In recent years, not-for-profit organisations in New Zealand have seen several legislative changes that have had a big impact on the sector. For starters, organisational activities and community needs, along with board member responsibilities, risks, and legal obligations have all increased. While all not-for-profits are created to benefit the public and their members, not all of them need to register as a charity. The legal structure and status you choose as a non-profit will depend on whether or not the organisation has a charitable purpose and what activities you plan to conduct.
The key thing all non-profits have in common is that they are not operating for the purpose of making a profit for their owners and shareholders. Yet, different legal structures will require following regulations from various government departments.
Charitable purpose, according to the Charities Act 2005, covers all purposes for conducting charitable activities, including relief of poverty, the advancement of education or religion, promoting sports, and other matters beneficial to the community . This purpose will determine how your organisation is regulated and by who.
Not-for-profit organisations in New Zealand
The not-for-profit organisations’ sector in New Zealand includes charities, voluntary and non-government entities, each with their own purpose. The major types of not-for-profits can be grouped in the following way:
|Culture and Recreation
||Arts societies, spinners and weavers groups, national ballet and opera, sports clubs, museums and galleries, community newspapers and radio stations, service clubs
|Education and Research
||Smaller primary and secondary schools, adult or community education centres, nonprofit research entities, childhood services
||Social service providers, including disability services, family services, community services for older people, employment services, emergency services, some children’s support services
|Environmental and Animal Protection
||Environmental and animal protection groups unaffiliated with governments
||Social housing neighbourhood centres, community development projects not run by local government, employment and training groups
||Groups advocating for particular or local interests, political parties, legal aid services and community law centres
||Volunteer promotion and brokerage groups, philanthropic trusts and foundations
||Churches, mosques, temples, synagogues, religious organisations that don’t fit within the category of hospitals, schools, or social services
|Unions and Professional Associations
||Professional associations, trade unions, business associations, Chambers of Commerce
|International Aid and Relief
||Overseas aid and development organisations
The non-profit sector is made up of entities that choose not to distribute profits to members and owners, and instead are operating as non-governmental (private) entities organised and led by their members, self-governing, and non-compulsory. Non-compulsory means that activities involve voluntary participation and members are not required to contribute time and money.
Why is regulation necessary?
As organisations grow, they begin to hire people and receive public funding. Regulation is necessary to ensure proper governance is practised, industry laws are followed, and funds are not misused. Not-for-profits and charities are accountable to their stakeholders and may be established under various laws depending on their legal structure. This may include having their own Act of Parliament or being accountable to the Charitable Trusts Act or the Charities Act. As regulation requirements increase, governance is becoming more important in the not-for-profit sector.
While members of Boards manage operations for their not-for-profit organisations, the New Zealand government has set up various rules that provide oversight for these individuals and the way they govern. These rules exist to protect the public and donors who fund activities and clients who receive services. Engaging in fraudulent activities can therefore lead to fines, a loss of tax exempt status, or even a lawsuit. Compliance is beneficial for everyone and oversight allows organisations to better serve their communities, raise more money, and establish public trust.
Legal obligations under the law
There are many possible legal structures and laws involved in the regulation of not-for-profits and charities in New Zealand. Each regulator has a different process for resolving governance issues. The main legal structures a non-profit can choose can be unincorporated groups, incorporated societies, trusts, charitable trust boards, companies, or industrial and provident societies. Being a registered charity also comes with its own set of legal obligations under the law.
Unincorporated Group Obligations
Unincorporated groups don’t need to go through the same administrative process as other not-for-profit organisations or charitable organisations. They have fewer requirements, for example, they don’t need to register their members or file annual financial statements with the Registrar of Incorporated Societies. At the same time, they have no legal standing and rely entirely on their members to conduct operations and enter into agreements.
Incorporated Societies Obligations
Incorporated Societies Act 2022 outlines the responsibilities of incorporated societies and the risks of governing. The Act requires these entities to register a new Constitution by 2025. The constitution must be updated to include the name, purposes, membership procedure, membership termination procedure, details about the roles, functions, powers, and procedures of the committee. Procedures for election, managing finances, amending the constitution, resolving disputes, conducting general meetings, and re-distribution of assets when the society stops operating.
Charitable trusts registered with Charities Services must file annual financial statements and must report address changes, rules changes, and board name changes. Like any other charity in New Zealand, a charitable trust must meet tax obligations and comply with Inland Revenue Department rules. If the board engages in criminal activity such as fraud or theft, they can be reported to the police. The Attorney General may also make enquiries about a charity’s activities and governance.
Community groups have the option to become companies, though if they do so they will be legally required to comply with the Companies Act 1993. This legal structure means organisations are obligated to register and incorporate through the Registrar of Companies to become a body corporate under the name of their company. Companies must have a constitution that complies with the Act and need a special resolution to change it. They must also hold annual meetings and keep detailed records such as annual reports, financial statements, and tax returns.
