CouncilCorrespondence202208LandTax

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Council Correspondence 202208 Land Tax

Letter received

Letter to the State Treasurer - Land Tax This is of concern to all congregations, faith communities and churches that hire out their property to outside users

David Toscano of Northern Community Church of Christ has been proactive in assisting churches to comment quickly and easily on the recent matter of Land Tax obligations. Essentially, his important observation is that sporting clubs gain a Land Tax exemption based on primary use, rather than exclusive use. The legislation concerning churches, however, states the property must be for the exclusive use - which means annual land tax can be applied if hired to outside users. A similar concession for churches (change of wording from exclusive use to primary use) would seem to strike a more reasonable balance. It is not asking for anything more than already granted to sporting clubs etc. There is a tight timeframe to have correspondence considered before the state election that will hopefully reduce the tax debt for many churches.

Individuals, groups and congregations are encouraged to write to support this campaign. Click to download a sample letter to the State Treasurer and a letter writing guide to allow you to make your own submission by the end of this week.

Analysis

• The first important link is https://www.sro.vic.gov.au/legislation/land-tax-charity-exemption

• This is a new ruling on 2005 legislation for 2022 onwards, not new legislation.
• It includes its own, much broader that the ATO, definition of a charity, including:

  • Generally, an organisation is a charity if it is established for:
    ...
            c. the advancement of religion,
            d. other purpose beneficial to the community.

• Plus be not for profit.
• So we are charitable for land tax, and so are many of our tenants.
• Do we have tenants who would fail that test of charitable?
• What portion of our property do they occupy?
• Land is exempt if:

  • land is used and occupied by a charitable institution (charity) 
    exclusively for charitable purposes (section 74(1)(a) of the Act

• The "exclusively" has been in the act since 2005. (Old and new versions of the act are available from https://www.legislation.vic.gov.au/in-force/acts/land-tax-act-2005/010)

• The lawyers opinion also makes clear that this is not a new problem. https://www.moores.com.au/news/land-tax-rules-for-charities-are-missing-the-mark/

• The case that led to the ruling is described as:

  • The words ‘and occupied’ were recently inserted in section 74 of the Act following the Supreme Court decision in University of Melbourne v Commissioner of State Revenue [2021] VSC 156. In that case, the University leased two parcels of land to a private company which operated a student accommodation facility.  While it was accepted that the University is a charity and that the provision of accommodation to students by the University is a charitable purpose, the issue was whether the University used the land exclusively for its charitable purpose. The court held that the word ‘used’, for the purpose of s 74(1)(a), is not synonymous with ‘occupy’ and the text alone points to a wider meaning of ‘use’ than the active physical use consistent with occupation. Accordingly, the Supreme Court ruled that the exemption could apply to the land, notwithstanding it was leased by the University to a commercial tenant who used it for profit-making activities.

• That is, the decision made it easier to claim charitable exemption, not harder. The change to the act reversed that.
• If we rent to a profit making company who runs ESL classes that are beneficial to the community, I think that we have a stronger case than Melbourne Uni, at least before the changes, that is for past history.
• Also of interest in that ruling is:

  • However, other factors, when taken into consideration on a holistic approach, may indicate that the charity has occupation of the land. These factors include legal possession, conduct amounting actual possession and degree of control of the land.   For example, where a charity leases its land to provide accommodation to a tenant at nominal or subsidised rent as part of the charity’s activities, the charity may still be considered to be in occupation of the land if it provides substantial on-site care and support services, remains responsible for substantial maintenance of common areas and essential amenities, retains authority to control public access on premises and generally maintains sufficient measure of control and actual possession of the premises.

• We do much of that for all our tenants.
• Op shops are specifically exempt by another ruling, provided they meet certain, quite reasonable IMHO, tests.
• Having said all that, Moores make a well argued case to change the 2005 (Bracks) legislation, and I would have no problem supporting the letter writing campaign.

DavidMorgan

For updates see

• UCA joining the campaign at CouncilAgenda20220912/Land-Tax-Campaign.pdf

• The requested list of renters is available at ExternalRenters2022

Update:

• UCA Property trust Victoria is a "Registered charity" but not a "Deductable Gift Recipient", i.e. a charity for tax purposes. (https://www.abr.business.gov.au/ABN/View/39703442583)

• "exclusively" has been in the act since 2005. The change is from "used by a charitable institution exclusively" to "used and occupied by a charitable institution exclusively for charitable purposes".
• This change was in response to the ruling on the Melbourne University case.

• Synod issued FAQs for 22 Sep 2022.