A grassroots campaign is emerging to support sensible amendments to Victoria's Land Tax Act and ensure that charities don't lose their exemptions by accident.
Northern Community Church is coordinating a campaign seeking amendments to the Land Tax Act 2005 before the State Election in November. The amendments would bring the treatment of charities into line with the treatment of a range of other non-profit organisations.
Under the current provisions of the Land Tax Act 2005, for charitable institutions to be exempt from the land tax, they must exclusively use their property for charitable purposes. This is outlined section 74 of the Act (emphasis added):
- Section 74 (1) (a) ‘it is used and occupied by a charitable institution exclusively for charitable purposes’ and
- Section 74 (1) (b) (iii) ‘declared by its owner to be held for future use and occupation by a charitable institution exclusively for charitable purposes’
This strict requirement for exclusive use sits in stark contrast with the far more sensible approach taken in the Act to land owned by non-profit sporting, recreational or cultural landowners. Under section 72 of the Act these entities are exempted from land tax being levied on land used ‘primarily or substantially’ for the relevant non-profit purposes.
Moores provide a simple, and relevant, illustration of the problem -
Let’s say a school has a fantastic performing arts theatre. It cost a lot to build, so the business manager has the good sense to make it available for hire.
If the theatre is hired by another school for an event, there is no problem. The theatre is still being used for an educational purpose and the land tax exemption can still apply. Education is a charitable purpose.
When a local dance group wants to hold their annual concert in the theatre, it appears to be another good opportunity to earn some revenue from the facility’s spare capacity. The problem is that the local dance group is not a “charitable” activity and is not a charity itself.
The mere act of hiring out the facility for a non-charitable use has the potential of exposing the school to an assessment for land tax. A one-off hiring event might be long regretted if it were to result in a land tax assessment for a charity trying to do the right thing and put its spare capacity to good use.
A ‘commercial’ hire doesn’t even have to be one that makes money. If it is not a ‘charitable use’, then a literal reading of the current law puts the land tax exemption at risk.
These problems can be easily avoided by replacing 'exclusively' with 'primarily or substantially'.
You can find out more about this issue on the campaign page established here.
We are encouraging all schools to contact the Treasurer and Shadow Treasurer supporting this amendment. A sample letter we have prepared for schools can be downloaded from the link below.
Obviously, if schools have time, sending a copy of your letter to the Treasurer and Shadow Treasurer to your local MP and Upper House MLCs would assist in drawing attention to these concerns.
Download Sample Letter