Inland Revenue has published a "Revenue Alert" highlighting their concerns that some people are claiming tax credits for "donations" where there may not have been a true gift of money to a charity.
The arrangements that have come to their attention involve smaller, locally-based charities, and typically involve a payment being made in the expectation that the donor would receive something in return.
Any payment of over $5 to a charity can potentially qualify for a donations tax credit if it is a gift. To be a gift it must:
- Be made voluntarily;
- Provide a material benefit to the recipient without imposing a countervailing detriment;
- Be for no consideration; and
- Provide no material benefit or advantage to the giver in return.