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IRD have issued a draft Interpretation Statement which differentiates between gifts and assessable income. A gift of money or money’s worth is not subject to income tax in NZ. This is because gifts tend to be the result of affection, esteem or respect for the recipient. However, there are some cases in which a gift may be assessable income.

When is a gift assessable income?

A gift can be assessable income if it is derived:

  • In connection with employment
  • From a business or profit-making activity
  • In undertaking a voluntary activity (and is not a reimbursement of expenditure
  • As income under ordinary concepts

Employment Income

Under the following scenarios, the courts consider the gift is employment income

  • The amount of the gift reflects the extent of any services provided
  • The gift is made in the hope of future services or to encourage further effort by employees
  • The gift has recurred, or it is foreseeable that it will recur
  • The payment is related to duties that are expected of the employee
  • The gifts are commonplace as a matter of practice in the occupation, profession or industry e.g. tips
  • The payment is commonly provided to the holder of a position or office that has a degree of continuance and independence from the current incumbent


Business or Profit-making Activity

Gifts are income from profit making activity when the payment can be attributed to the activities or specific work the recipient has carried out.

The gift will be considered an income if the following factors are present:

  • The payer and recipient are both carrying on a business or profit-making activity
  • The recipient cannot continue to carry on the activity without the gift
  • The recipient is not a charity

Voluntary Activities

A gift is income under s CO 1 when the gift and the activity of the recipient have a sufficient connection. The following are some relevant factors that support a view that the gift is derived from a voluntary activity:

  • The amount of the gift reflects the amount of the recipient’s personal exertions in undertaking the voluntary activity.
  • The payer makes the gift in the hope that the recipient will undertake future activities or to encourage them to make further efforts.
  • The gift has recurred or has a foreseeable element of recurrence.
  • Such gifts are expected or asked for or are commonplace as a matter of practice in undertaking the voluntary activity

Income Under Ordinary Concepts

In many cases, a gift that occurs periodically, regularly and recurs is income because these qualities allow gifts to become part of the funds the recipient may expect to depend on for meeting living expenses. A single gift is income if, at the time of the gift, the gift is the first of a series of expected periodic and regular gifts.

If a recipient expects that, as a result of their activity, they will receive gifts that will provide for the maintenance of the recipient’s and their family, this may show the gifts will be income. This is more likely where multiple payers are involved, or the recipient is actively soliciting gifts.

A series of gifts may be income under ordinary concepts where:

  • The gifts have the necessary periodicity, and the payer makes them for the recipient to rely on for regular living expenses and they are relied on by the recipient in this way.
  • The necessary periodicity of the gifts refers to gifts made with such regularity, recurrence, amount and frequency that they amount to “an income”.
  • The gifts are connected with some activity or personal exertion of the recipient, even though that exertion or activity does not necessarily arise in the context of an employment relationship or a business or profit-making activity

If the gift you have received meets the above criteria it may be subject to income tax and no longer be a gift. If you are unsure whether your gift qualifies as assessable income, don’t hesitate to get in touch with us below.


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New Zealand Tax Accountant.