Government tax credit cap will inhibit charity donations, experts warn

New Zealand's 2026 Budget has introduced a cap on donation tax credits, a move that has surprised and dismayed the charities sector. From April next year, donors will only be able to claim tax credits on the first $100,000 they give annually, limiting their tax rebate to a maximum of $33,000.

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The 2026 Budget has put to bed a range of nettlesome reforms the Government has been mulling for the charities sector.

The Inland Revenue Department estimates this reform will boost government coffers by $19 million each year. However, legal experts and charities argue that the cap will significantly inhibit generosity and discourage large donations, potentially impacting the sector's ability to fund its work.

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The charities sector has responded with surprise and dismay, saying the move will chill large donations.

Dr. Juliet Chevalier-Watts, Associate Professor at the University of Waikato's School of Law, Philosophy and Politics, and Steven Moe, a partner at Parry Field Lawyers, suggest the measure will chill large donations. The government's decision, detailed in the recent Budget, aims to increase revenue but faces strong opposition from organizations reliant on substantial contributions.

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donors will only be able to claim donation tax credits on the first $100,000 they give each year. That means a maximum of $33,000 tax back for big donors.