compliance Archives | Edmonds Judd

Taxing the business income of charities

February 26, 2026

Charities & Not-for-Profits, Government & Policy, Regulatory Compliance, Taxation, Trusts & Legal Governance

Inland Revenue proposal unlikely to proceed

In February 2025, Inland Revenue issued a paper entitled ‘Taxation and the not-for-profit sector’ (the Issues Paper).

Among other things, the Issues Paper proposed taxing the business income of charities, where that income did not relate to their charitable purposes. This was highly controversial and resulted in a flurry of submissions.

Charities in New Zealand

Section 5 of the Charities Act 2005 defines ‘charitable purpose’ as including ‘every charitable purpose, whether it relates to the relief of poverty, the advancement of education or religion, or any other matter beneficial to the community.’

From time to time, public debate arises over organisations that have been granted charitable status, particularly where that status is seen as controversial. For example, Greenpeace has gained and lost charitable status a number of times, and Family First has had charitable status declined by the Supreme Court. After serious allegations of abuse and law-breaking, Gloriavale’s charitable status is under review.

One charity in New Zealand has been controversial for some years. Sanitarium, the company that makes Weet-bix and other breakfast cereals, is owned by the Seventh-day Adventist Church.

As a general rule, where a charity owns a business, and receives business profits, tax does not need to be paid on those profits, because they are being distributed to a charity which can only use them for charitable purposes. This tax exemption was closely scrutinized by Inland Revenue in the Issues Paper.

Taxing business income

The Issues Paper suggested that businesses owned or operated by charities have certain competitive advantages over non-charitable businesses. These businesses:

Can accumulate funds without paying tax, and therefore invest in and grow their businesses faster, and
May not face the same compliance costs as tax-paying businesses.

This led to Inland Revenue’s proposal to tax charities’ business profits where they were not related to the charitable activities in question.

The charitable sector argued that it would be very difficult to identify what business activities were related to furthering a charitable purpose and what activities were unconnected.

The Salvation Army’s thrift stores might remain untaxed, but what about Sanitarium’s production of healthy breakfast cereals? Sanitarium might argue that it provides free healthy breakfasts in more than 1,400 schools as part of the overall charitable endeavours of the Seventh-day Adventist Church. (It might also make the point that John Kellogg invented cornflakes in the late 1800s because he believed that eating bland breakfast cereals facilitated godly morality.)

More specific counterarguments were also made in submissions. Charities said that they faced a number of competitive ‘disadvantages’ which for-profit businesses did not face; these include a limited ability to raise finance and differences in their ability to claim imputation credits. Any advantages their businesses might enjoy were offset by disadvantages.

Submissions also said that where business profits were taxed and then distributed to the charity which owned the business, they would always have to be used for charitable purposes, and a tax credit would need to be given to the charity in due course. It was argued that it would be time-consuming and costly (for both the charities and Inland Revenue) to make a tax payment and later receive a credit in respect of the same funds.

A number of charities also said that they face much greater compliance costs than small businesses. They have, for example, much more stringent audit requirements; if the law changed, there might need to be an income threshold whereby small charities are exempted from having to distinguish between types of income earned.

Sue Barker, a well-known tax and charities lawyer, said that the Issues Paper did not start by asking the fundamental question of whether there is a problem in the charitable sector regarding the payment of business income tax? If charities are misusing funds and not using them for charitable purposes, this would justify more scrutiny over charitable activities and perhaps better enforcement of existing laws, but it would not justify a law change.

Government response

Recently, Revenue Minister, Simon Watts confirmed that Inland Revenue is unlikely to pursue the proposal to tax charities’ business income. He suggested that there might be more scrutiny over the way charities use funds to ensure that existing laws are being followed, and there may be changes yet to come regarding ‘donor controlled’ charities, including rules about minimum distributions which must be made each year.

