In this Part 8 in our series of articles on land tax we examine the charities exemption as well as some other exemptions under the Land Tax Act 2005 (Vic) (LTA).

Charitable institutions and purposes exemption

What is a charitable institution?

The term “charitable institution” is not defined in the LTA, accordingly in Telecommunications Industry Ombudsman Ltd v Commissioner of State Revenue [2017] VSC 286, the Supreme Court clarified that the reference to ‘charitable’ in the Act has its legal or technical meaning, as opposed to its popular meaning.

In assessing whether an entity or an institution is “charitable”, it must be determined whether the predominant purpose of the entity or institution falls within one of the following four heads of charity:

Trusts for the relief of poverty;
Trusts for the advancement of education;
Trusts for the advancement of religion; and
Trusts for other purposes beneficial to the community, not falling under any of the preceding heads.

Application of exemption

The charitable institutions and purposes exemption in section 74 of the LTA provides an exemption from land tax if land is:

Used and occupied by a charitable institution exclusively for charitable purposes; or
Owned by a charitable institution, vacant and declared to be held for future use for charitable purposes; or
Owned by a charitable institution, is leased for outdoor sporting, recreational, cultural or similar outdoor activities and available for use for those activities by members of the public.
If only a part of land satisfies any of the 3 qualifying exempt uses, section 74(2) of the LTA provides that land tax is assessable on the remaining part of the land, unless another exemption applies to that part.

What this means is that when a parcel of land meets the charitable exemption requirements in section 74(1) but for a part of it not satisfying the exemption, section 74(2) of the LTA takes effect such that only that part which is not exempt is charged with land tax for a particular year.

In practical terms, while it means that the full exemption in section 74 only applies when the entirety of the land satisfies the qualifying exempt use, it does mean that the exemption can partly apply even when the whole land does not satisfy the exemption.

Sporting, recreational and cultural land owned by certain non-profit organisations exemption

This exemption applies to land owned by a non-profit organisation (or in the case of a non-profit organisation that is unincorporated, by a person on trust for the non-profit organisation).

While this exemption appears to be similar to the charities exemption in section 74 of the LTA, unlike the charities exemption which grants exemptive relief whether or not the charity owns the land, this exemption is only available if the land is owned by the non-profit organisation.

Application of exemption

Section 72 of the LTA provides an exemption from land tax if land is:

Used by the non-profit organisation primarily or substantially for:
- Sporting activities; or
- Outdoor recreational, outdoor cultural or similar outdoor; and

The primary purpose or objective of the non-profit organisation is to conduct the sporting activities or the specified outdoor activities for which the land is primarily or substantially used.

It should be noted that separate to the requirements as to type of use, this exemption will only apply if the intensity of the land use can be classified as being ‘primarily or substantially’ used. This means that while certain exemptions such as the charities exemption in section 74 of the LTA provide part-relief, no exemptive relief applies if the threshold in section 72(2)(a) is not met.

Caravan parks exemption

Under section 77 of the LTA, an exemption from land tax exists if land is used as a registered caravan park in accordance with the Residential Tenancies Act 1997 (Vic).

In Lifestyle Investments 1 Pty Ltd v Commissioner of State Revenue [2021] VSCA 107 (“Lifestyle Investments”), the Victorian Court of Appeal acknowledged that the term “use” is a protean concept that will derive its meaning largely from the particular subject matter with which the legislation is concerned and its context in that legislation. The Court of Appeal went on to confirm that the exemption in section 77 of the LTA would not apply if land was merely registered as a caravan park but was not used as such at the relevant time.

As set out by the Court of Appeal in Lifestyle Investments, the satisfaction of the requirements in section 77 of the LTA would ultimately depend on whether the land is available for use as a registered caravan park in accordance with the appropriate registration.

It should also be noted that if only part of the land is used as a registered caravan park, the exemption will only apply to that part.

Land owned and occupied by not for profit clubs

Section 73A of the LTA provides an exemption from land tax where land is owned and solely occupied by a not-for-profit club that exclusively provides for the social, cultural, recreational, literary or educational interests of its members.

A part exemption applies if only part of the land qualifies for the land tax exemption. In such instance, the remaining part of the land that does not qualify will be assessable for land tax unless another exemption applies to that part.

While the operation of the exemption in section 74 is broad and covers most not-for-profit clubs, from the 2022 land tax year, the exemption does not apply to racing clubs or to private gender-exclusive clubs and gender-restrictive clubs.

Gender exclusive clubs

As a general rule, while the land tax exemption for not for profit clubs no longer applies to gender-exclusive or gender-restrictive clubs, such clubs may still be eligible if it can be proven to the Commissioner that any gender-exclusive membership restrictions have been removed and the Commissioner is satisfied that the club is either:

genuinely inclusive of members of any sex or gender identity; or
the purposes of the club are such that it is consistent with community interests and expectations that the exemption apply.

In considering whether a club is genuinely inclusive of members of any sex or gender identity, the Commissioner may have regard to the following factors:

the membership composition of the club;
membership classes and the rights of members of the club;
any other relevant circumstances.

Similarly, in considering whether a club’s purposes are consistent with community interests and expectations, the Commissioner may have regard to the following factors:

the purposes of the club;
the membership composition of the club;
membership classes and the rights of members of the club;
the nature of the benefits or services the club provides to its members;
benefits or services the club provides to the community;
whether the benefits or services the club provides to its members are to meet their special needs or particular personal characteristics;
any other relevant circumstances.

Questions

If you have any questions about how these land tax exemptions should apply in your circumstance, please contact our specialist team at:

Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au