New Zealand's Inland Revenue (IR) opened consultation on 18 September 2026 on draft guidance covering the income tax treatment of amounts received from members by not-for-profit associations (NFPs) and their filing requirements.
New Zealand’s Inland Revenue (IR) opened a public consultation on 18 September 2026 on Exposure Draft ED0265, which sets out the proposed income tax treatment of amounts received from members by societies, clubs and other not-for-profit associations (NFPs).
The draft operational statement (OS), titled Mutual associations (including clubs and societies), applies to NFPs that are not covered by specific tax exemptions, such as certain charities or sports clubs.
Tax treatment of member receipts
The draft explains how the mutual association provisions in the Income Tax Act 2007 override the principle of mutuality for certain transactions between NFPs and their members.
Amounts received from trading transactions would be taxable whether the transactions were conducted with members or non-members. These transactions include supplies of trading stock and services and interest on loans.
General membership subscriptions, fees and levies would generally be treated as exempt income. However, they could be taxable where a payment described as a subscription, membership fee or levy was actually a charge to a specific member for trading stock or services supplied to that member.
The principle of mutuality would apply only where members contributing to a common fund could share in the return of surplus funds to members.
Expense deductions
NFPs would be able to deduct expenses incurred in producing income from trading transactions when calculating net income for tax purposes.
Where expenses relate to both income-producing trading activities and other activities, NFPs would need to apportion those expenses on a fair and reasonable basis.
The draft also assumes that proposed changes under the Taxation (Annual Rates for 2026–27, FBT Simplification, Foreign Investment Funds, and Remedial Measures) Bill will be enacted.
Under the proposed changes, certain amounts such as membership subscriptions, fees and levies received by an NFP that is prohibited from distributing funds to its members would be treated as exempt income.
Deduction and filing rules
Qualifying not-for-profit organisations with net income of NZD 10,000 or less would be able to claim a deduction of up to NZD 10,000, resulting in no income tax liability.
NFPs qualifying for the deduction would only need to file an income tax return if requested by IR. NFPs that did not qualify for the deduction would remain required to file income tax returns.
IR also stated that it would not devote resources to identifying and adjusting assessments for tax years ended 31 March 2027 and earlier where NFPs had filed incorrect returns by excluding income from trading transactions with members or had not filed returns in circumstances covered by the applicable deduction rules.
Consultation deadline
Public submissions on Exposure Draft ED0265 will close on 11 December 2026. The finalised OS is proposed to apply from 1 April 2027.