Charities seem to agree that better enforcement of existing laws is preferable to more law changes. The not-for-profit sector has already responded to considerable change in recent years; charitable trusts were impacted by the Trusts Act 2019, and incorporated societies have been significantly affected by substantial law changes under the Incorporated Societies Act 2022.

The most common criticism of New Zealand law relating to charities seems to be that ‘advancement of religion’ qualifies as a charitable purpose, even where the religion (or a popular figure associated with it) has a questionable reputation. There are, however, no current proposals to review that aspect of the law.

DISCLAIMER: All the information published in Trust eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Trust eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2026. Editor: Adrienne Olsen. E-mail: [email protected] Ph: 029 286 3650

Business briefs

February 2, 2026

Artificial Intelligence & Technology, Business & Investment, Consumer Rights, Immigration Law, Regulatory Compliance

Launch of the Business Investor Visa

The government has introduced the Business Investor Visa (BIV), a new immigration pathway aimed at attracting experienced international investors to strengthen New Zealand’s economy. The launch of the BIV follows the closure of the Entrepreneur Work Visa and represents a significant shift toward sustained investment in established New Zealand businesses.

The BIV offers two residency pathways:

Work-to-residency (3 years) – minimum investment threshold of $1 million, or
Fast-track residency (12 months) – minimum investment threshold of $2 million.

Investments must be directed into an existing, actively operated New Zealand business. Other key requirements include demonstrated business experience by the investor, investment in a business that employs at least five full-time staff, and compliance with approved and qualifying business categories.

For New Zealand business owners, the BIV presents an opportunity to attract new capital, expand operations and generate employment that, in turn, will promote long-term economic growth.

Responsible AI usage

AI is advancing and reshaping how businesses operate. However, if you adopt AI without a clear strategy it may expose your business to serious risk – including, without limitation, bias, errors, privacy breaches and cybersecurity threats.

To help businesses navigate this, the Ministry of business, innovation and Employment has released Responsible AI Guidance for Businesses, The Guidance outlines practical steps to ensure AI use is responsible and aligns with your commercial goals, legal obligations and ethical standards.

Key recommendations include:

Defining your purpose for using AI and starting with low-risk projects
Maintaining human oversight to prevent errors and unintended consequences
Reviewing governance, risk management and compliance processes
Choosing trusted AI providers and implementing strong data protection methods, and
Training staff to understand AI’s capabilities and limitations.

For a more comprehensive overview, we encourage you to read the Guidance and consider seeking legal advice to protect your business as you implement AI. While AI can deliver significant benefits, successful implementation requires a cautious and comprehensive approach.

HelloFresh and the Fair Trading Act 1986

In the Winter 2025 edition of Commercial eSpeaking, we reported on the Commerce Commission’s allegations against HelloFresh for misleading conduct under the Fair Trading Act 1986 (FTA).

The commission’s prosecution focused on an 18-month cold call campaign, during which former customers of HelloFresh were offered discount vouchers without a clear explanation that accepting those offers would result in subscriptions being reactivated, consequently triggering customer account charges.

Recently, in the Auckland District Court, it was found that the way the discount vouchers were presented created a misleading overall impression for former customers. HelloFresh was fined $845,000 as a result.

The above decision underscores the serious consequences of breaching the FTA. This is particularly relevant now, as the government has proposed to substantially increase the penalties for non-compliance. At present, the maximum penalties for misleading and deceptive conduct under the FTA are capped at $200,000 for individuals and $600,000 for businesses. The proposal to increase these limits will allow penalties to reach the greater of:

$1 million for individuals
$5 million for businesses
Three times the value of any commercial gain or loss avoided, or
The value of the transaction(s) involved.

Although a new civil regime will also apply for most breaches, the most serious or deliberate conduct will remain a criminal offence. These changes are expected to take effect by late 2026.

This announcement marks a significant increase in potential liability, emphasising the need for businesses to ensure advertising, pricing and promotional terms are accurate and transparent. Disclaimers buried in fine print may not be enough to correct misleading impressions. With penalties expected to become significantly higher, compliance with the FTA is essential to avoid financial and reputational consequences.