Industrial Provident Societies Obligations
This form of non-profit organisation is similar to a co-operative and is regulated under the Industrial and Provident Societies Act 1908. It represents an entity formed to carry out a trade, business, or industry and consists of small business owners who wish to continue operating independently while working with others for mutual benefit. Co-operative societies in New Zealand must provide a benefit to their community, have at least seven members, and have a formal set of rules.
The Charities Act 2005 regulates registered charities such as societies, trusts, and institutions, and oversees their registration process and other obligations. Under the Act, registered charitable entities must meet the following duties. Not-for-profits and charities that request funds, sell lottery tickets, appear for donations, or canvas for subscriptions by phone or Internet must be registered and disclose their registration number upon request. Charitable entities must notify Charities Services of changes to their name, address, officers, rules, or purpose. Organisations must prepare an annual tax return and prepare and have audited their financial statements.
Maori Organisations Obligations
Maori land trusts are regulated by the Te Ture Whenua Maori Act 1993. They must have an appointed trustee or trustees and can obtain charitable status. In this case, they must meet the obligations of registered charities. For example, maraes are recognized as having a charitable purpose if the physical structure of the complex is on Maori land . A marae is a complex that includes a meeting house (Wharenui), a kitchen and dining hall (Whare Kai), and a sacred space for conducting washing ceremonies (Whare Paku). Maori land trusts must submit annual financial statements to the Registrar of Maori Land Court.
How to start a non-profit in NZ?
Not-for-profits and charities in New Zealand are overseen by Charity Services, a federal government branch of services that provides guidance on what you will need to register. Not all non-profits are considered charities but all charitable organisations are not-for-profit. If you decide to register as a charitable organisation, you will need to create your charitable purpose, rules, a list of officers running the charity, and be familiar with the benefits and obligations of being a registered organisation. If your non-profit doesn’t fit the definition of charitable purpose, you will still need to decide how you plan to operate and choose a legal structure that works for you. Each structure has its own requirements. You should find out about tax obligations and decide whether to incorporate or not. Better Boards can offer governance advice and tools for better governance.
What is New Zealand’s Charities Services?
Charities Services administers the Charities Act 2005 in partnership with other government departments like Inland Revenue and the Ministry of Business, Innovation and Employment. It advises governments, no-for-profit board members, and other not-for-profits and charities and their stakeholders, promotes public trust and confidence in the charitable sector, and encourages the use of existing charitable resources. You may still be able to receive information and support as an unregistered organisation, but will not be required to meet the same legal obligations such as submitting tax returns or financial reports.
Why are having a charitable purpose and your rules important?
As a non-profit organisation wishing to register and conduct charitable activities, you must clearly set out a list of purposes in your rules, beginning with the organisation’s main purpose. The purpose is the main objective your organisation plans to achieve through its activities. Another way of putting it is that this is your overall mission. New Zealand courts recognise many charitable purposes that meet the social needs of the country. Rules are the documents that set out a charity's purposes, what it does and how it operates. These two elements will later guide your organisation’s decisions and actions.
What can qualify to start a non-profit in NZ?
To meet the definition of a not-for-profit organisation, your purpose must focus on what the government considers to be charitable activities. They can include things like working to reduce poverty, advancing education or health, or protecting the environment. If your revenue comes largely from donations, membership fees, fundraising activities, grants or investment incomes, rather than sales, you may also qualify as a non-profit. Generally, only registered non-profits can receive certain tax incentives for donations or apply for grant funding but to qualify for these benefits, you will need to register with the government.
How do I register with IRD and apply for tax exemption?
Not all not-for-profits can receive tax exemptions. To do so, an organisation must register with Charities Services and obtain an IRD number. Once you register, you may qualify for tax-exempt status as long as your income is used for charitable purposes. You will also have several legal obligations to meet to maintain your status. There are different types of non-profit organisations, including schools, sports clubs, and charities. Each legal form has different rules to follow. The best way to know which rules apply to your organisation is to contact the Inland Revenue Department.
For more on charitable trusts, visit The Charitable Trusts Register
For advice on charitable status, contact the Department of Internal Affairs Charities Unit
For more information on how to establish a charitable trust, see the page on Trusts
For information about how to apply, visit the Companies Office website.
For more on Incorporated Societies, visit The Incorporated Societies Register
Learn more about the resources available through Charities Services.
This fact sheet is intended as a simple overview. Non-profit law is incredibly complex and there are many components, allowances, restrictions, exceptions and important qualifications that are not described above. Dedicated legal advice should be sought from a legal practitioner before taking action.