Taxing times: David Cole; 'Mountain Scene' last week
Losing charitable status may cost Queenstown’s affordable housing agency a whopping $2.5 million-plus in tax by 2015.
Accountants have been calculating the fallout since a recent bombshell decision to strike the Queenstown Lakes Community Housing Trust off the charities register on September 15.
Trust chairman David Cole: “Looking at our strategic plan, our accountants have outlined a potential annual tax liability of more than half a million dollars a year if the trust achieves its five-year goals.”
Denied charitable status, the trust will be hit for 33 per cent tax on gains from each property.
In a nutshell...
Queenstown Lakes Community Housing Trust will be struck off the charities register on September 15, making it liable for 33 per cent tax on most income, including some Government grants.
It will also be liable for tax on property gains when homeowners buy the trust out.
The trust will have an estimated annual tax liability of $500,000-plus per year, money lost to future housing projects.
Since 2007, the trust has had $3.5 million in Department of Building and Housing grants and helped 35 households into properties.
“This reduces the capital the trust can recycle to the next family,” Cole says – meaning fewer and fewer homes will be built.
“And if you take it to its logical conclusion, the trust ultimately runs out of money.”
Cole says the Govern-ment’s Charities Com-mission is signalling a tax on what he calls “community capital going into home ownership schemes”.
The local housing trust encourages its homeowners to buy out the trust's 15-40 per cent equity in their properties, Cole says.
“We encourage that in order to recycle our capital.”
Buyouts are done based on a home’s valuation at the time.
Since the shock announcement a fortnight ago, other affordable housing groups from Nelson, Marlborough and Wellington have come out in support of the local trust.
The groups’ national body, Community Housing Aotearoa, is also calling for a “solution”.
“There is apprehension that the same 17th century definitions that have been rigidly applied in deregistering Queenstown will begin a domino effect across the country,” Cole says.
“Housing Minister Phil Heatley has signalled he wants to grow the community housing sector and this decision flies in the face of that aspiration.”
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