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2026. Editor: Adrienne Olsen. E-mail: [email protected] Ph: 029 286 3650

Major changes ahead for New Zealand’s financial landscape

June 4, 2025

Business Compliance, Credit Markets, Financial Services Regulation, Government Reform

Credit Contracts and Consumer Finance Amendment Bill

On 31 March 2025, the government introduced into Parliament a reform package making major changes to

New Zealand’s financial services landscape. Included in the reform package is the Credit Contracts and Consumer Finance Amendment Bill which proposes to reform the regulation of credit markets to make them fairer, more efficient and transparent.

The overall intent of the Credit Contracts and Consumer Finance Act 2003 (CCCFA) is to protect consumers when borrowing money, or buying products or services on credit. The bill proposes significant changes to the CCCFA to modernise and improve the regulation of financial services, benefitting both consumers and lenders.

Key proposals and Implications

The bill proposes several key changes to the CCCFA. These aim to simplify and streamline compliance obligations for consumer credit providers (ie: businesses or individuals that offer credit, such as loans or credit cards) and, in some ways, reduce the risk of CCCFA breaches. We summarise the key changes.

FMA oversight

One of the most significant changes proposed is the shift in regulatory responsibility. The bill proposes to transfer the responsibility of enforcing the CCCFA from the Commerce Commission (CC) to the Financial Markets Authority (FMA).

The shift is intended to align consumer credit regulation with broader finance markets regulation under the Financial Markets Conduct Act 2013 (FMCA). This will result in the FMA becoming the sole conduct regulator for financial markets in New Zealand. By centralising regulatory oversight, the bill aims to create a more cohesive and efficient regulatory environment.

FMA licensing

The bill introduces a licensing regime for lenders, whereby lenders will need to be licensed under the FMA. This will replace the current certification system, where lenders must be certified by the CC (unless they are already exempt). For those already certified under the CC, there won’t be an immediate impact as they will be deemed to be licensed under the FMCA.

This change ensures that only qualified and responsible lenders operate in the market. The new licensing process will involve more stringent checks and ongoing compliance requirements that are intended to improve the overall quality and reliability of lenders.

Consequences of disclosure breaches

Another important aspect of the bill is the proposed amendment of disclosure requirements. The revision aims to avoid disproportionate consequences from minor or technical disclosure breaches.

The change will limit situations where a lender’s failure to make required initial or variation disclosures results in the debtor not being liable for the costs of borrowing. This change aims to balance the need for transparency with the practicalities of compliance, ensuring that consumers are adequately informed without imposing disproportionate burdens on lenders.

Other changes

The bill also includes some other changes for lenders that are intended to simplify and streamline the regulation of financial services. The key benefits include:

Revoking the due diligence duty for directors and senior managers
Repealing the annual reporting requirements, reducing ongoing compliance costs for lenders (ie: not required to prepare annual reports)
Wider exemptions for loans to borrowers who are trustees (previously this exemption only applied to family trusts, but the bill extends this to any category of trust), and
Lenders no longer being required to provide continuing disclosure if the borrower’s unpaid balance is available on the lender’s website, offering a more flexible approach to meeting disclosure requirements.

Next steps

It will be crucial for businesses to either engage, or keep up to date, with the consultation process for the reform package and to proactively adapt to the proposed changes.

Given the FMA’s additional role, lenders should evaluate their compliance practices to meet regulatory expectations under the licensing regime, and familiarise themselves with the additional obligations for licenced entities under the FMCA.

Being proactive and understanding how these changes will impact your business, especially lenders unfamiliar with FMCA licensing, will help ensure a smoother transition and improved compliance

once the changes are fully implemented.

Although the government has not indicated when this legislation will pass, it is expected before the end of the year. If you need assistance preparing your business for these proposed changes, please contact us. We are here to help.

