Tax treatment of cash gifts and koha

The Church’s policy is:

  • The basic test is that where money is given in exchange for services provided, then that is income and needs to be taxed.
  • In a situation where a minister (or some other person) receives a stipend or wage for a full-time job where there is an expectation that he or she will conduct weddings or funerals), for example, as part of that work, and pays tax on that stipend or wage - then as long as tax is paid, they have fulfilled their responsibilities to Inland Revenue. Any other money given to that person, at say a funeral or wedding could be regarded as a non-taxable gift.
  • Ideally a person receiving some sort of gift in these circumstances will have:
  1. Clarified with his or her employer or parish how such gifts should be treated, and
  2. Clarified with the giver of gifts whether the gift is intended for him or her personally - or is a donation or gift for the church.
  • In a situation where a minister depended on deriving his or her income from payments for services provided, then this income would need to be declared.
  • If a beneficiary of the gift or koha was receiving an unemployment benefit, and they advertised or promoted their services for the purposes of receiving some financial benefit then that person would need to declare that gift or koha as income.
  • If, on the other hand, the beneficiary was invited by family or friends to conduct a wedding for which he or she received some money, then that money may or may not be treated as a gift depending on the circumstances. If this person was doing this regularly, or where there was any suggestion of some sort of contract (“if you conduct this service then we will pay you”) or where the person indicated an amount which he or she should be paid, then we move from gift to income.
  • In a situation where a person receives money or goods through the compassion, concern, or generosity of another, and not because of any service that person has provided, then that would not be considered a payment but a gift.

There may be grey areas here – every situation involves some question about the intention of the payer and payee, the nature and expectations of the transaction etc and it is in this grey area which the IRD might show some allowance for cultural subtleties.

However the IRD is going to look with concern on any situation where an individual expects payment for a service he or she provides and for which no income tax is paid. The situation where a regular offering is given for services provided by a minister - then its likely the IRD will view that income as taxable. The fact that it is regular anticipated and relates directly to the provision of a service all suggest that it should be declared as income.

If you are receiving or paying cash gifts/koha, and are not sure of if or how the payment should be declared, please contact Brendan Sweeney for advice.

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