A Guide to Filing the IR10 Tax Return for Your New Zealand Charity

Running a charity in New Zealand is rewarding work, but it also comes with administrative responsibilities like tax paperwork. You'll need to file an IR10 return with Inland Revenue (IRD), and while it might seem daunting at first, it's manageable once you understand its purpose and structure. You don't need to be a tax expert; you just need a clear plan.

What is the IR10?

You might be wondering, "Why do we even file this if we're tax-exempt?" That's a good question. The IR10 is an income tax return for estates and trusts. Most New Zealand charities are legally structured as trusts, which is why this form applies.

Your charity must file an IR10 if it has:

• Income that is not exempt from tax (like profits from an unrelated business).
• Been requested to do so by the IRD Commissioner.

Filing is also considered good practice for maintaining financial transparency.

Before You Start: Gather Your Information

Preparation is key. Gathering all your information before you start will save you time and stress.

Here are the main things you will need:

• Your charity's full name, IRD number, and New Zealand Business Number (NZBN).
• Your Charities Services registration number.
• Complete financial statements for the year, including the Statement of Financial Performance (like a P&L) and the Statement of Financial Position (like a Balance Sheet).
• A clear breakdown of all income sources, separating exempt income (like donations and grants) from any other income earned.
• A detailed list of all expenses.

The easiest way to file is online through myIR. If you haven't already, setting up a myIR account for your charity will make this and future interactions with the IRD much simpler.

Steps to Fill Out the IR10 Form

Whether you are filling out the form online or using the PDF version from the IRD website, the main sections are similar. We won't cover every single box, but these are the key areas to focus on:

1. Trust Details

   This part is straightforward. Fill in your charity's name, IRD number, balance date, and contact information. Ensure this information matches what the IRD has on file.

2. Income

   This is a critical section of the return. You must report all income your charity received during the year, including tax-exempt income. The form has separate boxes for different income types, such as gross business income, interest, dividends, and rent. You will also report your exempt income here. The form is designed to show the complete financial picture before calculating what is taxable.

3. Expenses

   This is where you list the costs incurred to generate your income. If your charity doesn't have a business operation, you may not have much to report here. However, if you do, you can claim direct costs like rent and utilities. Meticulous record-keeping is crucial for this section.

4. Tax Calculation

   Here's where it all comes together. After you input your income and expenses, the form guides you through calculating the net income. You then subtract the exempt income. For most charities, this will result in zero taxable income. The purpose of this exercise is to formally demonstrate to the IRD how you arrived at a zero tax liability, confirming your tax-exempt status for the year.

5. Declaration

   In the final step, a person with proper authority, such as a trustee or director, must sign and date the return. By signing, you are declaring that the information provided is true and correct.

Common Mistakes and Tips

Some organizations struggle with the same issues repeatedly. Here are common pitfalls to watch for and tips to help you file correctly.

Common Pitfalls

• Late Filing: The standard deadline for the IR10 is the 7th of July following your balance date. Missing the deadline can result in penalties, so be sure to mark this on your calendar. Tax agents may have an extension of time to file.
• Poor Record-Keeping: Inaccurate or incomplete records can cause significant problems. The IRD can request to see your financial statements, which must be accurate and well-documented.
• Forgetting Business Activities: If your charity runs a business (like a café or shop), you must file an IR10 for that activity, even if all profits are returned to the charity.

Helpful Tips

• Use myIR: Filing online is much easier. The system has built-in checks and calculations that reduce the risk of simple math errors.
• When in Doubt, Get Help: If your charity's finances are complex or you lack confidence, consider consulting an accountant who specializes in non-profits. Getting it right is important.

What Happens After You File?

Once you've submitted your return, the IRD will process it. You will receive a confirmation, and if you filed online, you can view the processed return in your myIR account. It is essential to keep a copy of the filed return and all supporting documents for at least seven years.

The IR10 is just one part of maintaining your charity's good financial health. It demonstrates transparency and accountability, which helps build trust with your community, your funders, and the IRD. Proper compliance allows you to stay focused on the important work your charity does.