Substantial changes were made to the land tax exemptions relating to charitable institutions in 2021, which drew significant angst due to the perceived impact where charities allowed non-charitable groups to use their land for short periods of time.
However, an often-overlooked element of the 2021 amendments was a discreet change to the separate exemption which applies to vacant land owned by a charity.
For 2021 and earlier land tax years, charitable owners had to declare that their vacant land was held for future use for charitable purposes (whether by the owner or some other charity). From the 2022 land tax year, additional requirements were added:
- the charitable owner must declare that the vacant land is held for future use and occupation by a charitable institution exclusively for charitable purposes; and
- the Commissioner of State Revenue (Commissioner) must be satisfied that the declared use and occupation will commence within 2 years, or such longer period approved by the Commissioner.
The default 2-year period has now ended for land held as at 31 December 2021. Charitable owners enjoying exemption for vacant land in 2022 and 2023 risk losing their exemption in 2024, unless the Commissioner approves a longer period. This requires a formal application, demonstrating a genuine timeline for future use and occupation.
In addition, because an owner’s entitlement to exemption in 2022 and 2023 relied on the Commissioner’s satisfaction that the owner had declared a genuine intent for use and occupation to commence by 31 December 2023, charitable owners should be aware of the possibility of an investigation being commenced into the accuracy of the exemption during these years. If no written declaration can be identified and presented, or the Commissioner is not satisfied any declared intent was genuine having regard to steps taken (or failed to be taken) by the charitable owner since the date of the declaration, then the charitable owner should expect re-assessment of their land tax positions.
Charities should also be aware that if their declared intent for vacant land involves mixed use – such that some land is intended to be developed for charitable purposes (i.e. to construct a school campus), while the balance is intended to be developed for sale – then they may not be entitled to a full exemption.
Letters of investigation from the State Revenue Office are already being issued. Charities with vacant land as of 31 December 2023 should proactively assess their eligibility for 2024 and seek the Commissioner’s approval for an extended timeframe for use and occupation.
Charities should also carefully review their land tax assessments to ensure existing exemptions have been accurately granted. If there are errors, such as changes impacting eligibility during the preceding tax year, charities must notify the Commissioner within 60 days of receiving their assessment to avoid significant penalties.
Mills Oakley’s Private Advisory team has considerable experience in the charity tax concession space. Please reach out to us if your charity needs support considering its land tax positions.