“Ten election policies for charities for 2023 with Sue Barker” – Policy 2: widening eligibility for donee status

Sue BarkerWith the new PM reconsidering policy priorities, Sue Barker, Director of Sue Barker Charities Law, joins us for a series on 10 election policies for charities for 2023. In the second part of the series, Sue shares her insight on widening the eligibility for donee status. She will also be presenting in March at the upcoming Charities and Not for Profits Update.


Policy 2: widening eligibility for donee status

“Donee status” is a key tax privilege that allows donors to “donee organisations” to claim a tax credit or a tax deduction for their donation.[1] An elegant, but consistently overlooked, way of supporting kiwis,[2] and putting more money into people’s pockets,[3] would be by allowing a wider range of charities to access charitable registration and therefore donee status.

Due to the way the Charities Act is currently being administered, only a limited range of charities are currently able to register and therefore be accepted for donee status. However, Charities Services’ narrow interpretations of the definition of charitable purpose are contentious: correctly interpreted, the definition is not limited to “assuaging need”, and can extend to “hand ups” rather than merely handouts. The test for charitable purpose needs to be set out in legislation (as other jurisdictions have done),[4] to reduce the scope for subjectivity and inconsistency in the way the definition is interpreted. This simple change could be expected to widen current interpretations of the definition and bring it more into line with society’s expectations.

Allowing a wider range of charities to access donee status is important to democracy and social cohesion: donee status is potentially the only direct way that individual taxpayers (including businesses) can themselves allocate government revenue to causes they would like to see funded. On that basis, allowing a wider range of charities to access registration and donee status would be an elegant means of democratisation and localisation. It would also allow charities engaging in important areas, such as affordable housing, economic development, prevention (rather than merely “relief”) of poverty, and other types of “hand ups” rather than “handouts”, to access charitable registration (and therefore, often, funding).

New Zealand appears to be following the approach of authoritarian countries, which tend to bifurcate their charitable sectors: for example, countries such as China have embarked on “modernisation” strategies seeking to partner with, and draw on the expertise of, civil society to improve the often dismal provision of social services;[5] under this model, apolitical, service-providing charities may be privileged through supportive policies, such as access to funding, easier pathways to registration, less state intervention in their daily activities, access to information, and prestige; at the same time, the charities law framework will be used to repress charities pursuing social justice, human rights, democratisation and environmental advocacy agendas.[6] As a result, charities engaging in social service contracting may flourish, even under a restrictive authoritarian regime, and amid an otherwise shrinking space for civil society.[7]

However, such a limited conception of charities comes at a cost: exploiting charities for community service delivery, while restricting their role in broader civil society, challenges the innate virtue of a civil society and undermines its democratic-participatory functions.[8] Charities’ increasing dependence on government funding may allow governments to coopt and thus control these organisations; as a result, charities may struggle to pursue their core functions and hold on to their “civicness”, instead effectively turning into instruments of the state. Selectively disbursing rewards to favoured service-providing charities may also create conflict and division within civil society itself, undercutting the social capital building and democratising aspects of civic life.

Arguments that there are “too many charities” in New Zealand need to be seen in this light: the number of charities is a sign of a healthy democracy;[9] just as a healthy ecosystem requires a diversity of species, a healthy democracy requires a diversity of voices, pluralism, and social tolerance. While the tax credits available for donations to donee organisations have been conceptualised as a tax expenditure and therefore a “fiscal cost”,[10] allowing a wider range of charities to access registration and therefore donee status would have considerable offsetting benefits, including bolstering our social cohesion, social capital and community wellbeing.

It is not clear why New Zealand’s number of registered charities is seen as high in any event: the current figure of 28,560[11] is almost 10,000 less than initial estimates,[12] and only 4% of New Zealand’s 711,599 companies (which also receive considerable taxpayer-funded privileges).[13] Contrary to popular conceptions, New Zealand does not have “more charities per capita than comparable jurisdictions”:[14] most charities are small, and many jurisdictions do not include vast tracts of small charities on their charities registers; this factor alone skews the numbers.[15] When the numbers are correctly analysed, it becomes clear that comparable jurisdictions, such as England and Wales, in fact have more charities per capita than New Zealand.

New Zealand must guard against autocratic use of the charities law framework to restrict charities to merely underfunded service delivery arms of the state. In a democracy, charities should be the “eyes, ears and conscience” of society,[16] with an important role in holding government to account.[17]

Of course, there are funding pressures, and opportunities to reduce duplication and to collaborate with others should always be considered. But such decisions are for charities to make, not government, and must be made in the best interests of charities’ charitable purposes, not to further an arbitrary objective to “rationalise” the sector.[18]

Now more than ever in the current cost of living crisis, New Zealand needs an informed debate about the importance to its democracy of allowing a wider range of charities to access registration and donee status.


