Latest Victorian State Revenue Office draft revenue ruling on the land tax exemption for charitable institutions

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On 15 February 2022, the Victorian State Revenue Office published a draft revenue ruling LTA-009 – Land Tax Charity Exemption (the Ruling), replacing previous rulings of LTA-004 and LTA-005. 

The Ruling responds to recent amendments made to the Land Tax Act 2005 (Vic) (Land Tax Act) in Victoria by the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021.  The amendments require that, in order for a charitable institution to obtain an exemption from land tax, the Commissioner of State Revenue (Commissioner) must be satisfied that the relevant land for which an exemption is sought was “used and occupied” exclusively for charitable purposes.  Previously, the Land Tax Act only required that the land was used by a charitable institution exclusively for charitable purposes – occupation was less relevant. The Ruling seeks to clarify the Commissioner’s position on how the exemption is intended to now apply in this context.

The Ruling is proposed to apply from the 2022 land tax year.  The previous rulings – LTA-004 and LTA-005 – will continue to apply for the 2021 and prior land tax years.

A consultation process is open for any comments and submissions prior to the Ruling being finalised. The due date for submissions is 5pm AEDT 15 March 2022 to [email protected]. Please get in touch if you would like us to assist you in preparing a submission, or if you would like further detail as to how the changes may affect your charity.


With effect from 1 December 2021, the Land Tax Act has been amended insofar as it applies to charitable institutions.  From the 2022 land tax year onwards, for land to be exempt from land tax in Victoria, the Commissioner must determine that:

  1. the land is “used and occupied by the charitable institution exclusively for charitable purposes”; or
  2. the land is “owned” by a charitable institution, vacant and declared by its owner to be held for future “use and occupation” by a charitable institution exclusively for charitable purposes; or
  3. the land is “owned” by a charitable institution, leased for outdoor recreational, outdoor cultural or similar outdoor activities and available for “use” by members of public in respect of one or more of those activities.

These changes are a response to the decision in The University of Melbourne v Commissioner of State Revenue [2021] VSC 156.  In that case, the Supreme Court of Victoria held (under the Land Tax Act as it was) that the University of Melbourne (which is a charitable institution at law), was exempt from land tax in respect of two parcels of land that it owned but leased to a third-party student accommodation operator for the provision of student accommodation to students of the University.  The Court found that the act of leasing by a charitable institution constitutes a “use” for the purposes of the Land Tax Act and that this “use” was in accordance with a “use” that was exclusively for the University’s charitable purposes (being the advancement of education). 

The Court found that occupation of property was not relevant to the land tax exemption.  Amendments to the Land Tax Act were introduced as a consequence.

Summary of ruling

The Ruling outlines the Commissioner’s position on how the exemption in section 74 of the Land Tax Act is intended to apply following the recent amendments.  The Ruling also set out the evidentiary matters that the Commissioner expects applicants to submit when applying for the exemption (noting that the Ruling is only a draft at this stage and is subject to change after a consultation process).

The Ruling highlights the following key aspects:

  1. For the meaning of “used and occupied”, occupation is a factual inquiry and is not as broad as “use”. The Commissioner’s view is that occupation requires actual physical activity with a degree of permanence or exclusive possession to satisfy the meaning of “used and occupied”.
  2. The use and occupation of the land by the charitable institution must be exclusively for charitable purposes. The Commissioner cautions charitable organisations undertaking commercial activities to fund their charitable objects. In the context of land tax, the Commissioner’s view is that a land tax exemption will not apply to situations where land is used for a commercial activity that is not in itself a charitable activity. In this regard, not all commercial activities undertaken on land by a charitable institution will suffice for the purposes of satisfying the charitable institution exemption from land tax (even if the funds generated from the activity are used for its charitable purpose).
  3. For charities who provide accommodation as part of their activities, the Commissioner will look to a range of factors in determining whether the accommodation arrangements are consistent with the charity using and occupying the land. This includes whether subsidised rent is provided by the charity, whether the charity provides amenities on the land (such as care and support services, on-site security, electricity etc), whether the charity has the authority to exclude or permit members of the public to access the premises and whether the charity otherwise maintains control / possession of the land.
  4. For opportunity shops, the “use and occupied” requirements require a number of specific conditions to be met. These are that the activities conducted in the opportunity shop must specifically meet the aims of the charity (i.e. the shop must, through its operations, directly provide relief of poverty for its shoppers, as distinct from raising funds), goods should be sold at nominal prices, good must be predominately donated and second hand, and workers must be volunteers.
  5. To qualify for the vacant land exemption, the Commissioner must generally be satisfied that the vacant land will be used and occupied by a charity within 2 years. Simply declaring that a vacant property is held for future charitable use and occupation is not sufficient, especially where there is considerable uncertainty around the timing and likelihood of the purported future charitable use and occupation of the land. 

Key takeaways

Charitable institutions, or landowners with charitable occupants, seeking to claim the charitable institution exemption from land tax should consider the following in light of the recent amendments and the Ruling:

  1. Whether the charitable institution is using and occupying the land exclusively for its charitable purpose.
  2. Whether appropriate documentation is in place to demonstrate to the Commissioner that the use and occupation of the land satisfies the exemption.
  3. Whether a review should be undertaken of existing or proposed use and occupation arrangements between landowners and charitable institutions to confirm that the charitable institution’s use is consistent with the new exemption. Exclusive rights granted to private (non-charitable) entities should in particular be considered very closely.

Please contact a member of the KWM Tax Team if you would like more details regarding the implications of the amendments, assistance in ascertaining whether the newly amended charitable institution exemption is available to you, or whether you require our assistance in lodging a consultation submission with the State Revenue Office.

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