Recent ruling provides additional opportunities for charities to be exempt from land tax
There have been several recent amendments relating to the charity exemptions available regarding land tax. The previous State Revenue Office (SRO) ruling LTA-009 has been replaced by LTA-009v2 in reference to the land tax exemptions contained in section 78B and 78C of the Duties Act 2000 introduced by the State Taxation Amendment Act 2024 (STA Act) as well as section 78D introduced by the State Taxation Further Amendment Act 2024 (STFA Act). This new ruling provides important clarification on aspects of the land tax charity exemptions as well as filled necessary gaps in the relevant legislation.
Relevant Legislation
Section 74 of the Land Tax Act 2005 (the Act) contains an exemption to land tax where the land is used and occupied for charitable purposes.
From the 2025 land tax year, three new tax exemptions relating to charitable accommodation may be available where land is not eligible for the section 74 exemption. These include:
Land used exclusively for social housing, occupied or available for those registered in the Victorian Housing Register and allocated tenancy (new Section 78B– Social Housing);
Land used for accommodation owned by a charitable institution, public authority, or participating agency, available for those at risk of homelessness or family violence, with rent below market rate (new Section 78C – Emergency Housing); and
Land used for accommodation owned by a charitable institution with the purpose of relieving poverty, available for those in need of poverty relief (new Section 78D– Housing for Poverty Relief).
Ruling
Charity
Generally, the question of whether an organisation is a charitable one is determined through common law principles. Typically, an organisation is a charity if it is established for:
the relief of poverty;
the advancement of education;
the advancement of religion; or
other purposes beneficial to the community.
An organisation must also operate on a not-for-profit basis to be considered a charity. Essentially, any surplus income or profits must be used for the sole purpose of furthering the organisation’s objectives and cannot be distributed to its members.
Used and Occupied
To qualify for the charity or vacant land charity exemption, the land must be exclusively used and occupied by a charity for charitable purposes. Generally:
a charity leasing land to a non-charitable tenant is not considered to occupy the land;
a charity leasing land from any landowner may be considered to occupy it, regardless of the landowner’s status; and
if a charity engages a service provider to provide goods or services on the land, the charity remains the occupier.
This policy ensures non-charity tenants are treated like other commercial tenants.
Exclusively for Charitable Purpose
To qualify for the charity exemption, land must be used exclusively for charitable purposes, not just occupied by a charity.
The High Court in Commissioner of Taxation v Word Investments Ltd (2008) 236 CLR 204 expanded the definition of a charitable organisation to include those conducting commercial activities to fund charitable goals.
Examples of land use by a charity that may be considered incidental to its charitable purposes include:
a university licensing land to an industry partner for a research project that may lead to commercial products or services; or
a university licensing land to a vendor providing food and beverages mainly for students and staff.
Opportunity Shops and Charitable Purposes
For land to be used and occupied by a charity for the purposes of operating an opportunity shop, to be exempt under section 74 of the Act they must meet all the following:
the conduct in the opportunity shop must specifically meet the aims and objectives of the organisations charitable work;
goods must be sold and nominal price;
goods sold by the opportunity shop must be primarily donated; and
goods sold in the opportunity shop must be primarily second-hand.
Vacant Land Charity Exemption
To qualify for the vacant land charity exemption from the 2022 tax year, the Commissioner needs to be satisfied that the vacant land will be eligible for the current charity exemption under section 74(1)(a) of the Act within two years.
If a charity does not use and occupy the land for charitable purposes at the end of the vacant land charity exemption period, the land will no longer be exempt from land tax.
Outdoor Leasing Charity Exemption
Additionally, prior to the 2022 tax year, land that was leased for sporting, recreational, cultural or similar activities was exempt from land tax under section 71 of the Act if the proceeds were applied for charitable purposes. Since then, this exemption has been amended and under section 74(1)(c) of the Act with the added requirement that the land must be owned by a charity.
Partial Exemption
In some cases, only part of the land may be exempt from land tax. The remaining part of the land will be subject to land tax unless another exemption applies.
Land tax is generally calculated based on the total taxable value of the taxpayer’s landholdings. However, section 37 of the Act states that land or part of land owned by a charity that is not exempt from land tax is assessed as if it is the only land owned by the charity.
Evidentiary Requirements
To claim a land tax exemption for charitable purposes, landowners must submit a written application to the Commissioner under section 74 of the Act, including:
location and ownership details of the land, plus any relevant agreements (e.g. leases, licenses etc);
the governing document of the charity (including either its constitution, trust deed, or rules of association);
the organisation’s aims, objectives, and rules;
financial statements from the last three years;
evidence that the organisation is charitable;
proof of a wind-up clause stating that assets will be passed to another charity and not its members;
details of activities on the land; and
information on future use and any agreements for vacant land.
Key Takeaways
This recent ruling provides important expansions under lax tax law and clarifications to charitable exemptions available for land that is used and occupied for charitable purposes.
Importantly, the amendments elaborate and expand upon two pieces of legislation which is significant in circumstances where land does not qualify for an exemption under section 74 of the Act as it may now be eligible for one of the new exemptions available under section 78B, 78Cand 78D.
For further advice or information on not-for-profits and charities and land tax exemptions for your charity, please contact our office:
Briget O’Callaghan
Principal Lawyer
T 03 5225 5244 | M 0436 456 144
E bocallaghan@ha.legal
Evelyn Zeglinas
Associate
T 03 5225 5245
E ezeglinas@ha.legal
Jemimah Fitzgerald
Graduate Lawyer
T 03 5225 5219
E jfitzgerald@ha.legal