A recent proposal from Inland Revenue could mean that member subscriptions for many incorporated community sport organisations (ICSOs) will be treated as taxable income, the New Zealand Amateur Sport Association (NZASA) has highlighted. The NZASA notes that this marks a shift from the historical understanding where such subscriptions were generally considered non-taxable.
The draft operational statement from Inland Revenue, now out for consultation, outlines this potential change. However, the NZASA points out that this new approach, if confirmed by the Commissioner of Inland Revenue, will only apply prospectively. It will not affect ICSOs that already hold a tax-exempt status, such as those registered as charities or possessing a CW46 exemption for promoting amateur games and sports.
For those non-tax exempt ICSOs, the NZASA suggests the proposed change might lead to increased compliance activities, though not necessarily a higher tax bill. These organisations are currently eligible for a $1,000 income tax deduction (not backed by an expense) as non-profit entities under section DV8 of the Income Tax Act. According to the NZASA, income exceeding this threshold, which would include member subscriptions under the new interpretation, could be subject to tax.
The New Zealand Amateur Sport Association is urging all ICSOs to review their income tax status, especially in light of the requirement to re-register under the Incorporated Societies Act 2022. The Association advises that, where feasible, ICSOs should explore applying for a CW46 income tax exemption to fully mitigate any potential tax risks arising from the draft statement.
The NZASA also states its view that in most instances, member subscription fees are directly channelled into affiliation costs with national bodies or fund the ICSO’s core purpose of providing amateur sport access to its members and the wider community. The Association acknowledges that while these expenditures were historically treated as non-deductible, the draft statement indicates they would generally be deductible if subscriptions are treated as taxable income. The NZASA has said its submission to Inland Revenue will reinforce these factors as strong reasons against classifying future subscription income as taxable.
Furthermore, the Association notes that the need to confirm, and if necessary, apply for an income tax exemption adds another layer of administrative complexity for the volunteer governors of community sports organisations. The NZASA believes this is an additional burden at a time when their future is already jeopardised by legislative reform. ICSOs uncertain about their current tax status or eligibility for an exemption should seek professional guidance, the Association recommends.
The deadline for providing feedback on Inland Revenue’s Exposure Draft 0265 (ED0265) is 25 June 2025. The NZASA also reminds ICSOs registered before 5 October 2023 that they must re-register with the Companies Office by 5 April 2026 to maintain their incorporated society status and current IRD number. According to the Association, clubs that opt not to re-register but continue operating will need to apply for a new IRD number and reapply for any previous tax exemptions or not-for-profit deductions under the new number.