Separation of Rotary Clubs and Rotary Charitable Trusts
The widespread establishment of Rotary Charitable Trusts with Trustees appointed by a settlor Rotary Club prompts some simple rules to preserve the integrity of Clubs (usually an Incorporated Society), the settled Trusts (an equitable arrangement) and Rotary itself.
A Rotary Club is a membership-based entity. Its affairs are separate from those of the Trust. Club members are not members of the Trust although their voluntary efforts may enable the Trust to conduct business – e.g. fundraising.
The governance of the Club should be separate from the governance of the Trust. each entity should have separate meetings, bank accounts, minutes, etc. Trusts registered under the Charities Act 2005 and listed on the Charities Register are considered “approved donees” and exempt income tax provided they do not make
overseas remittances from business income (events, fund-raisers, etc). Donated monies are not included in this restriction. Receipts issued by “approved donees”, for donations of at least $5, are required to evidence tax deductions for charitable donations.
A Club is not an “approved donee”. Club accounts should not be vehicles for handling monies for which donors expect to receive an “approved donee” tax receipt (e.g. depositing donations plus subscriptions into the Club account and subsequently receiving an “approved donee” receipt for the ‘donation’ from the Trust). To avoid doubt, Club members wishing to receive “approved donee” receipts should be urged to donate directly to the registered charity (e.g. the Trust).
The Club is liable for tax on business income but may also be eligible for a rebate of $1000. Donations to “approved donees” are deductible business expenses. (entitieslisted in Schedule 32 Income Tax 2007, such as The New Zealand Rotary Clubs Charitable Trust, are also “approved donees”).
monies received by a Club during the normal course of its meetings (e.g. meals, a sergeant’s session, the ‘box’, raffles for donated/purchased goods, etc) or business activities (e.g. fundraising) must be properly accounted for by the Club (i.e. mutuality is exempt whereas business activity is taxable).
Goods or services cannot be tagged to donations; neither may they be included on an “approved donee” tax receipt. (e.g. entry price to an event may not include a ‘mandatory’ donation).
Clubs or Trusts conducting business that results in taxable supplies of $60,000 or more per annum must also register for GST.
Clubs must make annual (public) returns to the Registrar of Incorporated Societies; Trustsmust make annual (public) returns to Charities Services which is part of the Department of Internal Affairs.
If Clubs or Trusts are in any doubt about these matters, they are urged to seek professional advice as non-compliance with prevailing Income and Charities Acts jeopardises the integrity of Rotary in our community.