Worknow_Aotearoa_NZ

Letter to IRD Re: tax + GST obligations of the charitable or business organisation

Time to be specific. What I wanted to know was whether organisations would be penalised for participating in a time trade community that supports volunteer mentoring and business based work-experience.

While my letter was only one page long it solicited a three page response from the IRD. More good news confirming the tax free status of time trade but rather than providing this information in part, I offer for your interpretation, copies of both my letter and the IRD response.

Tax Inquiry 26 January 2010 / IRD Response 24 March 2010

For more information on the IRD treatment of Time Trade please refer to Tax & GST

Letter to IRD Re:Tax obligations for volunteer work experience

Dear Sir / Madame,

Thank you for your letter dated 24th September outlining the legislation upon which your advice is based. I now seek clarification on two points please.

1. We intend time trade to be a tool to promote, support and encourage people to volunteer in the community. For example;

• Sue Smith volunteers with the SPCA to walk a dog one afternoon. After the work is done the SPCA provides feedback for Sue’s online talent profile with the comment “Sue did a great job, she was on time and works well with animals” . They also credit Sue 1 hour for the 1 hour she volunteered.

• If charitable organisations use time trade as a means to provide recognition of volunteer work and offer constructive feedback on volunteer contributions will such an exchange be liable to any type of tax or GST?

2. We want to facilitate volunteer work experiences for young people and believe time trade provides a means to promote, encourage and reward volunteer work experience. However, if a business offers students Volunteer Work Experience for example;

• to shadow and learn from a business person
• attend meetings and take minutes or
• work with employees and contribute to a business project

And then use our time trade system to

1. place constructive feedback about the volunteer and;
2. credit the volunteer time in recognition of the time they volunteered

Would such activity be liable for Tax and GST?

Can you please clarify the treatment of these time trades for all tax or gst purposes. I appreciate your help to understand where our tax and legal obligations are on these matters. Thanks for your time.

Kind Regards,

Renee Lee
www.worknow.co.nz
renee@worknow.co.nz
+64 21 18 300 50

IRD Response Received 18 January 2010

On the basis that:-

• volunteer workers are freely undertaking volunteer activity within New Zealand chosen either by themselves or a group of which they are a member and
• volunteer activities do not form part of a business activity ordinarily carried on by the volunteer and
• a benefit is provided to the community or another person for which there is no intention of private pecuniary profit for the person

NO TAX LIABILITY ARISING

• the crediting of time to the volunteer and
• the posting of feedback on their volunteer contribution

IS NOT considered to give rise to an INCOME TAX or GST liability to the volunteer undertaking the work.

The time credit is considered to be a form of reimbursement of time and or costs that may have been incurred by the volunteer in undertaking the volunteer work, which is accordingly TAX EXEMPT

Copies of Correspondence

Tax Inquiry 7 December 2009 / IRD Response 18 January 2010

For more information refer to Tax & GST