The High Court has released a judgment finding that some purported donations to the Trust Board of the Church of Jesus Christ of Latter-Day Saints (Trust) by a missionary, their family and others, in connection with the missionary’s application to be a missionary overseas were not charitable gifts for purposes of section LD 1 of the Income Tax Act 2007 (Act). The Court found however that payments by some relatives of a missionary and other members of the Church were gifts and might therefore be tax deductible under section LD 1.

The Church has a practice of supporting its missionaries in New Zealand, in part, via standard payments from members applying to be missionaries overseas. Once the payments were made they were they property of the Church to use as it saw fit. Once overseas, the country to which the missionaries travelled would meet their expenses.

This raised the question of whether the Trust could issue donation statements to any of the people making those payments. This was complicated by the range of categories of persons making the payments: not only young missionaries but also (for example) their parents, other relatives, or other Church members. In 2015 the Commissioner of Inland Revenue (CIR) had begun disallowing claims by a missionary and their immediate family, considering that their “gifts” were not made gratuitously to the Trust. Rather they were made in return for the Church supporting the missionary while on their mission.

The High Court held that these payments were not gifts for purposes of section LD 1 of the Act, if made by the missionary, their parents or their grandparents. Payments from other relatives or other Church members were gifts which might be tax deductible.

  • The missionaries benefited from their essential expenses being paid overseas, and were aware that they needed to make the payments in order to go on mission.
  • Although there was no direct link between the payments and the missionaries having their expenses met, this scheme was an international policy of the Church. In the High Court’s view this was a sufficient link between the payments made as part of an application, and the missionary eventually having his or her essential expenses met by the Church overseas.
  • The substance of the transaction was that the payments were made to facilitate the missionary being able to travel and carry out his or her mission.
  • Where parents and grandparents made the payments, they too were not gifts. Although the primary motive might be to benefit the Church generally, parents and grandparents also received the benefit of their younger family member’s being able to travel and gain the experience of being an overseas missionary.

The case demonstrates the principle established in past cases: that although only a direct link between a purported gift and the benefit received by a “donor” can prevent the former’s classification as a gift, the benefit itself may be indirect. Here, for parents or grandparents the benefit to their younger family members was itself indirect, but linked directly to the payments made as part of an application.