The definition of a charity arose in a court case over 100 years ago and it has not been reviewed since.   An organisation may qualify as a charity if it promotes the relief of poverty, the advancement of education, the advancement of religion or is for other purposes for the benefit of the community. 

An important aspect, is that the purpose should be for the benefit of the public or a sizeable sector rather than private individuals or a narrowly defined group.

Until 2005, decisions on tax-exempt status were made by the Inland Revenue Department and charities were otherwise largely unsupervised.

In 2005, the Charities Commission was established, which required charities to register in order to qualify for tax-exemption. The commission has since been abolished and its functions taken over by the Department of Internal Affairs.

In 2012, the Minister for the Community and Voluntary Sector, Jo Goodhew announced that Cabinet had decided not to proceed with the review of the definition of charity in the Charities Act.  This was a complete U-turn from Cabinet’s decision on 1 August 2010 that the review would begin in 2013 and be completed by 2015.

Cabinet’s promise of a review was in response to the recognised problem that the definition used in the Charities Act is inadequate for New Zealand in the modern age.

The existing definition has seen some good community organisations either refused registration as charities or barred from being registered. Concerns have arisen about significant commercial enterprises able to channel tax benefits into private hands and undermine local communities.

Sanitarium is a large business owned by the Seventh-day Adventist Church.    In the last financial year it made $187 million (total gross income) and only paid $10.2 million to charity.  The bulk of the profits went into helping the church and its members.

Some private hospitals and private schools are registered as charities.

Only people with plenty of money can afford to make use of private hospitals and private schools so they should not be charities.   A private hospital is a business operated by wealthy doctors. They are able to charge higher fees if the business does not pay tax on its profits In the case of St Georges Hospital in Christchurch it made a profit of $ $6.5 million in 2011/2012 and donated only $ $91,463  to charity.