Charity - start a trust
Farmer Freddy finds out how to start up a charitable trust.
Farmer Freddy, who had just been told by his doctor that he needed to pay more attention to what he ate and drank, sat down to his afternoon tea of scones, jam and cream.
"I suppose I'd better take that warning from Doc on board," though Freddy. "But I'd also better get on with some of those plans I've been making. Maybe I should call Pebbles."
"Hi Dad," said Pebbles, when Freddy called. "What's up?"
"Well Pebbles," replied Freddy, "you know how I've always wanted to set up that farm training scheme for troubled teenagers? Now might be the time to get on with it. I've got a bit of money salted away to get it started, but I'd need to get a few more people on board with their money to carry on when I've made my way to the great 19th in the sky."
"Crikey, Dad," said Pebbles, "you're sounding a bit morose. If you take your doctor's advice, there's no reason why you won't be puddling around the local course for a fair while longer."
"Puddling around ..." splutters Freddy.
"But the farm training scheme sounds like a great idea," she says. "It sounds like the best thing to do would be to set up a charitable trust. That way anyone making donations to the trust will get one-third of their donation back as a tax rebate. That should encourage your mates to help out."
"Ok Pebbles, how do we set up a charitable trust?" asks Freddy.
"First, we set up a trust. Then we incorporate the trust (so that it's a separate legal entity from the trustees in the same way that a company is a separate entity from its shareholders). We can do that online at www.societies.govt.nz. Then, we apply to the Charities Commission to have the trust registered as a charity. In that way, the trust itself can be exempt from tax, and people who make donations to the trust should qualify for a tax credit."
"That sounds good," said Freddy. "What do I need to do?"
"Well, Dad," said Pebbles, "you need to decide on a name, find some suitable people to be trustees and decide exactly what the purposes of the trust will be. It's absolutely critical that the trust's purposes be charitable. Otherwise, the Charities Commission will refuse to register it, and it won't qualify for the tax advantages I mentioned.
"Ok, so what's a charitable purpose then?" asked Freddy.
"The Charities Act 2005 says that charitable purpose ...includes 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, "explains Pebbles.
"What the Charities Commission will do is to compare the purposes and activities set out in the trust's rules and the activities listed in your application form against the meaning of "charitable purpose" in the Charities Act and decide whether or not the trust should have charitable status."
"Crikey," thinks Freddy as he hangs up the phone. "After all that, I think I need a cup of tea and a lie-down."