Charitable Trusts in New Zealand
A charitable trust is established to benefit the public or a section of the public, rather than private individuals. These trusts support charitable purposes like education, poverty relief, health, community development, or environmental protection.
What Makes a Trust “Charitable”?
Under New Zealand law, a trust is charitable if its purpose falls into one of these categories:
- Relief of poverty
- Advancement of education
- Advancement of religion
- Other purposes beneficial to the community
The benefit must be for the public, not private gain.
Benefits of a Charitable Trust
Tax Advantages
Charitable trusts can:
- Receive tax-deductible donations
- Be exempt from income tax on charitable activities
- Claim back tax credits on donations
Public Recognition
- Demonstrates commitment to social causes
- Builds legacy and reputation
- Attracts philanthropic support
Perpetual Operation
Can operate indefinitely to support your chosen cause.
Governance Structure
Provides formal oversight and accountability for charitable activities.
Types of Charitable Trusts in NZ
Grant-Making Trusts
Distribute funds to other charities or causes.
Operating Charities
Directly run programs (e.g., food banks, shelters, educational programs).
Community Trusts
Support local community projects and initiatives.
Scholarship Trusts
Provide educational funding for students.
Environmental Trusts
Focus on conservation and environmental protection.
How to Set Up a Charitable Trust
1. Define Your Charitable Purpose
Be specific about:
- What you want to achieve
- Who benefits
- Geographic scope
- How it operates
2. Draft a Trust Deed
Must include:
- Charitable purposes
- Trustee appointments
- Decision-making rules
- Asset management
- Wind-up provisions
3. Appoint Trustees
Choose people who:
- Share your vision
- Have relevant expertise
- Can commit time
- Understand trustee duties
4. Register with Charities Services
Apply for charitable registration at www.charities.govt.nz
Benefits include:
- Tax exemptions
- Public credibility
- Access to grants
5. Apply for Donee Status
Allows donors to claim tax credits on donations to your trust.
Trustee Obligations
Charitable trustees must:
- Act in the best interests of the charitable purpose
- Follow the trust deed
- Keep proper financial records
- File annual returns with Charities Services
- Avoid conflicts of interest
- Ensure funds are used for charitable purposes only
Ongoing Compliance
- Annual returns to Charities Services
- Financial reporting (depends on size)
- Governance meetings with documented decisions
- Public accountability through transparency
- Audits (for larger charities)
Costs
- Setup: $2,000 – $5,000+
- Annual compliance: $500 – $2,000+
- Audit costs (if required): $1,500 – $5,000+
- Charities Services registration: Free
Common Uses
- Family philanthropy – Coordinate family giving
- Memorial trusts – Honor deceased loved ones
- Community projects – Support local initiatives
- Scholarship funds – Help students access education
- Cultural preservation – Protect heritage and arts
- Environmental conservation – Protect native species and habitats
Charitable Trust vs Family Trust
| Feature | Charitable Trust | Family Trust |
|---|---|---|
| Purpose | Public benefit | Private benefit |
| Tax status | Tax exempt | Taxable |
| Donations | Tax deductible | Not deductible |
| Beneficiaries | Public/community | Family members |
| Regulation | Charities Services | General trust law |
FAQs — Charitable Trusts
Can I benefit personally from a charitable trust?
No. Trustees and their families cannot receive financial benefits from the trust. Reasonable expenses can be reimbursed.
How much money do I need to start?
There’s no legal minimum, but most start with at least $10,000 to be viable long-term.
Can I control how the money is spent?
Yes, through the trust deed. You set the rules, but they must align with charitable purposes.
What if my charitable trust fails?
The assets must be transferred to another charity with similar purposes.
Do I need to register with Charities Services?
Not legally required, but highly recommended for tax benefits and credibility.
Can a charitable trust employ people?
Yes, many do. Salaries must be reasonable and for charitable work.
How do I wind up a charitable trust?
Follow the wind-up provisions in your deed. Assets must go to another registered charity.
Can I donate my home to a charitable trust?
Yes, but consider tax and practical implications carefully.