Sue Barker is the director of Sue Barker Charities Law, a boutique law firm based in Wellington, New Zealand, specialising in charities law and public tax law. Since its founding in 2012, the firm has won a number of awards, including Boutique Law Firm of the Year at the New Zealand Law Awards. Sue is a member of Charities Services’ Sector Group and a member of the Core Reference Group for the review of the Charities Act. Sue is also a co-author of the text The Law and Practice of Charities in New Zealand (LexisNexis, 2013) and a contributor to a number of texts, including Charity Law: Exploring the Concept of Public Benefit (Routledge, 2022) and Regulating Charities: the Inside Story (Routledge, 2017). In 2016, Sue was made an Honorary National Life Member of the National Council of Women of New Zealand Incorporated for her work assisting the Council with charities law issues. In 2019, Sue was awarded the New Zealand Law Foundation International Research Fellowship Te Karahipi Rangahau ā Taiao, New Zealand’s premier legal research award, to undertake research into the question “What does a world-leading framework of charities law look like?”. Her report Focus on purpose was released in April 2022 making 70 recommendations for charities law reform in Aotearoa New Zealand”. More information about Sue and the research can be found at www.charitieslaw.co and www.charitieslawreform.nz
Contact Sue at susan.barker@charitieslaw.co or connect via LinkedIn

[1] See Income Tax Act 2007 subpart LD.

[2] Molly Swift Jacinda Ardern says cost of living ‘top of our agenda’, political experts believe another payment could be on the cards Newshub 5 November 2022: <www.newshub.co.nz/home/politics/2022/11/jacinda-ardern-says-cost-of-living-top-of-our-agenda-political-experts-believe-another-payment-could-be-on-the-cards.html>.

[3] National Delivering tax relief <www.national.org.nz/delivering_tax_relief>.

[4] See S Barker Focus on purpose – what does a world-leading framework of charities law look like? [2022] NZLFRR at 152-155.

[5] Stefan Toepler, Annette Zimmer, Christian Fröhlich, Katharina Obuch The Changing Space for NGOs: Civil Society in Authoritarian and Hybrid Regimes Voluntas (2020) 31:649-662 at 655.

[6] Stefan Toepler, Annette Zimmer, Christian Fröhlich, Katharina Obuch The Changing Space for NGOs: Civil Society in Authoritarian and Hybrid Regimes Voluntas (2020) 31:649-662 at 651-652.

[7] Myles McGregor-Lowndes “An Overview of the Not-for-Profit Sector” in Matthew Harding (ed) Research Handbook on Not-for-Profit Law (Edward Elgar, 2018) 131 at 131, 138, 148 – 149.

[8] Myles McGregor-Lowndes “An Overview of the Not-for-Profit Sector” in Matthes Harding (ed) Research Handbook on Not-for-Profit Law (Edward Elgar, 2018) 131 at 131, 138, 148 – 149.

[9] See the Australian Productivity Commission Contribution of the Not-for-Profit Sector 11 February 2010 at 17, referring to Putnam, Leonardi and Nannetti 1993, PC 2003 and not-for-profit entities generally.

[10] Te Tai Ōhanga The Treasury 2022 Tax Expenditure Statement 19 May 2022 at 11: <www.treasury.govt.nz/publications/tax-expenditure/2022-tax-expenditure-statement>

[11] Charities Services Ngā Ratonga Kaupapa Atawhai Annual Review 2021/22: <www.charities.govt.nz/assets/Annual-Review-Report-2021-2022-WEB.pdf> at 11.

[12] See Charities Bill 2004 (108-1) (1R) NZPD 616 (30 March 2004) at 12,108 per Richard Worth (National) and Hon Richard Prebble (ACT).

[13] The number of companies in New Zealand has increased steadily since 2013 by over 31%. See Companies Office Latest Company Statistics <www.companiesoffice.govt.nz/insights-and-articles/latest-company-statistics/>.

[14] Melanie Carroll Coronavirus: Is 27,000 charities too many when they’re struggling to survive? Stuff 23 August 2020: <www.stuff.co.nz/business/industries/122481760/coronavirus-is-27000-charities-too-many-when-theyre-struggling-to-survive>.

[15] See the discussion in S Barker Focus on purpose – what does a world-leading framework of charities law look like? [2022] NZLFRR at 70-75.

[16] House of Lords Select Committee on Charities Report of Session 2016–17Stronger charities for a stronger society HL Paper 133 at 3, 99, 116.

[17] National Council of Voluntary Organisations For the public benefit? A consultation document on charity law reform 2001 at [4.1.4].

[18] A for-profit sector focus on “efficiency” may not translate well to a not-for-profit context: charities and other not-for-profit entities are required by law to focus on their purposes. If efficiency becomes an end in itself, or is pursued at the expense of effectiveness, it may be counterproductive or even unlawful. See D Gilchrist and P Knight “There are more useful questions to ask than whether Australia has ‘too many’ charities” The Conversation, 27 March 2017: <theconversation.com/there-are-more-useful-questions-to-ask-than-whether-australia-has-too-many-charities-73056>.