, which is about 10 per cent lower than the number of claims it processed 10 years earlier. But the average donation tax credit of $877 is about 30 per cent higher than that in 2012.

Overall, the DTC cost $309 million in 2022. But the regime has many justifications and objectives, such as allowing governments to further social objectives and providing wider benefits to society.

One improvement suggested by the review was delinking the credit from the tax system to allow real-time payments. Another suggestion concerned addressing cultural considerations, improving education materials and reconsideration of the treatment of overseas giving to Pacific Island countries.

In response to the review, IRD stated that delinking the credit from the tax system and allowing real-time payments could not be prioritised at the moment due to resource constraints and the need for significant system changes.

FULL STORY

Donor Tax Credit Regulatory Stewardship Review Report (IRD)

Inland Revenue Response to Donor Tax Credit Review Findings (IRD)