Changes to charity land tax exemption to increase University land tax bills.
The recently released Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021 has introduced Victoria’s new Windfall Gains Tax and included changes to the charity exemption for land tax.
This should be considered closely by Universities that hold land in Victoria as it will impose:
land tax on certain land owned by Universities that has not historically been subject to land tax; and
a significant new value capture tax where University land is rezoned (particularly where it is rezoned from public land to residential land).
The land tax exemption for charities has been narrowed so that it is now only available where land is:
used and occupied by a charity exclusively for charitable purposes; or
is vacant and has been declared by the University to be held for future use and occupation by a charitable institution exclusively for charitable purposes.
It is believed that this change was introduced to reverse the decision in University of Melbourne v Commissioner of State Revenue (Vic) which allowed the charity land tax exemption to apply to student accommodation located on the University of Melbourne Campus that is operated by a third-party student accommodation provider.
However, the amendment is likely to have a broader impact.
Universities will need to determine if land and buildings that they own but rent to or is used by third parties is ‘occupied’ by the University.
This would include not just student accommodation facilities rented to students, but any other buildings or facilities that are leased to businesses to provide services to students on campus such as banks, travel agents, cafes, etc.
Windfall Gains Tax
For a summary of the new Victorian Windfall Gains Tax please refer to our Windfall gains tax alert.
Relevantly for universities where land is rezoned it will be subject to Windfall Gains Tax unless the 15-year charity waiver applies.
The waiver is available where the land is continued to be held for 15 years after rezoning by the charity.
This waiver can continue to be available where the rezoned land is transferred to another charity and the new charity elects to receive the land with the deferred windfall gains tax liability and any accrued interest and commits to the land being used by a charity exclusively for charitable purposes.
How can SW assist?
If you believe that you will be affected by the WGT or have any questions on how to navigate these changes, please contact us – either your usual SW contact or any of our experts below.
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