Did you know that exemptions from land tax and council rates are available for properties in Victoria that are used for charitable purposes? This applies even if the property is owned by a third party and occupied by the charity under a commercial lease. However, despite these exemptions, some non-for-profits are still paying land tax and/or council rates. If you find yourself in this predicament, we urge you to keep on reading.

In this blog, we explore land tax charity exemptions and discuss how we can help you in applying for a submission to be exempt from council rates/land tax.

What is Land Tax charity exemption?

Section 74 of the Land Tax Act 2005 (LTA) details how under certain circumstances, exemptions and concessions from land tax are available for land owned or used by a charitable organisation.

Under current (updated) legislation*, land is exempt from land tax if it is:

• Used and occupied by a charitable institution or not-for-profit exclusively for charitable purpose.
• Vacant and owned by a charitable organisation and is declared to be held for future charitable use (vacant land charity exemption). However, it is important to note that as of 2022, a charity will need to satisfy the Commissioner that the relevant land will be used and occupied exclusively for charitable purposes within two years or a longer period approved by the Commissioner from the tax year to which the Commissioner’s determination applies.
• Owned by a charitable organisation and leased for outdoor sporting, outdoor recreational, outdoor cultural or similar outdoor activities and available for use for one or more of those activities by members of the public.

*The newest amended exemptions apply from the 2022 land tax year. Previous SRO rulings LTA-004 and LTA-005 remain applicable for 2021 and prior land tax years.

The four heads of charity

To assess if you are eligible for land tax charity exemption, it is important that your organisation is recognised in Australia as being charitable. Generally, charitable purposes are divided into four categories, commonly referred to as the four heads of charity.

The categories of charitable purposes that were grouped under these four heads include:

1. The relief of the aged, impotent and poor — ie providing low cost accommodation to persons in needy circumstances, providing health and welfare services, caring for the physically disabled or mentally afflicted etc.
2. The advancement of education — ie establishing teaching positions or providing student accommodation, conducting scientific research, increasing public appreciation for art, music or literature etc.
3. The advancement of religion — ie construction of places of worship, providing support and accommodation for teachers of religion etc.
4. Other purposes beneficial to the community — ie environmental conservation, animal welfare, promotion of trade, industry and commerce etc.

Why are some charities still paying Land Tax?

In the majority of cases, charities are still paying land tax and council rates solely due to misinformation or lack of awareness. Many may find the process of applying for exemptions too complicated, or simply find themselves misinformed about exemptions they are eligible for. If your charity owns or leases property in Victoria, it’s definitely worth checking whether or not it is unnecessarily paying land tax and/or council rates. After all, these unnecessary costs could instead be channelled towards furthering your cause or helping the public.

Can my charity claim retrospective exemptions?

Generally, applications for exemptions are normally granted for current and future assessments. However, in some instances retrospective applications may be successful, depending on individual circumstances. Regardless, it is always worth making a retrospective request alongside any request for an exemption for current or future land tax and/or council rates.

Applying for an exemption

Step-by-step instructions are available to assist an owner of land applying for a land tax exemption or concession and can be found here. Do note that you will need to provide details and evidence of ownership and use of the land, and these requirements are set out in Revenue Ruling LTA-009. Because the process of applying for an exemption can be rather complex, it is always recommended to seek out the advice or assistance of an experienced financial advisory firm to avoid potential time and cost-consuming delays.

How we can help

AFS understands the challenges faced by not-for-profits in an ever changing landscape of new regulatory requirements, increased public scrutiny and growing demand for services. We have over 20 years’ experience servicing the not-for-profit sector in regional and rural Victoria, including health and social services, education and training, charities, sporting and community clubs, industry groups and member based organisations.

Our highly skilled team is able to provide reliable advice and professional services to help ease the challenges faced by not-for-profit organisations and ensure their long term success and delivery of purpose and mission in a compliant and efficient way. If you require assistance with applying for a submission to be exempt from council rates/land tax, we are here to help. For more information or assistance, do not hesitate to call us at 03 5443 0344 today.