Charities face NRAS uncertainty over tax status
The Senate Affordable Housing committee report has noted the matter of the charitable status of community housing providers was needing resolution as a matter of concern.
In 2008, the Standing Committee on Community Affairs inquired into legislation providing for regulations to prescribe NRAS with witnesses representing the community housing sector saying that their biggest concern around their participation in NRAS was the possibility that such engagement would compromise their charitable or public benevolent institutions (PBI) status.
At that time, a position taken by the Australian Taxation Office (ATO) generated concern as the ATO indicated that any organisation with charitable status would seriously jeopardise that status if they participated in NRAS.
They further indicated that organisations such as consortiums that participate in NRAS will not be endorsed as charitable organisations.
Furthermore—one that sent chills down the spine of the sector—participation in NRAS may have caused the ATO to heavily scrutinise all of the activities of a participating not-for-profit organisation, not just those that pertain to participating in NRAS.
The ATO reasoned that NRAS was intended to assist not only low income earners, but people on moderate incomes.
The then government took measures to provide assurances that participating in NRAS would not jeopardise the status of not-for-profit organisations as charities.
Even so, concerns persist that charitable organisations could risk their charitable status by participating in NRAS.
According to the Community Housing Federation of Australia, a charitable tax status allows providers access to a range of tax concessions, including exemption from income tax and GST, access to the Fringe Benefits Tax and often local government concessions on rates and utility bills.
It argued that the charitable tax status was an essential component of the community housing model because the concessions lowered their operating, construction and development costs.
The Federation told the Senate committee that these concessions, however, were contingent on a community housing provider satisfying the ATO that its organisation's purpose met the criteria for charitable status.
Despite measures taken since 2008 to preserve the status of NFP community housing providers as charitable institutions, the Federation explained over the last several years the sector has operated under the threat and uncertainty that many of its activities, especially in the delivery of affordable housing, would not be considered to have met the criteria of the relief of poverty and could jeopardise the charitable status of community housing providers.
The legislation that was purported to constrain housing activities through a narrow interpretation of permissible activities was withdrawn.
However, other legislation passed in June 2013 contained some tax conditions that may have a similar impact on providers' charitable status, resulting in limiting their participation in the affordable housing market for fear of putting their charitable tax status at risk.
Other legislation, such as the new definition of charity that went into effect 1 January 2014 provided some clarity on the situation...[but it] has been mooted for repeal leaving the sector back in the position it was before with ambiguous interpretations of housing activities allowable as a charitable organisation.
The Community Housing Federation drew attention to 'the unsettling environment in the charities and tax arena' which would 'cause continuing uncertainty for the sector for forward planning in the affordable housing market'.
The Senate committee was firmly of the view that the Australian Government must take steps to provide certainty for community housing providers engaged in NRAS or similar schemes designed to provide affordable housing that their charitable status is not in jeopardy by participating in such schemes.