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As a charity, churches can access exemptions to land tax. Land tax is an annual tax that landowners pay to state
and territory governments. It applies in every state in
Australia, apart from Northern Territory.
Every
state has different rules and regulations in relation to
land tax, especially in relation to exemptions from land
tax. In most states, religious exemptions are available. In
all states, apart from ACT, churches must be granted a
specific exemption from the regulatory body, churches are not permitted to self-assess.
Victorian Land Tax – State Revenue Office
(SRO)
The Victorian Land Tax Act 2005 was amended in
December 2021. Now, land is
exempt from land tax if it is used and occupied
by a charitable institution exclusively for
charitable purposes. Previously, for land to be exempt, it
was only required to be used by a
charitable institution, it did not have to be occupied by a
charity institution. This amendment relates to the
2022 land tax year, which started 1 January 2022.
We would like to remind Victorian
churches that only purposes directly related to the
achievement of objectives of a charitable institution are
considered charitable. A commercial activity carried out by
a charitable institution to raise funds is not considered a
use for charitable purpose even through the funds raised are
used for charitable purpose. If a church runs a commercial
business on their land, that portion of the land may be
assessed for land tax.
Land tax can impact the following church situations:
Vacant land
This land tax amendment now indicates
that unoccupied land may be subject to land tax. The act explains that a charity will need to satisfy the SRO
Commissioner that the relevant land will be used and
occupied exclusively for charitable purposes within two
years or a longer period approved by the Commissioner. If
this is not achieved, land tax will be payable on vacant
land.
Residential / commercial rental property
Churches may have commercial or residential properties. Where a church has a residential
property and it is being used for charitable
purposes, such as provision of housing for a pastor, a
church may be exempt from paying land tax. Land tax may be
payable if the church rents a residential property to an
individual or a commercial entity that is not using the
property for charitable purposes.
Church building rent
Many churches rent their auditoriums or halls to
organisations in the community. There are traps in this,
because the church property should be used by a charitable
institution exclusively for charitable purposes. A church is
permitted to rent its buildings to another charity
including a school, however, if the hall is rented to an
entity that is not a charity, there is potential exposure to an
assessment of land tax.
Action
This is a timely reminder to
encourage all churches to consider their current land tax
status. Is the church exempt? It is also
important for churches to consider ways to preserve their
exemptions, if there is doubt.
If you would like
assistance with these issues, please contact Helen or your
legal advisors.
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