News & Insights

The Budget 2026 announcement that donation tax credits for individuals will be capped at $100,000 per year from April 2027 has prompted significant discussion across New Zealand’s charitable and philanthropic sector.

Front of mind is the concern that this change may reduce larger charitable donations at a time when many organisations are already facing funding pressure and rely on major gifts to sustain key programmes.

The purpose of the donation tax credit has always been to encourage philanthropy. Yet there remains limited New Zealand evidence on how tax incentives influence donor behaviour. As Inland Revenue states clearly in its Regulatory Impact Statement, “The extent to which the increased cost of donations above [$100,000] results in a reduction in overall charitable giving is not known. The wider (and indirect) impact on the charitable and voluntary sector from the preferred option is also not known.” Introducing a change of this scale without clear evidence on its likely impact has raised numerous questions for the sector.

While early policy statements have positioned this change as ‘at the margins’ - the potential scale is not insignificant. More than $100 million in donations last year came from individuals who would have exceeded the proposed cap. While some donors will maintain their giving regardless of tax settings, others will adjust.

The introduction of a $100,000 cap alters the incentive at the point where large-scale philanthropy is formed. While the number of donors directly affected may be small, philanthropy is concentrated. A relatively small cohort contributes a disproportionate share of total giving. Meaning that while ‘yes’ this is a change at the margin, we need to be cognisant that the margins influence the system as a whole.

This is not simply a question of whether giving reduces. It is how it changes.

Early indications suggest adjustments in timing, structure and scale. Large, one-off gifts may become less frequent. Giving may temporarily accelerate prior to the cap’s introduction in April 2027 and then rapidly recalibrate, with some donors pulling back and others spreading planned gifts across multiple years. The result is a more volatile and then slower accumulation of capital into foundations and endowments rather than an immediate decline in donor intent.

At its core, this is a capital formation issue. The previous framework supported the build-up of long-term philanthropic capital through larger gifts that could be invested and distributed over time. The cap reduces the incentive for those gifts beyond $100,000, and with it the pace at which that critical capital can form.

Over time, this has consequences. Slower endowment growth translates to less income available for future distribution. What appears a technical change today may shape the sector’s funding capacity over decades.

For boards and leadership teams, this shifts the focus. With the tax settings altered there is a clearer impetus on how organisations engage with major donors. The central question follows. If the external incentive changes, what sustains the level and consistency of major giving over time? There is no clear evidence base yet on how donors will respond.

Whether explicit or implicit there is also a broader signal in the policy. The cap suggests a recalibration in how public support is applied to higher-value giving. This will influence how donors, advisers and families approach longer-term philanthropic planning.

Our guidance explores these dynamics and outlines the implications for donor behaviour, capital formation and fundraising strategy.

Read our preliminary paper from Budget night here, our evidence-based overview of the changes in our FAQ document and insights from charity law expert, Sue Barker here to understand the implications for you, for your organisation and what to consider next.

If you would like to discuss the implications in your context, contact a JBWere Adviser or our Philanthropic Services team.