Tax exemption for hospitals operating as charities

2007 amendments re-instate an income tax exemption for hospitals operated as charities by council-controlled organisations.

Sections CB 3(b)(ii)(A) and CB 4(3) of the Income Tax Act 1994; sections CW 32(4)(c)(i), CW 34(3) and CW 35(2) of the Income Tax Act 2004, and sections CW 39(4)(c)(i), CW 41(4) and CW 42(2) of the Income Tax Act 2007

The amendments re-instate an income tax exemption for hospitals operated as charities by council-controlled organisations (CCOs). Activities of CCOs generally do not qualify for the charitable tax exemption.

Background

Generally, activities that are beneficial to the community would qualify for the charitable tax exemption, but the policy intention is that commercial activities of councils should not. As a result, income derived by CCOs is specifically excluded from the charitable exemption.

However, District Health Boards are exempt from income tax because there is no reason why income derived by a hospital operated as a CCO should be denied the charitable tax exemption.

Key features

Income derived by hospitals that are operated as charities by CCOs now qualify for the charitable tax exemption. Consistent with the tax treatment of other charities, the hospitals must register under the Charities Act 2005.

Application date

The amendments are effective from 1 April 2001.