Credit unions cry foul over tax plan
New Zealand credit unions may soon follow their Australian counterparts and lose a century old tax exemption.
New Zealand credit unions may soon follow their Australian counterparts and lose a century old tax exemption.
Commerce minister Paul Swain says the Government is currently trying to determine whether the income tax free status of credit unions gives them an unfair competitive advantage over other financial services institutions.
“Credit unions have been exempt from paying income tax since 1891. Nobody knows for sure why credit unions were granted that exemption,” Swains says.
However, head of the New Zealand Association of Credit Unions, Doug McLaren, has reacted angrily to the suggestion, claiming the Inland Revenue Department (IRD) is driving the issue.
“We work daily with Commerce Department officials and they show an appreciation of the mutual philosophy of credit unions,” McLaren says.
“But the money crunchers and theorists at the IRD seem to be confusing credit unions with corporations.”
He says to compare credit unions with other commercial financial services companies is ludicrous as they operate in entirely different ways.
“In mutuals such as credit unions, all assets are owned by the members and can only deal with their own members,” McLaren says.
While he disagrees with the IRD arguments, McLaren says that if the Government intends to revoke the credit unions’ tax exemption, it will have to do the same to all mutual organisations such as clubs and friendly societies.
“Why are they just looking at us? I think the IRD has picked on credit unions as we’re small and easier to nail on the head with a big hammer,” McLaren says.
He says as most credit union members are on low incomes, any move to take away the tax exemption will “hurt those who can least afford it”.
The Government has called for submissions on the tax status of credit unions with a deadline set for early October this year.
Recommended for you
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
The Senate economics legislation committee has recommended Schedule 1 of the Delivering Better Financial Outcomes legislation be passed as it is a “faithful implementation” of the recommendations.
Treasurer Jim Chalmers has handed down his third budget, outlining the government’s macroeconomic forecasts and changes to superannuation.
