Payroll giving - making it easier to donate to good causes

The government is looking at ways to make it easier for people to donate to their favourite charities and other non-profit causes.

A discussion document released today by Finance Minister Dr Michael Cullen and Revenue Minister Peter Dunne explores the possibility of introducing a voluntary payroll-giving scheme that would make it easier for people to donate money to their chosen charity.

"Payroll giving allows people to have donations deducted automatically from their pay and forwarded to their chosen charity by their employer. In return, people who make donations in this way receive immediate, real-time, tax relief reflected in their normal pay, based on the amount they donate," the Ministers said.

"Based on overseas experience, payroll giving has the potential to increase donation levels and establish genuine partnerships between businesses and the community.

"For payroll giving to be a truly winning formula, however, we recognise that it must also be easy for employers to administer.

"In particular, we want to ensure that such a scheme does not raise undue costs and is easy to administer for employers who choose to offer payroll giving. This was a key concern raised during our earlier consultation with representatives of charities and donor and employer groups.

"For employees, a payroll-giving scheme offers a convenient and simple way to donate without their having to retain receipts and request and file a rebate claim form at the end of the year. All they need to do is choose their charity, set the amount of their donation and ask their employer to deduct their donation each payday.

"For charities, it is an efficient, low-cost way to raise funds and delivers the regular income support they need, while for employers, payroll-giving schemes can provide a low-cost and administratively simple way to build employee morale by supporting their efforts for charity, and raising the business's profile in the community.

"The foundation for building a culture of charitable giving in New Zealand was laid in Budget 2007, which announced the removal of limits on the current tax relief on charitable donations made by individuals, companies and Mâori authorities.

"Our next step is to make it easier for people to donate to their chosen charities," the ministers said. "This discussion document looks at one of the ways we might achieve this.

"The type of payroll giving described in the discussion document has been introduced successfully in a number of other countries, including Australia and the United Kingdom, and looks at two options for this type of charitable giving. We are now seeking the views of employees, employers and charities on what type of scheme might work best for New Zealand.

"We already know that New Zealanders are generous people. In fact, according to a 2005 study by BERL, New Zealanders gave some $1.27 billion to philanthropic and charitable causes that year.

"This proposal recognises the importance of charitable giving to New Zealanders. It also acknowledges the significant role charitable organisations play in delivering many services that make a positive difference in our communities," the ministers said.

"The initiative is part of the government's commitment to fostering a culture of charitable giving in New Zealand and is a direct result of the confidence and supply agreement between United Future and the Labour-led government."

The discussion document, Payroll giving: providing a real-time benefit for charitable giving, is available at www.taxpolicy.ird.govt.nz. Submissions close on 25 January 2008.