Contract compliance

December 19, 2022

Amanda Leahy

Commercial, First Job, Your Own Business

Fair Trading Amendment Act 2021 now in force

If you have customer contracts, inter-business contracts or contracts valued under $250,000, the Fair Trading Amendment Act 2021, that updated the Fair Trading Act 1986, should be on your radar. The changes came into effect on 16 August 2022.

Unfair terms, unconscionable behaviour and direct sales are all targeted in the updated legislation that includes an expansion on the regulation of ‘unfair terms’ impacting all consumer contracts and standard, trade and small contracts. This means all businesses should be reviewing these changes to ensure they comply with the 2021 Act to avoid penalties.

In this article, we focus on the ‘unfair’ contract term changes as these will impact almost all businesses.

What is an ‘unfair’ contract term?

Contract terms that are now considered ‘unfair’, and therefore unenforceable, are any terms that meet all of the following requirements:

The contract or term causes a significant imbalance in the parties’ rights and obligations arising under the contract
The term is not reasonably necessary to protect the legitimate interest of the party who is advantaged by it, and
The term would cause detriment (financial or otherwise) to a party if it were applied, enforced or relied upon.

There are a few exemptions to the above requirements, including where the contract specifies a transparent price term, upfront price, defines the main subject matter of the contract or is expressly permitted by another law.

Examples that could be considered unfair include terms that:

Refer to other hidden or ambiguous terms and conditions, such as committing your customer to ‘standard terms that will be provided with the supply of goods’
Prevent someone from taking legal action
Give one party a unilateral ‘final decision’ status
Make your customer bear all the risk
Restrict your customer from transferring their rights under the contract (i.e.: non-transferable), and
Allow you to transfer your contract without their consent.

If it is unclear whether a term is ‘unfair’, the Commerce Commission can make that determination or ask the court to do so. In making its decision the Commission or court is required to consider any matter it considers relevant; the two most important matters are, however, the contract as a whole and the unfairness of the term.

Does this apply to your contracts?

This legislation applies to a vast number of contracts including consumer contracts, standard contracts, in trade contracts and small contracts. While most people understand that a consumer contract is one engaged between a business and a customer, to properly understand if any of the contracts you use in your business come under this legislation, it is important that three key terms – ‘standard’, ‘in trade’ and ‘small’ – are clarified.

Standard contract

A ‘standard contract’ is any contract in a templated form. This template is not subject to negotiation and is more of a ‘tick box’ of a contract. Most terms of trade and standard issued terms and conditions would be considered a ‘standard form contract’.

In trade contract

Using an ‘in trade contract’, you or your business must undertake any trade, business, industry, profession, occupation, activity of commerce or undertaking related to the supply of goods, services or interests in land.

Small contract

‘Small contracts’ are contractual business relationships that result in less than $250,000 in anticipated value in the first 12 months of the relationship.

In addition, and importantly, almost all independent contractors will be caught up in these changes. Contractors should review their agreements to ensure they remain compliant with the legislation.

Penalties

If your contract, or terms of trade, is considered unfair, a court may determine any number of remedies should be applied including:

Removal of the clause
Refunding money or pay damages
Preventing the business from using the clause in any way, and
Fines of up to $200,000 for an individual or $600,000 for a company or body corporate.

If a clause is considered unfair in a standard contract, there is a risk it could extend to all the contracts issued by your business and every consumer or business negatively impacted by that clause could be entitled to a remedy.

The new law reflects the reality that many small businesses are sole traders or small family-owned businesses that require more protection from unfair contractual terms than large corporations. On the flipside, it also means all businesses should take additional care to ensure their contractual terms are fair and reasonable, and comply with the legislation.

If you are uncertain if your contracts are compliant or would like to discuss this change, please contact us.

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022. Editor: Adrienne Olsen. E-mail: [email protected]. Ph: 029 286 3650

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