Corporate giving

Support by companies to various organisations can be provided in a number of different forms. Deciding upon what type of support will best achieve the company's objective will depend upon the resources available, and what the key drivers are for the support in the first instance.

Cash Donations

A company is allowed a deduction for charitable and public benefit gifts made. A deduction reduces the amount of a company's taxable income and so reduces its income tax payable. Some companies with specifically tailored Constitutions can claim charitable status and avoid income tax altogether meaning deductibility is not an issue.

On the other hand, prior to the commencement of the 2008 - 09 income year (1 April 2008 for companies with a 31 March balance date) small companies caught by the definition of a "close company" got no tax relief for gifts at all (unless they were listed on the stock exchange).

All other companies were entitled to a tax deduction for charitable and other public benefit gifts but limited to 5% of their taxable income.

This limit has now been removed, and any company (including a close company) may now claim a tax deduction for charitable and other public benefit gifts up to the amount of its taxable income before making the gifts. It cannot create a tax loss by gifting more than its taxable income.

For tax purposes the definition of "company" includes any incorporated body such as Maori Authorities and Incorporated Societies.

Sponsorship
Sponsorship is a common means of providing support to organisations. Goods, services or cash are given to an organisation in relation to a specific event or activity in return for something passing back to the provider. This can include advertising, acknowledgement or naming rights, free goods or services in return.

Sponsorship is an effective way for a company to provide support while generating good public exposure. The event does not necessarily need to be directly connected to the company's business to be beneficial, as any funding provided will assist in creating a favourable public perception.

In addition, if the corporate sponsor can show a connection between the costs incurred and the business, a tax deduction is available for those costs. This connection could be as simple as the sponsored event helps to provide advertising for the company in an attempt to increase the level of sales.

Free or Discounted Goods & Services
Providing free or discounted goods and services has a direct benefit to the donee organisation. On the one hand, it helps cover the overhead costs which would otherwise be required to be paid by the organisation. Alternatively, the goods or services may be converted into cash, such as through on-selling, prizes in competitions, charity auctions etc.

Goods
A donor could choose to donate (or sell at a discounted rate) goods. This may be particularly cost effective for the company if the opportunity cost of making or acquiring those goods is small. In addition, the company may chose to donate surplus, obsolete or cosmetically damaged stock or equipment, returned (but still functional) goods or old stationery supplies. Examples include old furniture and equipment, out of date computers.

Services
A wide range of services can be made available on a pro bono basis to assist the organisation. Those services can include professional (legal, accounting, marketing, leadership, business experience), technical (information technology, web-site, printing, design), ancillary (free use of premises, postage) or simply supplying additional personnel resource. The expertise and experience of company personnel can be invaluable.

Whilst some companies simply see this as a means of providing a level of support, there can be additional benefits. These range from a greater market profile and beneficial perceptions, to employee satisfaction and belonging. How and when the services would be offered would require consideration so that it did not adversely affect normal business operations and place strain on the existing business or its employees.

Donation of Association
A company can effectively donate its reputation by any of the means described above, or simply by associating itself with a charity. This can be the visible catalyst for other organisations to make similar contributions.