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Tax Breaks To Boost NZ Home Ownership

by Mary Swire,, Hong Kong

20 November 2013

Community housing providers and donors who assist New Zealand's low income families into home ownership will be exempt from income tax.

New Zealand's High Court recently confirmed the former Charities Commission's judgment that while helping those on low incomes with renting a house was indeed "charitable," supporting them during the purchasing process was not. According to the Government, this decision has led to one trust being deregistered, and has resulted in uncertainty over the tax status of others.

Legislation will now be introduced to parliament, with the aim of clarifying the situation. Revenue Minister Todd McClay has explained that the Government did not "think it was fair that community organizations working hard to assist families with housing could face uncertainty over whether they would or would not be liable for tax. This law change will give these providers the confidence they need to get on with their important work. The changes will also enable people to claim tax relief on their donations to qualifying community housing providers."

Housing Minister Dr Nick Smith added that the exemption "should be limited to providing housing support to low- income families but should not be limited to just rental options. Helping a low-income family achieve home ownership can be hugely beneficial to the stability and long-term financial security of that family."

The Government estimates that the reform will cost up to NZD2.4m (USD2.01m) a year. Provisions will be included in an amendment bill to the Income Tax Act 2007, which will be placed before parliament later this week.

Transitional assistance will be given to some community housing providers facing tax liabilities prior to the new law entering into effect. If the legislation passes, the changes will apply from April 14, 2014.

TAGS: compliance | tax | tax compliance | property tax | tax incentives | revenue guidance | law | ministry of finance | tax authority | legislation | tax planning | New Zealand | tax breaks | revenue statistics

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