The ‘chilling effect’ of changes to charitable donation tax rules

Monday, 15 June 2026

Canterbury Museum, Christ Church Cathedral and the Christchurch School of Music are all relying on philanthropic funding to complete their projects and worry the new rules will make that harder.

A surprise change to tax rules for large charitable donations could have a “chilling effect” on big Christchurch projects, the sector warns.

The move has forced at least one entity, the Canterbury Museum, to review its fundraising strategy and reconsider the timing of planned campaigns to beat the April 2027 change.

The Government announced in last month’s Budget that people who donate more than $100,000 a year will not get the 33% tax credit. The credit will only apply to donations below that amount.

The credit, which has been in place since 2008, was designed to encourage and reinforce charitable giving.

The charity sector says the cap was unexpected and will make it harder to attract donations at a time when the Government should be encouraging more philanthropy.

Revenue Minister Simon Watts said the change will affect 0.1% of charitable giving and will not stop anyone from donating.

Christchurch has several big projects seeking philanthropic donations. Canterbury Museum is in the middle of a $261.9 million redevelopment. It has a $91.9m funding gap to plug and plans to raise $27.9m via philanthropists, trusts, grants, wills and partnerships.

Christ Church Cathedral is also seeking significant donations to fund some of the $95m it needs to complete a pared-down restoration.

Dame Sue and Phil Bagshaw have criticised the Government’s decision to cap the donation tax credit.

Christchurch School of Music is aiming to raise more than $2m from the public toward a new $12m building on Armagh St and Youth Hub Christchurch needs millions of dollars to complete further stages of its complex.

Dame Sue Bagshaw, who created the Youth Hub, said the change has come at a time when non-governmental organisations were being asked to do more things that the Government did not want to do. Now they would face funding problems of their own.

“It’s unbelievable. We need those big donations. I’m sure the whole charity sector is going to feel badly about this.”

Her husband Phil Bagshaw, chair of the Canterbury Charity Hospital Trust, said more charity hospitals were being created because of chronic under-funding.

“Many of those organisations are trying to fill a gap left by the Government, yet it’s going to make it harder for us.”

The cap will be introduced in April 2027. Inland Revenue estimates it will affect about 350 donations, or 0.1% of donors.

Canterbury Museum Trust Board chairperson Tom Thomson acknowledged it would affect few donors, but said they were often the biggest contributors.

Canterbury Museum Trust Board chairman Tom Thomson says the Government’s move is worrying for the sector.

The change would likely affect how and when people donated as well, he said.

“There is a risk that donations might decrease or be spread out over multiple years, making it harder to fund projects that depend on large upfront contributions.”

The museum was now reviewing its fundraising strategy, he said, and considering the timing of its campaigns.

“In the face of very tight government funding and greatly increased pressure on limited philanthropic funding, this is a worrying decision.”

Thomson said the board would be expressing its concerns directly to the Government.

Christ Church Cathedral Reinstatement Limited (CCRL) chairperson Steve Wakefield said the tax change could have a “chilling effect” on charitable donations.

“[The Government should be] encouraging more philanthropy not handicapping it.”

“The policy risks discouraging the very kind of major giving that helps fund projects the Government does not want to fully fund on its own.”

Philanthrophy New Zealand has written a letter on behalf of more than 60 groups and individuals, asking Revenue Minister Simon Watts to reconsider the decision.

Acting chief executive Robyn Scott said a donor who gave $1m to charity receives nothing in return. The tax credit reduces the after-tax cost of the gift, so under existing rules, a $1m donation costs the donor $667,000 net. Under the new cap, the same donation would cost them about $967,000.

“The credit does not reward the donor. Removing it would increase the price of generosity meaning charities will receive less.”

Scott said the Government has estimated the change will save about $19m a year, but Philanthropy New Zealand was concerned it had not taken into account the wider cost to the sector.

IRD’s data showed that the estimated 350 affected donors gave about $103m annually ‒ $294,000 each on average.

“If those donors reduce their giving to $100,000, the sector could forgo up to $68m per year in charitable donations.”

Watts said Inland Revenue had identified an increasing number of large donations being used as part of aggressive tax planning. There were examples of money donated to a charity the donor controls and being invested back into the donor’s business interests.

“That is not fair and it is not sustainable.”

Donation tax credits were a form of government spending, he said, and when a donor claimed a sizeable tax credit that money became unavailable for investment elsewhere.