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Charities have a long history and are perhaps still associated with snow, urchin boys asking for more and Charles Dickens. However, they are a powerful means of organising the collection of money and other resources for purposes beneficial to the public.

A charity can be created by a will or a legal document or using the form of any sort of entity. Examples are a trust, whether or not incorporated, an incorporated society (in the nature of a club) or a limited liability company. Of these, the trust incorporated as a board and having similarities to both an incorporated society and a company is a common form of a charity.

However, the key matter is not form but substance - is the charity one which has an appropriate public purpose?

The classic charitable purposes are the relief of poverty, the advancement of education or religion and other purposes beneficial to the community. In a broad sense all these purposes focus on public benefit rather than private gain.

They are tests which are elaborated in cases particularly in new areas of activity for those wanting to act in a beneficial way for society. Note that sport is not by itself a charitable purpose which may come as a surprise given its importance in this country.

There are two main advantages of being a charity: first, no business income or resident withholding tax is paid (there is still liability for other taxes); second, donations create tax rebates or deductions up to certain limits for the donors (givers). The tax status of donations is independent of charitable status. For example, sporting organisations can enjoy the status of approved donees so that those donating to them can take advantage of the tax rebate or deduction.

Some estimates put the number of charities in New Zealand at more than 80,000 - they are certainly a huge factor in the voluntary sector providing all kinds of medical, educational and other resources outside central or local government.

Charities have been unregulated. No longer with the passing of the Charities Act 2005.

The legislation requires all existing and new charities to register with the Charities Commission in order to enjoy the previously-noted tax advantages.

Registration starts from 1 February 2007. There is a helpful website at www.charities.govt.nz. Registration will require disclosure of the documents creating the charity and the filing of annual accounts and generally a new level of disclosure, supervision and accountability.

There is a recent (August 2006) exposure draft issued by the Inland Revenue which reviews some of the important tax issues raised by the new regime: see www.ird.govt.nz/public-consultations/. Comment deadline date is 30 September 2006.