Key Takeaways
- Inland Revenue is pushing ahead with a plan to tax membership fees for some societies and associations
- Accountants and organizations, such as Federated Farmers and Chartered Accountants Australia New Zealand, have expressed concerns about the proposal
- The consultation process has been criticized for being non-transparent and exclusive, with only 50 organizations invited to provide feedback
- The proposed change could have a significant impact on incorporated societies, which are already under strain
- The government has been accused of being inconsistent in its approach to tax changes, having previously backed away from changes to charities
Introduction to the Issue
Inland Revenue’s plan to tax membership fees for some societies and associations has sparked concerns among accountants and organizations. The proposal, which was first announced in May, would require organizations that charge membership fees to pay tax on that income. This has been met with opposition from groups such as Federated Farmers and Chartered Accountants Australia New Zealand, who argue that the change could have a significant impact on incorporated societies.
The Consultation Process
Despite the initial backlash, Inland Revenue has pushed ahead with the consultation process, circulating a document to 50 organizations in November. However, the consultation has been criticized for being non-transparent and exclusive, with only a select number of organizations invited to provide feedback. The Taxpayers Union has accused Inland Revenue of breaching New Zealand’s open tax-policy process by consulting only with insiders and shutting out critics. A spokesperson for Inland Revenue has defended the approach, stating that targeted consultation is a common method used to explore technical detail with tax professionals and affected parties.
Concerns About the Proposal
Accountants and organizations have expressed concerns about the potential impact of the proposed change. Angus Ogilvie, managing director of Generate Accounting and NZ division councillor for CPA Australia, has stated that the original proposal received a significant amount of feedback, with many organizations opposing the removal of the mutuality principle for membership fees. The mutuality principle allows organizations to pool members’ funds to meet overheads without being subject to tax. Ogilvie has argued that the proposed change could have a significant impact on incorporated societies, which are already under strain. He has also pointed out that the Australian case used by Inland Revenue to justify the removal of the mutuality principle was ultimately overturned by the Federal Parliament.
Inconsistencies in the Government’s Approach
The government has been accused of being inconsistent in its approach to tax changes. Having previously backed away from changes to charities, the government now seems intent on imposing changes to incorporated societies. This has been seen as inconsistent and has raised concerns about the potential impact on the for-purpose sector. Ogilvie has stated that the government’s approach seems to fly in the face of the Generic Tax Policy Process, which is designed to ensure that tax policy is developed in a transparent and inclusive manner.
Next Steps
The consultation process is set to continue until December 24, with final decisions expected to be made in early 2026. Inland Revenue has stated that anyone who wants a copy of the consultation document can request one. However, the lack of transparency and inclusivity in the consultation process has raised concerns about the legitimacy of the proposed change. As the consultation process continues, it remains to be seen whether the government will take into account the concerns of accountants and organizations, or whether the proposed change will be pushed through despite opposition.