Proposed Legislation Confirms Non-Taxable Treatment of Membership Subscriptions

29 September 2026

Earlier this year, Clubs New Zealand advised members that the Government intended to preserve the long-standing tax treatment of genuine membership subscriptions. We welcomed that announcement, particularly given Inland Revenue's earlier interpretation which created uncertainty for many clubs and other not-for-profit organisations.

The good news is that proposed legislation currently before Parliament now provides further detail on how this will be achieved.

What does the Bill propose?

The Bill introduces a new exemption intended to preserve the non-taxable treatment of genuine membership subscriptions, fees and levies paid to qualifying not-for-profit organisations.

In practical terms, this means that membership subscriptions should continue to be treated as non-taxable income where they represent a contribution towards the collective purposes and activities of the organisation, rather than payment for specific goods or services.

For clubs, this provides welcome certainty that annual membership subscriptions should remain outside the income tax net if the legislation is passed as currently drafted.

What has not changed?

While the proposed legislation provides certainty around membership subscriptions, it does not create a general income tax exemption for clubs.

Income generated through trading and commercial activities remains subject to normal tax rules.

Depending on a club's circumstances, this may include income from activities such as:

• Bar and restaurant operations
• Sale of goods and services
• Events and functions
• Other trading activities

The distinction between membership subscriptions and trading income remains important and clubs should not assume that all member-related income is exempt from tax

The $10,000 statutory deduction

The Bill also proposes to increase the statutory deduction available to eligible taxable not-for-profits under section DV 8 from a maximum of $1,000 to a maximum of $10,000.

The new deduction will be more tightly targeted:

• An eligible not-for-profit with net income of $10,000 or less, calculated before the deduction, will generally be able to deduct an amount equal to that net income,
• An organisation with net income exceeding $10,000 will receive no statutory deduction,
• Associated not-for-profit bodies, such as regional or district branches of a national organisation, will not each qualify separately for the deduction.

Eligible organisations with net income of $10,000 or less before the deduction will also generally not be required to file an annual income tax return unless Inland Revenue specifically requests one. This should simplify compliance obligations for small not-for-profit's that don’t already benefit from a tax exemption.

What should clubs do now?

At this stage, the legislation is still progressing through Parliament and is not yet law and will be passed to the Finance and Expenditure Committee of the incoming 55th Parliament.

The proposals are positive and provide greater certainty than clubs have had over the past 18 months. However, taxation of clubs and other not-for-profit organisations remains a complex area, particularly when distinguishing between membership subscriptions, trading income, grants, fundraising activities and other revenue streams.

Clubs New Zealand strongly encourages all clubs to discuss their individual circumstances with their accountant, tax adviser or other suitably qualified professional.

Every club is different, and the appropriate tax treatment will depend on the nature of the income being received and the activities being undertaken.

We will continue to monitor the progress of the Bill and any supporting Inland Revenue guidance and will keep members informed of any developments.