Land tax review ordered amid charity fears

Church and charity fears of looming large land tax bills have sparked a review of the law by the Andrews government.

Victorian Treasurer Tim Pallas. Picture: NCA NewsWire/David Crosling

An official review has been ­ordered into a land tax clampdown in Victoria that has alarmed charities and churches who fear being caught in the revenue net.

Victorian Treasurer Tim Pallas has asked the State Revenue Office and Treasury to review a new system under the Land Tax Act, after it was stated that land owned by charities needed to be used exclusively for charitable purposes or be included in the tax net.

It is common for churches to hire out assets including halls for community-based events such as ballet, martial arts and choir sessions, ­attracting extra income and providing a home for non-church ­activities.

But churches, which are normally exempt, are now seeking urgent advice from the revenue office, with an Anglican church parish estimating that in eastern Melbourne the range of possible land tax bills could be between $45,000 and $350,000 annually.

Mr Pallas has maintained that no charity will be forced to pay land tax as long as any activities are incidental to the institution’s charitable purpose.

St Hillary’s Anglican warden Matthew Crichton, whose parish covers suburbs in Melbourne’s east and inner east, said there was a high degree of uncertainty around the policy, raising concerns of a looming land tax bill of up to $350,000.

“The burden will fall on the church and the parishioners. The problem will be community groups will be forced to disband,” he warned.

Mr Pallas wrote to nearby St Columb’s Anglican Church in Hawthorn last month, saying that churches would not be punished if, for example, they let out some of their premises to a community group or fitness class.

“Nonetheless, the government is committed to ensuring clarity around the application of section 74 (of the act),” he wrote.

The Northern Community Church in Preston in the northern suburbs has also expressed concerns about potential land tax ­implications of the changes made last year.

Victorian opposition Treasury spokesman David Davis said the government had chosen a “sharp and rigid new interpretation” where a fee paid to the charity could be regarded as a commercial transaction and land tax would then kick in.

Victorian Shadow Treasurer David Davis. Picture: NCA NewsWire/Andrew Henshaw

“Quietly, in late 2021, with an introduction date of 1 January, 2022, Labor has narrowed the land tax exemption for charitable institutions by harshly insisting that charitable institutions ­“exclusively” use their land for charitable purposes,’’ he said.

“This sharp and rigid new ­interpretation means churches and other charities, potentially sporting clubs, who occasionally use their hall or other facilities for dance classes, callisthenics, choirs and other local groups are likely to be hit with a land tax on their entire premises.

“Daniel Andrews’ scrooge-like interpretation means that where a fee is paid it may well be regarded as a commercial transaction and land tax will therefore be levied under the new rules on the entire landholding.”

A spokesman for Mr Pallas said a scare campaign was fuelling misinformation.

“This is an unfounded scare campaign. Someone has been telling charities that have never ­received a land tax bill that they need to be afraid, even though there has been no change to the long-standing land tax exemptions available to Victorian charities,” he said.

“Charities can still be eligible for a land tax exemption if their property is used some of the time for other activities, like a church hall being hired out to a community group or for a fitness class.”