March 2022

               

 

Welcome to our Church Finance Handbook Newsletter. These newsletters aim to keep you up to date with issues within the church sector as well as remind you of areas of interest within the guide. We hope that you will find these newsletters helpful.
If you have any suggestions for topics to be covered in this newsletter, please let us know.

    
      

Helen Boucher 

Audit Director - Religious Sector Lead

e: helen.boucher@sawarddawson.com.au  

 

    
      

Churches enjoy some very generous tax concessions in relation to fringe benefits. However, it is critical that these concessions are carefully managed and all your obligations are satisfied.   

Churches can provide tax free fringe benefits to employees that meet the definition of a religious practitioner. Churches can also provide limited fringe benefits on a concessional basis to non-ministerial staff. Where this occurs, a church may need to prepare and lodge a fringe benefits tax return. This return covers the provision of fringe benefits for the year 1 April to 31 March. 

Please contact Murray Nicholls, our Director of Remuneration Services.  Murray can provide assistance and advice to ensure that your church is maximising its opportunities. managing its compliance risks and can also assist in preparing a fringe benefits tax return, if required. 

    
     
   

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. 

  
    

Within the GST legislation, there are generous exemptions available churches in relation to GST.  In these newsletters, we will cover a number of these concessions to ensure that your church is aware of and utilising these concessions. 

We encourage all churches to never assume that an exemption exists in relation to charging GST on income. Churches should always research and conclude that an exemption does or does not apply to each type of income that the church earns. It's the church's obligation to ensure that this research and the conclusions reached are documented. 

We will include more focused areas of GST in the coming newsletters. Here is a quick link to the GST section of the Church Finance Handbook.

   
     

 

The Finance Resource Centre is included as part of the Church Finance Handbook. This section of the guide includes many templates and resources for church treasurers.

We would like to direct you to our Governance Calendars. These governance calendars have been put together to assist governing boards and finance committees, to remind these groups of areas of responsibility that need to be covered during a financial year, as well as an expected frequency and/or timing of these discussions.

Please find these calendars, in this section of the Church Finance Handbook.

   
   

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Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer: This publication has been prepared on the basis of information available at the date of preparation. The information is general in nature and is not to be taken as substitute for specific professional advice. We recommend that our advice be sought on specific issues prior to acting on transactions affected.