A $19m tax saving is pricing big donors out of charity

New Zealand’s wealthiest donors have never been more generous. They may also never be this generous again. Perpetual Guardian’s latest philanthropy report shows giving distributed for its clients rose 28 percent to a record $48.4 million this financial year, with social services and health taking more than 70 percent of it.

The timing is awkward. From 1 April 2027, the donation tax credit will be capped at $100,000 of donations per donor per year, a maximum credit of $33,333.33. Today there is no ceiling. A donor can claim back a third of whatever they give.

Kirsten Kilian-Taylor, head of philanthropy at Perpetual Guardian, puts it bluntly. The cap “will completely remove the incentive of givers… that wind will come out of the sails,” she says, warning that the high-wealth gifts that “keep things afloat” will disappear.

A small number of donors carry the load

The government’s defence rests on scale. IRD’s own regulatory impact statement says the change touches roughly 350 donor entitlements, or 0.1 percent of donors. The same document concedes that group accounts for 10 percent of all claimed donation value, about $103 million. That works out at roughly $294,000 per donor, nearly three times the new cap.

This is how philanthropy works everywhere. A thin layer of major givers funds the capital campaigns, the endowments and the projects government will not touch. Treating them as a rounding error because there are only 350 of them misreads the market.

The arithmetic does not favour the Crown

IRD expects the cap to save $19 million a year once fully phased in, against total Crown spending on the credit of about $350 million. If affected donors simply trim their giving back to $100,000, the sector could forgo up to $68 million a year, more than three and a half times the saving.

The price signal is stark. On a $1 million gift, today’s credit returns $333,333, leaving a net cost of $667,000. Under the cap the credit is $33,333, and the net cost jumps to $967,000. Anyone who thinks the very wealthy will not notice a 45 percent increase in the price of something should spend time with them. Economist Shamubeel Eaqub has pointed to research showing large donors are “very price responsive” to tax incentives.

The discomfort reaches inside National. Maungakiekie MP Greg Fleming called the policy “a sledgehammer to crack a walnut” before clarifying his remarks.

A real problem, a blunt remedy

IRD’s concern is not imaginary. Its stated worry is donors using charities they control as a tax-planning vehicle, and Revenue Minister Simon Watts has said “there is no change from a government point of view”, while agreeing IRD will keep talking to the sector.

But if the abuse sits in related-party giving, the fix belongs there: tighter rules on donations to controlled entities, stronger distribution requirements, sharper audit. A blanket cap punishes the donor who writes a cheque to a hospital trust they have never sat on just as hard as the one gaming a family foundation. A fiscally conservative government should be the first to spot a rule that costs the community more than it saves the Treasury.

Donors are already adjusting

The effect is not waiting for 2027. John Morrow, head of philanthropic services at JBWere, says the old settings supported larger gifts that could be invested and distributed over decades, and the cap “reduces the incentive for those gifts beyond $100,000, and with it the pace at which that critical capital can form.” He sees early signs of donors changing the timing, structure and scale of gifts, with a likely rush before April followed by a sharp drop.

Capital projects are racing the clock. Canterbury Museum’s redevelopment carries a $91.9 million funding gap and is rethinking when it asks philanthropists for help. Meanwhile there is still no tax incentive for leaving gifts to charity in a will, so the system now discourages big gifts in life without encouraging them at death.

What business owners should do now

For anyone running a family foundation, sitting on a charity board or planning a major gift, the message is simple. Gifts above $100,000 made before 31 March 2027 still attract the full credit. Talk to your adviser this summer, not next autumn. Businesses that co-fund community campaigns should expect charities to come knocking earlier and harder, competing across a sector of more than 30,000 registered charities.

The bigger question is whether the government will test its assumption before locking it in. IRD is still in conversation with the sector, and the cap does not bite for another five months. That is enough time to replace a blunt ceiling with a targeted anti-avoidance rule. A $19 million saving is not worth teaching the country’s most generous people to give less.

Sources

• Newsroom: High-end tax rules restraining charitable giving (2026-11-11)
• RNZ: High-end tax rules restraining charitable giving (2026-11-12)
• RNZ: IRD still talking to charities about cap on donation tax credits – Luxon (2026-08-21)
• IRD: Changing donation tax credit policy settings – Regulatory impact statement (2026-05-12)
• The Press: The ‘chilling effect’ of changes to charitable donation tax rules (2026-06-14)
• JBWere: Budget 2026 and the future of major giving (2026-06-03)
• Community Foundations NZ: Why New Zealand is leaving generosity on the table (2026-06)
• IRD: Consultation scope and impact analysis for proposed $100k donation tax credit cap (2026-06-17)