Overview

Ten submissions were received on the proposed new tax rules for deregistered charities and were largely supportive of the underlying policy intention of the proposals. Submissions made a number of suggestions to improve the overall functioning of the new rules.

A major issue in submissions related to the new tax on net accumulated assets of a deregistered charity that retains its net assets 12 months after deregistration. A number of submissions opposed the new tax on the basis that it may result in unintended and inappropriate consequences. This includes, for example, the over-taxation of some deregistered charities, compared with what they would have paid had they always been subject to tax. Even so, we believe the policy underlying the new tax is appropriate. Although some minor technical modifications are being recommended by officials, these will leave the original proposal largely intact.

The Committee directed officials to consult with some Māori bodies to discuss the possible effects of the proposed rules for deregistered charities, particularly in the area of treaty settlements. As a result of this consultation, we have recommended amending the proposed requirements of the tax on net assets to exclude treaty settlements from the calculation of the tax. This change is consistent with previous government policy decisions to enable the transfer of settlement assets as part of a Treaty of Waitangi settlement to be effected without any tax impost.