© 2013 Lions Clubs New Zealand
CHARITIES COMMISSION AND TAX ON PROJECT FUNDS
Only organisations registered with the Charities Commission qualify for income tax exemptions. Unfortunately, as currently constituted, Lions and Lioness Clubs do not qualify as charities under the law and therefore cannot be registered with the Charities Commission.
However, if your club wishes to retain the current tax benefits you can establish a charitable trust, as a subsidiary entity to your currently constituted club, which can be used to receive and distribute your income/project money. This entity can be registered with the Charities Commission and will therefore attract income tax exemption benefits.
A draft Trust Deed has been prepared that can be adapted easily for your club if you decide to proceed.
This can be downloaded, along with a set of instructions on how to proceed, from the links above.
If your club decides to establish a subsidiary charitable trust, it can be named after your club, eg, “Lions/Lioness Club of [insert area] Charitable Trust”. Your club would need to appoint Trustees to administer the Trust (say four senior members). This newly established Trust, once registered with the Charities Commission, would qualify for all the current income tax advantages.
1 Print off the draft Trust Deed and distribute to your Board members for consideration and discussion.
2. Gauge support to establish the subsidiary Trust.
3. If the Board decides to proceed, propose a motion to your members to establish the Trust.
4. Nominate the initial Trustees and put those nominations to your members.
5. Put a motion to pay an initial sum (eg, $100) to the new Trust from your Lions or Lioness Club Project account (see clause 2.1 of the Trust Deed regarding establishing the Trust Fund).
6. Complete the draft Trust Deed, inserting names etc as indicated, and have the Trustees sign it.
7. Complete the registration process with the Charities Commission, either online or by paper. (Forms can be downloaded from www.charitiescommission.govt.nz)
8. Send a copy of the executed Trust Deed, together with a completed IR596 (which can be downloaded from IRD website www.ird.govt.nz), to the IRD to register the entity and obtain an IRD number.
9. Apply to incorporate the Trustees of the new Trust as a Board with the Companies Office. All relevant information regarding incorporation can be found at www.societies.govt.nz in the “Information Library” under “Charitable Trusts.”
NB: Steps 7-9 can be completed simultaneously, but it is step 7 that is imperative to ensure you qualify for the significant income tax advantages that your club currently enjoys.
10. Establish a separate bank account for the new Trust and ensure any project funds that are collected go into and are paid out of that bank account. (This will effectively operate like your Club’s current project account, but decisions are made by the Trustees rather than the Board.)
11. Remember to file the Trust’s annual returns with the Charities Commission. (They will also forward it to the Companies Office).
* Stick to the standard wording of the Trust Deed. Acceptance by the Charities Commission and the IRD will be easier if all Lions and Lioness Clubs use the same wording.