Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Income - Exempt income

CW 43: Charitable bequests

You could also call this:

“Money from charitable gifts in wills may be tax-free”

When someone dies, the person who manages their estate (called an executor or administrator) might receive some money. This money can be tax-free if it meets certain conditions.

The money needs to come from assets that were left to a special kind of trust, society, or institution. These are the same kinds of organisations mentioned in section CW 41(1).

If the trust, society, or institution (or a business run by or for them) had received this money directly, it would need to be tax-free under section CW 41 or CW 42.

For a short time after someone dies, the money can still be tax-free even if the trust, society, or institution isn’t officially registered as a charity for tax purposes. This applies from the day the person died until the end of the next tax year.

However, after this time period, if the trust, society, or institution still isn’t registered as a tax charity, any money received won’t be tax-free anymore.

When deciding if the money is tax-free, the executor or administrator needs to think about things like what the will says, who gets what from the estate, any debts or bills the estate needs to pay, and how these might affect what’s left to give out.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513273.

Topics:
Money and consumer rights > Taxes
Previous

CW 42B: Community housing trusts and companies, or

“Tax rules for community housing organisations that help people with housing”

Next

CW 44: Friendly societies, or

“Tax exemptions for friendly societies, with some exceptions”

Part C Income
Exempt income

CW 43Charitable bequests

  1. An amount of income derived by a deceased’s executor or administrator is exempt income to the extent to which the requirements of subsections (2) and (3) are met, having regard to all relevant matters including—

  2. the terms of the deceased’s will, including the rights of annuitants, legatees, and other beneficiaries; and
    1. the nature and extent of the debts and liabilities of, and other charges against, the estate and their likely effect on the income and assets available for distribution to the beneficiaries; and
      1. the shares and prospective shares of the beneficiaries in the income and assets of the estate.

        1. The first requirement is that the amount arises from or is attributable to assets of the estate that have been left to a trust, society, or institution of a kind referred to in section CW 41(1).

        2. The second requirement is that the amount, if derived by the trust, society, or institution or by a business carried on by, or for, or for the benefit of it, would be exempt income under section CW 41 or CW 42.

        3. An amount of income derived by a deceased’s executor or administrator that is derived during the period beginning on the deceased’s date of death and ending at the end of the income year that follows the income year in which the deceased died is not prevented from being exempt income under this section merely because the trustee or trustees of the trust, the society, or the institution is not, or are not, a tax charity.

        4. For the purposes of subsection (4), until the end of the income year that follows the income year in which the deceased died, the requirements of sections CW 41 and CW 42 for the trustee or trustees of the trust, the society, or the institution to be a tax charity must be disregarded when applying those sections for the purposes of this section.

        5. This section does not apply to an amount of income derived after the end of the income year that follows the income year in which the deceased died if, at the time that the amount of income is derived, the trustee or trustees of the trust, the society, or the institution is not, or are not, a tax charity.

        Compare
        Notes
        • Section CW 43(4): amended, on , by section 22(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
        • Section CW 43(5): amended, on , by section 22(2) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
        • Section CW 43(6): amended, on , by section 22(3) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
        • Section CW 43 list of defined terms registered as a charitable entity: repealed, on , by section 22(4) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
        • Section CW 43 list of defined terms tax charity: inserted, on , by section 22(4) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).