Budget 2026 — Proposed changes for charities and not-for-profits
Inland Revenue has released an information sheet (dated 28 May 2026 outlining a package of proposed changes affecting charities and not-for-profits as part of Budget 2026. These are still proposals and may change as the legislation works its way through Parliament.
Most of these changes will have limited or no impact on our clients. The one exception we want to flag now is the proposed change to the tax treatment of honoraria, which is likely to be relevant to those of you who rely on volunteers.
Volunteers and honoraria
The proposal would give not-for-profit organisations the option to treat honoraria as salary or wages, rather than as schedular payments as they are treated now.
Under the current rules, honoraria paid to volunteers are treated as schedular payments, which can be confusing and creates unnecessary tax compliance work for those receiving the payments. The proposed change is intended to simplify this. It mirrors an approach already introduced in 2019 for Fire and Emergency New Zealand volunteers and would extend that optional treatment to all not-for-profits.
If enacted, this change would apply from 1 April 2028.
Other proposed changes
The information sheet also covers a number of other proposals, which we’ve listed below by title. We don’t expect these to affect most of our clients, so we haven’t gone into detail at this stage:
Changes to the donation tax credit (a new cap on eligible donations)
Membership subscriptions and levies for taxable not-for-profits remaining non-taxable
Increasing the effective tax-free threshold for smaller not-for-profits
Filing obligations for taxable not-for-profits
Donation tax credit in-year refunds
Transferring donation tax credit refunds to charities
Repeal of the income tax exemption for non-resident charities
Trust income allocations to tax-exempt beneficiaries must be paid within six months.
If any of these topics are of interest to you, please get in touch and we’ll happily talk you through how they might apply. Otherwise, we’ll publish fuller guidance once the legislation has been passed.