Nov 2, 2022 Matthew Hung

Victorian Land Tax Changes for Charities

In April 2022, the Victorian State Revenue Office released Land Tax Ruling LTA-009 in relation to land owned by a charity.  This ruling is more extensive and restrictive than the earlier Land Tax rulings it replaced.  It was issued following a tightening of the land tax laws pertaining to charities.  These amendments to the law were introduced by the Victorian state government after the SRO lost a land tax case against the University of Melbourne.

A key change in the new ruling is that whereas land “used” by a charity was previously exempted from land tax, such land now has to be “used and occupied” by the charity in order to attract land tax exemption.  This means that where a charity owns land which it leases to a non-charitable tenant the land will generally lose its land tax exemption even if the non-charity tenant is assisting the charity in carrying out its purpose.

Another perhaps more significant implication is the tightening of the land tax exemption on vacant land owned by a charity.  Whereas the previous ruling (LTA 004) stated that vacant land owned by a charity would generally be exempt where it was “declared for future use for charitable purposes”, the new ruling requires that a charity satisfy the Commissioner that vacant land will be used and occupied exclusively for charitable purposes within 2 years (or a longer period provided by the Commissioner).  For existing vacant land this means 2 years from the 2022 land tax year (the year ended 31st December 2021).  The ruling states that:

If a charity does not use and occupy the land exclusively for its charitable purposes at the end of the vacant land charity exemption period, the land will cease to be exempt from land tax from that point onwards. 

The rules relating to land used for an Op Shop (usually land tax exempt subject to certain rules) and land used to generate income to pursue charitable objects (generally not exempt from land tax) continue to apply.

We recommend that clients who are impacted by these rules seek appropriate legal advice.

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