The Government's social housing reforms have hit a major snag with a charity stung by a $6 million tax bill for helping poor families to buy homes.
The Government has been forced to pay the Queenstown Lakes Housing Trust's bill and has introduced a bill to ensure the ruling does not ruin other charities, with potential liabilities of tens of millions, or slow down moves to boost the supply of social housing.
Housing Minister Nick Smith revealed today they had been blindsided by the Charities Commission's ruling last year.
"A number of our community housing organisations have got into the business of assisting people into home ownership. The tax department and Charities Commission has ruled that that is outside the domain, they need to pay tax on that."
The Charities Commission had ruled that providing cheap rent was charitable but helping people to buy was not.
Smith described the ruling as "arbitrary" and said he did not agree with it but could not overrule it.
"That's causing real nervousness for our community housing sector who could literally have bills of many tens of millions of dollars that could wipe them out.
"That is why the Government has firstly provided the $6 million for Queenstown to pay its tax and why we have a bill before Parliament to change the law to make it plain where we have community housing organisations helping people to own their own home that that activity is not taxable and that those trusts can continue to do that."
The Income Tax Amendment Bill would retrospectively reverse that decision and provide community housing providers with the certainty they would not be hit with big tax bills for similar activities.
"I'm confident providing that bill is passed there will be no further difficulty and any need for a further tax grant to any other community housing provider," Smith said.
- Fairfax Media
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