The Government has passed tax legislation including the introduction of a New Zealand payroll giving scheme, enabling employees to make contributions to charities direct from their pay while immediately receiving a tax credit via PAYE.
Given recent scrutiny on charitable fundraising methods and costs to attract public donations, the advent of payroll giving programmes from early 2010 will provide New Zealand donors with an easy and efficient way to accrue donations to support chosen charities.
Both Australia and the United Kingdom have successively implemented workplace giving. Based on observation of the impact in these markets, New Zealand charities are looking forward to payroll giving as an effective and sustainable donations channel.
Founder and CEO of Givealittle.co.nz Nathalie Hofsteede welcomes the legislation, saying “it is exciting that we now have a practical way for donors to access the tax credit from gifting personal income to charity. Many of the charities registered with Givealittle have eagerly anticipated this legislation and most are organising themselves to take advantage of the changes.”
With nearly 300 charitable organisations registered with Givealittle and many more causes for employees participating in payroll schemes to choose from, the company looks forward to unveiling its payroll giving product after more than 14 months behind the scenes development. “Payroll giving really starts to make sense when you add in the tax credit, provided that as an individual employee you still have personal choice about where your donations go.”
Lead Web Developer at Givealittle, Karl Woollaston comments “our belief is that web systems and tools that make payroll and giving easy will help maximize the uptake of companies to the scheme”. Givealittle CEO also states that “targeted donor communications ensure that individual employees feel connected to the results achieved with their charitable donations as part of a wider company commitment to generosity.
Though the scheme will be limited to employers filing PAYE returns online, Hofsteede believes there is likely to be enough interest from employers currently filing paper returns that some will shift processes online via a number of established payroll service providers in order to access the benefits.
Givealittle are conduction a survey to gauge people’s view on Payroll Giving. You can complete the survey HERE. All those who take part go into a draw for Air New Zealand Mystery Break for two.
More ill-considered legislation from the boffins in Wellington!
1. Not only will employer’s carry the can for the extra bank transaction fees to transfer the employee’s donations to each employee’s charity, but they face the extra workload of maintaining their systems to cater for the donations, and producing schedules of payments to these charities. Employers are effectively paying fees and incurring costs to collect donations for charities.
2. This is an excellent opportunity for fradulent behaviour! There’s NOTHING in place to prevent direct crediting of donations to the incorrect bank account!
Guess what happens next? Unless someone actually audits direct credit payments, and compares the account numbers used against a register of validated account numbers – oh wait – there isn’t one – then “mistakes” are bound to happen.
3. If an employee has a job solely for the purpose of supporting a charity, or just like to contribute a lot – which is great – they won’t necessarily (or likely) receive their full 33% contribution rebate, as the tax they are likely to pay on their earnings will most probably be taxed in the range 20-30% on average – so, they’ll still have to claim any shortfall in the rebate at the end of the year.
This legislation is nonsensical from the start, and should have been established properly: Contributions should be deducted pre-tax with no further rebate claimable, the bank account should be data-matched (web service from a trusted source, or validated file supplied by your software vendor, or less-satisfactorily by reference to a charities register).
A quick browse of the organisation listed above gives no information about charities’ bank account numbers or the requirements they have for bank statement code, reference or particulars. The Charities Commission register doesn’t have bank account numbers or data requirements either.
Good idea, bad legislation, badly implemented – personally I can’t see anything but minimal uptake once employer’s realise the extra burden they will carry, and the opportunity for fraud that is sure to be exploited.