Part 3: Alternative Pathway Available for Entities Providing Housing
If you have got to Part 3, obtaining charitable status may not be the most viable option for your entity. As mentioned in Part 2 , an alternative pathway is to apply for an exemption through Inland Revenue whereby income derived from your entity will be exempt from tax.10
To be eligible, your entity must:
(a) Be either a trust or a company;
(b) Be registered as a community housing provider (for more on that, see our Community Housing guide);
(c) Not be carrying out its activities for any personal gain or profit;
(d) Ensure that all profits made are to be retained by the entity or either distributed or applied to its beneficiaries or clients, other community housing providers that meet this exemption, tax charities, or organisations with are allowed to receive charitable donations; and
(e) Ensure that those who control the entity cannot personally benefit from the entity’s activities.11
However, you must ensure that no more than 15% of your entity’s beneficiaries and clients have income or assets over particular amounts. Provided your beneficiary or client has never owned property before, then they must just satisfy the income limit requirement. Currently, the income limits are:
(a) Income limit for a single person’s income: ≥$85,000
(b) Income limit for a group of people: ≥ $130,000.12
The asset limit varies depending on where abouts your beneficiary or client will reside in. Currently, the asset limit ranges from $80,000 – $120,000.13
Conclusion
We have helped many groups in this area and have created a free guide for Community Housing providers which is available here.
If you would like assistance in obtaining a tax exemption for your entity, please contact us and we can help you decide which pathway is better suited for your entity.
This article is intended for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please contact a qualified legal professional. Reproduction is permitted with prior approval and credit to the source.
10Inland Revenue “Community Housing Providers” <www.ird.govt.nz>.
11Income Tax Act 2007, s CW 42B (2).
12At s CW 42B (3), Schedule 34 (1).
13At s CW 42B (3), Schedule 34 (2).
