Queenstown housing trust loses court battle over tax-free status

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Queenstown’s affordable housing trust has lost the battle over its tax-exempt status. 

In a Wellington High Court ruling just released, the Queenstown Lakes Community Housing Trust has had its appeal against a Charities Commission decision turfed out. 

The verdict essentially means the trust has to pay tax on capital gains as its properties appreciate in value – meaning fewer funds will be available to put up new homes for its shared-ownership programme. 

However, Justice MacKenzie plainly says the commission was correct in law to strike the trust off its Charities Register last September. 

The commission originally registered the housing trust for charitable and tax-exempt status in January 2008 under the “relief of poverty” category, the judge notes. 

He also notes the trust’s argument that only 38 per cent of Queenstown-Lakes residents own their own home – against 54.5 per cent nationally. 

Problem is, Justice MacKenzie says, under the Charities Act 2005 “the term ‘charitable’ is used not in its ordinary dictionary meaning but in the particular technical meaning that the law has ascribed to that word”. 

With the trust seeking applicants with annual household income of $86,000-$122,000, he says: “I consider those who are eligible to participate in the shared ownership programme are not, even in the relative sense, poor.” 

Accepting the housing trust has worthwhile aims, tax considerations shouldn’t come into his decision, the judge adds. 

He also rules that the trust helps “selected householders” but that help results in “a private benefit” which overrides community benefits and rules out charitable status. 

Housing trust chairman David Cole is understandably disappointed, saying no one from the commission or the court ever left Wellington “to appreciate the housing issues here”. 

“It’s been like a head office decision from on high,” he says. 

Cole also fears for the many other community housing organisations across the country. 

He also notes how his trust has had Government backing and input all along. 

“It therefore seems bizarre with this background of Crown support that the Charities Commission, as a Crown agency, has been so intent on pursuing deregistration [of the trust],” Cole says.