UPDATED - Land Tax for Victorian Charities

8 September 2022

Schools will recall our earlier Briefing regarding the grassroots campaign to support sensible amendments to Victoria's Land Tax Act and ensure that charities don't lose their exemptions by accident.

The Victorian Treasurer has responded to our representations and indicates that:

'In the Act, the term exclusively’ has a particular meaning, and land can satisfy the exemption requirement of being used by a charitable institution exclusively for a charitable purpose even where other activities take place, as long as they are merely incidental to the institution's charitable purpose. This could include, for example, a church hall being hired out to a community group or for a fitness class. This is a long-standing policy.'

This is quite at odds with the advice provided by Moores who provided 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.

The Treasurer goes on to advise that '[n]onetheless, the Government is committed to ensuring clarity around the application of section 74. I have asked my department and the State Revenue Office (SRO) to undertake a review in light of your concerns'.

He also indicates that guidance as to the application of the section 74 charity exemption is available on the SRO's website: https://www.sro.vic.gov.au/legislation/land-tax-charity-exemption, and that entities with specific concerns can contact the SRO's Technical Advice and Review Branch on 03 9628 0600.

This is a sensible and helpful outcome, and we look forward to engaging with the SRO Review on behalf of member schools.

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