Modernising the Charities Act: Frequently Asked Questions

Updated 2 June 2022

1. How can I have my say on the work?

As part of the legislative process, members of the public will have an opportunity to make submissions on an amendment bill during the Select Committee stage. There is no date yet for this stage.

2. What is the purpose of the work to modernise the Charities Act?

The objective of modernising the Charities Act is to support charities to continue their contribution to community wellbeing while ensuring sufficient public transparency. The work makes practical improvements to address some of the challenges that charities face.

3. What has prompted the work to modernise the Charities Act?

There has been significant change since the Charities Act was introduced in 2005. Changes have occurred in the wider operating environment for charities, the Charities Commission was disestablished, and charities are required to report to financial standards set by the External Reporting Board (a Crown entity). Cabinet approval for the work occurred in 2018.

4. Why are you not doing a first-principles review?

The work seeks to make practical improvements to the Charities Act. A first-principles review is out-of-scope for the current work programme. The fundamentals of the Charities Act (including the registration, reporting and monitoring of charities) are considered to be sound, so a first-principle review was not considered to be necessary by Cabinet in 2018.

5. What topics were out-of-scope from the work programme?

The following topics were out-of-scope for the work programme: advocacy; the definition of ‘charitable purpose’; and incorporating te ao Māori principles into the Charities Act. The work programme seeks to make practical improvements to the Charities Act, and for this benefit to be passed on to charities. The out-of-scope topics could be considered at a later stage.

6. Why has the work to modernise the Charities Act taken so long?

Work was interrupted and placed on hold due to COVID-19 as resources were redeployed to more urgent work. Following that, the work was rescoped to enable potential changes to be made in this term of Government.

7. When do you expect the policy decisions to be implemented?

We expect that an amendment bill will be introduced in 2022. The bill is likely to be passed into law in 2023.

8. Did you consider the business activities of charities in this work?

Business activity is a well-established way for charities to raise funds.  The work considered matters relevant to charitable businesses, like accumulation of funds and governance. Deciding whether business should be charitable was not something that was considered as part of this review as it links to more fundamental issues such as charitable purpose.

9. Are you looking at whether charities will still receive tax benefits?

Charities make important contributions to the wellbeing of New Zealanders. One of the ways the Government supports charities is by providing favourable tax treatment. The Department did not consider the issue of charities receiving tax benefits in the modernising the Charities Act work programme as tax issues are matters for the Minister of Revenue and Inland Revenue to consider.

10. How does the work address the Tax Working Group’s concerns about private charitable foundations?

Just like other registered charities, private foundations seeking registration must be established for charitable purposes and not seek private benefit. This work did not identify specific issues with private foundations. However, there is a lack of accessible information about why funds have been accumulated by all kinds of charities. To improve the transparency of this information, larger charities will be required to explain the reasons for their accumulated funds in their annual return. This will include private foundations.

While work to modernise the Charities Act looked at private foundations as per the recommendation of the Tax Working Group, it did not consider tax issues which is the role of the Minister of Revenue and Inland Revenue.

11. How does the work on reporting requirements for very small charities link with the External Reporting Board’s review of tiers 3 and 4 reporting standards?

The Chief Executive of the Department of Internal Affairs will have the power to exempt a class of small charities from the tier 4 reporting standard. The Chief Executive will not use the exemption if the outcomes of the External Reporting Board’s work align with the policy intent to reduce reporting requirements for very small charities.

12. How does the new Incorporated Societies Act impact this work?

The Department worked closely with the Ministry of Business, Innovation and Employment to ensure that the proposed changes to charities settings and the new Incorporated Societies Act align where possible. Common areas include the definition of officer and disqualifying factors for officers.

13. What does the term ‘significant decisions’ mean in the context of the appeals framework?

Significant decisions include deregistration, disqualification of an officer, declined applications, publishing decisions of possible breach, and serious wrongdoing.

14. Were submissions from the public consultation in 2019 considered as part of the policy development process?

The submissions were very important in developing the policy changes. As part of the policy development process, we considered submissions from public consultation in 2019 and submissions from targeted consultation in 2021. Specifically, the 2019 submissions are outlined in the summary of submissions report. Further information on submissions received during 2021 will be available here soon.

15. Who was consulted during 2021?

The stakeholders consulted include the Core Reference Group, the Charities Sector Group, registered charities, iwi, academics, lawyers, accountants, individuals, and other government agencies. Consultation during 2021 was targeted to specific stakeholders.

The Department selected stakeholders for consultation to ensure an appropriate representation of the charitable sector. The following principles were used:

  • Stakeholders with a high level of interest in the topics within the scope of the work;
  • Stakeholders with a high level of influence in the topics within the scope of the work;
  • Stakeholders who demonstrated understanding and expertise of the topics during the 2019 public consultation;
  • Stakeholders who provided a diversity of views (based on public consultation); and/or
  • Stakeholders who represent a diverse range of charities across different sectors, tiers and geographical spread.

The Core Reference Group consists of Sue Barker, Sai Lealea, Dave Henderson, and Charmaine Brown.

Back to Top