Payroll software companies are soon to play an important role in the promotion of charitable giving in New Zealand according to Heather Newell, a specialist in fundraising for the non profit sector.
“We are hoping that payroll software providers will play a key role in persuading companies that there are benefits for both the business and the community in promoting charitable payroll giving.”
The legislation allowing payroll giving completes a set of taxation changes started under the last Labour Government which relaxed the taxation provisions around charitable giving. Last year the cap on charitable giving was lifted for individuals and corporates. Closely held companies and Maori incorporations were also permitted to claim tax deductions on donations.
Individuals can claim one-third of every dollar, or 33%, they donate up to the value of their total annual income. Whereas previously refunds were limited to $630, no matter how much an individual donated. Businesses can now claim a tax refund of up to 100% of their charitable donation to the maximum value of their annual income.
In announcing the passing of this new legislation, Minister of Revenue, Peter Dunne said, \”The eagerly awaited payroll giving scheme for charitable donations, which will operate through the tax PAYE system, will come into being in January. Under the scheme, people whose employers sign up for the scheme will receive the tax benefits of their donations each payday, without having to present donation receipts.
Although the legislation has just passed through the House it has been on the drawing board since the Labour Government’s last budget in 2008.
For the charitable sector, organisations have been investigating the opportunities since last year.
Foresee Communications Limited which is offering a payroll giving advisory service to employers, conducted some preliminary research early in 2009. At that stage very few employers had heard of the concept and even government departments were unaware of the proposals. Director Heather Newell said that initial promotions internally within government had been successful and the IRD and MSD had confirmed their support. Other research undertaken in New Zealand in recent years shows that employees feel good about an employer who supports a cause they believe in. More than 70 percent have a strong feeling of loyalty in companies that support causes. In companies where there is no support for charities, 70 percent agree that the company should support charitable causes.
CCS Disability Action, for example, has explored the area of payroll giving but a lack of interest on the part of corporate businesses and organisations (such as government departments) wishing to participate means they have temporarily put their plans on hold. \”We look forward to any initiatives – legislative or otherwise – that will stimulate interest in the area,\” says Ali Bradshaw, National Funding Advisor at CCS Disability Action. \”In this time of recession, the corporate sector needs an incentive to undertake such a venture. Overseas there has been funding made available for the set up costs to contributing organisations and we would welcome such an initiative from government or any other body.\”
Other well known organisations like Greenpeace, Barnardos, Oxfam and Amnesty International have investigated various collaborations to push forward promotional opportunities with corporates.
Don Oliver of United Way, which has been working with many businesses on promoting payroll giving long before the legislation was changed, welcomed the announcement and the timing. “The latest tax breaks for charitable donations announced by the Government will boost income for New Zealand charities. Given we’ve all taken a hit with the recession, the timing couldn’t actually be better,” he said.
“Promoting payroll giving by allowing individuals and businesses to get an immediate and substantial tax break is something countries like the United States have been doing for years. We have been behind the ball, and subsequently New Zealand wage and salary earners have effectively been discouraged to give to charity. That has all changed now and the community will reap the rewards.
“Giving to charity is suddenly a whole lot more attractive for businesses going through a recession when you consider donations for businesses will now be 100% refundable. A lot of companies are committed to demonstrating corporate responsibility and community engagement. Well that’s just now got a lot easier to achieve.”
The Australian Charities Fund, an intermediary agency in Australia has conducted research on companies that offer payroll giving and those that don’t. Payroll giving has been available in Australia since 2002. Of the companies that offered payroll giving, 35% of respondents estimated their contribution to be less than $20,000 in the preceding twelve months. A review of sector and survey data suggests the average annual donation per employee to be $190 (the survey was conducted in 2004). In over half the businesses with programmes, participation was less than ten percent. One in ten businesses reported participation levels of 25% or more.
The report identified many companies perceived that it was too complex to set up and administer. In New Zealand the feeling may be echoed. A report in the business pages from a well known accounting firm warned companies that the additional administrative costs would be similar to those incurred for Kiwisaver. Many employers believe that the administrative cost will be prohibitive and some corporates have already indicated that their payroll software will not allow for the deductions.
It has been identified that promotions and marketing to businesses will be vital to ensuring the success of the scheme. Given that many New Zealand employers are small to medium enterprises it will not be easy to ensure a full understanding of the benefits. Heather Newell of Foresee Communications believes that the role played by payroll software providers will be vital in assuring employers that the benefits outweigh the costs.
Heather Newell, CFRE, MComms
Foresee Communications Limited
P O Box 40767
Upper Hutt
ph 64 4 5280742
P.S. Sign up for our free monthly e-newsletter
on fundraising and sponsorship by emailing
[email protected]
www.foresee.co.nz