Many organisations in the play, active recreation and sport sector benefit from an income tax exemption for promoting amateur games or sports. There are no plans to change the income tax exemption (section CW 46 of the Income Tax Act 2007), but organisations may need to ensure that their constitution clearly states that the promotion of amateur sport is a key part of their purpose to ensure they are eligible for the tax exemption. 

Some organisations could be affected by the proposal to remove the tax exemption for business income received by a charity that is ‘unrelated to the entity’s charitable purpose’. This change would affect registered charities who were unable to meet the separate income tax exemption noted above (section CW 46 of the Income Tax Act 2007). A minimum threshold is proposed under which this would only apply to those organisations with annual accounting expenditure of $5 million (the largest 11% of charities according to IRD figures). If this proposal was implemented, then any organisations with annual accounting expenditure of over $5 million that receive business income that is ‘unrelated to the entity’s charitable purpose’ could have to pay tax on this business income. This proposal may only affect a relatively small number of organisations, but it could create significant additional costs for those affected.