Extension of the grace period for deregistered charities

Issue:   Eligibility for the grace-period for deregistered charities is too narrow

Clause 264

Submission

(Community Housing Aotearoa)

The proposed extension of the grace-period for deregistered charities will apply too narrowly.  One of the requirements under clause 264 of the bill is that the “person’s activities are predominantly the provision of housing”.  Some of Community Housing Aotearoa members may face deregistration due to the extent of their housing programmes.  However, because these charities also provide other charitable activities they will not meet the “predominantly” test under clause 264, and therefore will not be afforded protection against the imposition of tax on net assets upon deregistration.

Clause 264 should be amended to require only that the “person’s activities include the provision of housing, as part of achieving the person’s stated objectives or purposes, before de-registration by Charities Services”.

Comment

We agree with the submission.  We consider that all providers involved in the provision of housing and who are deregistered by the Charities Services following its compliance review of community housing providers should be eligible for relief under the extended grace-period for reasons of equity.  The “predominantly” test is an unfair and unnecessary constraint on the relief offered by the grace-period for providers who, through no fault of their own, have found themselves facing potentially significant tax liabilities.

Recommendation

That the submission be accepted.


Issue:   The grace-period for deregistered charities does not fix the underlying problem

Clause 264

Submission

(Queenstown Lakes Community Housing Trust)

We support the amendment in clause 264 but are concerned that it simply provides a two-year extension and does not resolve the underlying lack of certainty of tax-exempt status for community housing providers after this two-year period.

Other concerns include:

  • Any permanent fix to the problem should be centred on the objects and purposes of the community housing provider and not on the specific characteristics of the recipients of the housing assistance.
  • A properly constituted community housing provider sees housing stress in all sorts of ways within their communities and it is not easy for central government to try and set the guidelines for determining what constitutes housing stress and how each community housing provider should be addressing it.

Comment

The Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 provided for a specific income tax exemption for a specific class of community housing providers (referred to as community housing entities) with the details to be set by Regulation.  It was expected that the Regulation would be in place by 1 April 2015.  However, owing to delays in setting the detail of the Regulation – in particular, the income threshold for determining who can be a recipient of a community housing entity – the tax exemption has not yet been finalised.  Ministers are expecting to finalise these details over the coming weeks.

Recommendation

That the submission be noted.


Issue:   Application date is contrary to policy intent

Clause 264

Submission

(Matter raised by officials)

Clause 264 as currently worded allows the extension of the grace-period for deregistered charities to apply to community housing providers who voluntarily deregister as well as to those who are deregistered by Charities Services.  This result was unintended.

Comment

The grace period was only intended to apply to community housing providers deregistered by Charities Services, but due to an oversight in the current drafting, also included those that voluntarily deregistered.  As a specific tax exemption for community housing entities is currently being finalised, it was considered appropriate to provide relief for community housing providers who, through no fault of their own, would have found themselves facing potentially significant tax liabilities.  Community housing providers who voluntarily deregister should not be afforded the same relief provided by the grace-period as they have made a conscious decision not to have the grace-period apply to them.

Recommendation

That the submission be accepted.