Exemptions and concessions from land tax are available to charitable organisations under certain circumstances.
Land is exempt from land tax if it is:
- Owned by a charitable organisation and used exclusively for charitable purposes.
- Used, but not owned, by a charitable organisation exclusively for charitable purposes.
- Vacant and owned by a charitable organisation and is declared to be held for future charitable use.
If only part of the land in scenarios 1. and 2. is used exclusively for charitable purposes, only that portion of the land will be exempt. Land tax applies and is calculated on the taxable portion of the land that is not exempt. Apportionment does not apply in scenario 3.
Land is not exempt from land tax if it is:
- Owned by a charitable organisation but leased to another party who does not use it for charitable purposes (unless another exemption applies).
- Used by a charitable organisation for commercial purposes, even if profits from the commercial activities are used to fund the charitable activities of the organisation.
- Owned by a charitable organisation but not used for any purpose and not declared to be held for future charitable use.
Land owned by a charitable organisation that is not exempt from land tax is assessed as if it is the only land owned by the charity (that is, each land is assessed at the single holding basis).
What is a charitable organisation (institution)?
The term charitable is not defined in the Land Tax Act 2005 and has a technical, legal meaning. For it 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.
- That predominant purpose must be for the benefit of the public in general or an appreciable section of the public.
To decide whether an organisation satisfies both these elements, it is necessary to examine its stated purposes, as set out in its constitution or memorandum of association, and its actual activities.
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.
Applying for an exemption
Step-by-step instructions are available to assist charitable organisations when applying for a land tax exemption or concession.
The charitable organisation 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 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 that are unsure of their tax obligations, or 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 date the assessment was issued.
Failure to notify us may constitute a notification default, which can result in a liability for penalty tax, which is calculated on the additional amount of tax that would have been assessed had the notification been lodged on time.