Exemptions and concessions from land tax are available for land owned or used by a charitable organisation under certain circumstances under section 74 of the Land Tax Act 2005 (LTA).
Land is exempt from land tax if it is:
- Used and occupied by a charitable institution exclusively for charitable purposes (current charity exemption). This applies from the 2022 land tax year. Prior to 2022, land is exempt land if it was used exclusively for charitable purposes.
- Vacant and owned by a charitable organisation and is declared to be held for future charitable use (future charity exemption). From the 2022 land tax year, a charity will need to satisfy the Commissioner that the relevant land (or part of the 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 (charity outdoor leasing exemption). This applies from the 2022 tax year. Prior to the 2022 tax year, the land is not required to be owned by a charitable institution but the proceeds from the lease must be applied exclusively for charitable purposes.
Apportionment of exemption
Where only a part of the land meets the requirements for the charity exemption, that part of the land is exempt from land tax. The remaining land is subject to land tax unless another exemption applies to it. For example, a charitable institution only uses and occupies a part of the land exclusively for charitable purposes, or a charitable institution leases part of its land for outdoor sporting activities which are available for use by the public.
Land tax is generally calculated on the total taxable value (i.e. aggregated value) of a taxpayer’s landholdings. However, land or part of land owned by a charitable institution that is not exempt from land tax is assessed as if it is the only land owned by the charity. This means that each taxable land is assessed for land tax on a single holding basis for the relevant tax year. No land tax will be imposed if the site value of the land is below the tax-free threshold.
What is a charitable organisation (institution)?
The term charitable is not defined in the LTA. It has a technical, legal meaning. For an organisation to be charitable, two elements must be satisfied:
- Its predominant purpose must fall within one of the following four heads of charity:
- relief of poverty
- advancement of education
- advancement of religion
- other purposes beneficial to the community.
- Its predominant purpose must be for the benefit of the public in general or an appreciable section of the public.
It is necessary to examine an organisation’s stated purposes, as set out in its constitution or memorandum of association, and its actual activities to decide whether an organisation satisfies both these elements.
Additionally, there must be no possibility of distribution of its profits or assets for the private benefit of its owners or members during its operation or at wind-up. This means that, besides setting out its objectives and activities, a charitable organisation’s constitution or memorandum of association should contain:
- a clause expressly prohibiting the distribution of any surplus funds, whether income or capital, to its members
- a wind-up clause which provides that in the event of a wind-up, surplus assets will be passed on to another charitable organisation and will not be distributed to any members of either the original or substitute charitable organisation.
Used and occupied by a charitable institution exclusively for charitable purposes
Further guidance on how to determine whether a charitable organisation uses and occupies land exclusively for charitable purposes is provided in Revenue Ruling LTA-004.
Future charity exemption
The future charity exemption applies to vacant land owned by a charity and declared by its owner to be held for future use and occupation by a charity exclusively for charitable purposes. Vacant land means unoccupied land, not unimproved land.
To qualify for the future charity exemption from the 2022 tax year, the Commissioner must be satisfied that the vacant land will be eligible for the current charity exemption within 2 years, or a longer period approved by the Commissioner from the tax year to which the Commissioner’s determination applies. Simply declaring that a vacant property is held for future charitable use and occupation is not sufficient, especially where there is considerable uncertainty around the timing and likelihood of the purported future charitable use and occupation of the land.
The Commissioner will make a determination by looking at all relevant information and only grant the exemption if he is satisfied as to the validity of the declaration of future charitable use and occupation.
If, at the end of the future use exemption period, the charity does not use and occupy the land exclusively for its charitable purposes, the land will cease to be exempt from land tax. However, the future use exemption already granted for the past tax years will not be revoked.
Charity outdoor leasing exemption
Prior to the 2022 tax year, land leased for outdoor sporting, recreational, cultural or similar activities was exempt from land tax under section 71 of the LTA if the proceeds from the lease are applied for charitable purposes. From the 2022 tax year onwards, this exemption was amended and incorporated under section 74 of the LTA. To be exempt land under section 74, the land must be owned by a charitable institution and leased for the outdoor exempt activities. The land must also be available for use for one or more of those activities by members of the public.
Applying for an exemption
Step-by-step instructions are available to assist an owner of land applying for a land tax exemption or concession.
The owner of land should pay any land tax liability which is due for payment in full or by instalment while the exemption application is being determined.
If you do not pay the assessed tax on time and your application is disallowed, interest may accrue daily on the outstanding amount.
You may be entitled to negotiate a provisional amount to pay if there is a partial amount of the total owing that is not in dispute. You should indicate if this is the case when you apply for an exemption.
Changes in circumstance
If any material changes arise during the exemption period, the owner of land or charitable organisation is required to notify us as soon as possible in writing.
Changes to the aims and objectives, or the principle activities and services of the organisation, or changes to the use of the land may cause the land to become ineligible for the exemption.
Omissions and errors
Owners of land who are unsure of their tax obligations or who believe that they have incorrectly received an exemption for non-exempt land should contact us to make a voluntary disclosure.
You should also notify us of errors or omissions in your land tax assessment notice within 60 days from the assessment issue date.
Failure to notify us may constitute a notification default, which can result in a liability for penalty tax. This is calculated on the additional amount of tax that would have been assessed had the notification been lodged on time.