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Ruling history

Ruling no.  LTA-009
Status Current
Replaces LTA-004 and LTA-005
Issue date  27 April 2022
Date of effect  2022 Land tax year

This ruling replaces LTA-004 and LTA-005 to reflect the amended section 74 of the Land Tax Act 2005 which applies from the 2022 land tax year onwards. LTA-004 and LTA-005 continue to be applicable for the 2021 and prior land tax years. 


Land is exempt from land tax under section 74 of the Land Tax Act 2005 (the Act) if the Commissioner of State Revenue (Commissioner) determines that:

  1. land is used and occupied by a charitable institution (charity) exclusively for charitable purposes (section 74(1)(a) of the Act – referred to as current charity exemption in this ruling), or
  2. land is owned by a charity and vacant and declared by its owner to be held for future use and occupation by a charity exclusively for charitable purposes (section 74(1)(b) of the Act – referred to as vacant land charity exemption in this ruling), or 
  3. land owned by a charity and leased for outdoor sporting, outdoor recreational, outdoor cultural or similar outdoor activities and available for use for one or more of those activities by members of the public (section 74(1)(c) of the Act – referred to as outdoor leasing charity exemption in this ruling). 

The three limbs of the charity exemption have been labelled above for ease of reference.

The purpose of this ruling is to provide the Commissioner’s interpretation of the meaning of the charity exemption provided under section 74 of the Act. This ruling is provided as a guide only and is not exhaustive. If your circumstances are not covered in this ruling, please apply for a private ruling in accordance with Revenue Ruling GEN-009v3 – General Information on Private Rulings.



The question of whether or not an organisation is a charity is determined in accordance with common law principles. Generally, an organisation is a charity if it is established for:

  1. the relief of poverty
  2. the advancement of education
  3. the advancement of religion, or
  4. other purposes beneficial to the community.

An organisation that is established for the advancement of education, the advancement of religion or other purposes beneficial to the community must meet the public benefit requirement. The public benefit must be for the community as a whole or an appreciable section of it.

Further, an organisation must operate on a not-for-profit basis to be considered as a charity. This means that any profit or surplus income must be used solely to further the organisation’s objectives and must not be distributed to its members. Generally, to be satisfied that this requirement is met, the Commissioner requires that the organisation’s wind-up clause prohibits distribution of any surplus assets to its members or directs distribution of any surplus assets to another charity whose wind up clause also prohibits distribution of any surplus assets to the members of that charity.

Used and occupied

To qualify for either the current charity exemption or the vacant land charity exemption, the relevant land must be, or be declared to be, used and occupied by a charity exclusively for charitable purposes.  

The words ‘and occupied’ were recently inserted into section 74 of the Act following the Supreme Court decision in University of Melbourne v Commissioner of State Revenue [2021] VSC 156. In that case, the University leased two parcels of land to a private company which operated a student accommodation facility. While it was accepted that the University is a charity and that the provision of accommodation to students by the University is a charitable purpose, the issue was whether the University used the land exclusively for its charitable purposes. The court held that the word ‘used’, for the purpose of s 74(1)(a), is not synonymous with ‘occupy’ and the text alone points to a wider meaning of ‘use’ than the active physical use consistent with occupation. Accordingly, the Supreme Court ruled that the exemption could apply to the land, notwithstanding it was leased by the University to a commercial tenant who used it for profit-making activities. 

It is a factual inquiry as to whether a person uses and occupies land and each matter will be considered on its own particular facts. Generally, if a landowner has granted exclusive possession of land under a lease, it is the tenant, not the landlord, who has occupation of the land. This means that:

  1. a charity who owns the land may not be in occupation of the land if the charity leases it to a non-charitable tenant
  2. a charity may be in occupation of land if it leases the land from the landowner, irrespective of the charitable status of the landowner, and 
  3. if a charity, who either owns the land or leases it from a landowner, engages a service provider under a service contract or licence to provide certain goods or services on the land, the charity generally remains in occupation of the land. 

The above reflects the long-standing policy that tenants or lessees that are not charities are placed on a level playing field with other commercial tenants or lessees. However, other factors, when taken into consideration on a holistic approach, may indicate that the charity has occupation of the land. These factors include legal possession, conduct amounting to actual possession and degree of control of the land.   For example, where a charity leases its land to provide accommodation to a tenant at nominal or subsidised rent as part of the charity’s activities, the charity may still be considered to be in occupation of the land if it provides substantial on-site care and support services, remains responsible for substantial maintenance of common areas and essential amenities, retains authority to control public access on the premises and generally maintains sufficient measure of control and actual possession of the premises. 

Exclusively for charitable purpose

In addition to the requirement that land must be used and occupied by a charity, the use and occupation of the land must be exclusively for the charitable purposes of the charity for the land to qualify for the current charity exemption and vacant land charity exemption. 

It is not sufficient that land is used and occupied by a charity. The exemption is also directed at the purpose for which the land is used and occupied by a charity.  Generally, only purposes directly related or wholly ancillary to the achievement of the objectives of a charity are considered charitable. A commercial activity carried out on the land by a charity to raise funds is not considered as a use and occupation of the land exclusively for a charitable purpose even though the funds raised are used for its charitable purposes.

The Court of Appeal of Western Australia in Shire of Derby-West Kimberley v Yungngora Association Inc [2007] WASCA 233 considered the meaning of 'land used exclusively for charitable purposes' under the Local Government Act 1995 (WA). It held that, in determining the purpose or purposes for which land is used, the focus must be on the use of the land for a charitable purpose, not on the use of what was derived from the land, for example, rental income. 

The High Court in Commissioner of Taxation v Word Investments Ltd (2008) 236 CLR 204 expanded the common law definition of 'charitable organisation' to include organisations that conduct predominantly commercial activities to fund their charitable objects or donate their profits to another charity. However, the decision was only concerned with the characterisation of an organisation as a charity. For the purposes of land tax, this decision does not change the position that land used for the purposes of generating income to pursue charitable objects does not of itself constitute land that is used and occupied exclusively for charitable purposes.

However, where the commercial activity conducted on the land by a charity is incidental to its charitable purposes, the land may be eligible for the exemption. In Salvation Army (Vic) Property Trust v Shire of Fern Tree Gully (1951) 85 CLR 159, the lands were used for the purpose of conducting training farms for delinquent boys and homes for difficult, wayward or underprivileged boys. Activities of the training farms included raising animals and growing vegetables and flowers. Produce of the farms was sold and the revenue generated was applied towards the costs of operating the training farms and homes. The High Court held that the lands were used exclusively for charitable purposes. Although revenue was generated from the farming activities, those activities were considered as merely incidental to the charitable purpose for which the land was being used.

The following are additional examples of use and occupation of land by a charity that the Commissioner may consider as incidental to the charitable purposes of the charity: 

  • a university licenses land to an industry partner to form a research group to support its educational objectives, and the research project may result in incidental commercial products or services
  • a university licenses land to a third-party vendor for the provision of food and beverages primarily to the students and staff of the institute.

Opportunity shops and charitable purposes 

In Trustees of the Superior Council of Australia of the Society of Saint Vincent de Paul v Goulburn City Council [1974] 2 NSWLR 655, the court held that an opportunity shop that sold goods on terms ‘designed to relieve poverty and necessity and to preserve some semblance of dignity’ for its shoppers was for a charitable purpose. 

For land that is used and occupied by a charity to operate an opportunity shop to be exempt under section 74 of the Act, the opportunity shop must meet all the following criteria (in addition to meeting the use and occupation requirement):

  • the activities conducted in the opportunity shop must specifically meet the aims and objectives of the organisation's charitable work (the opportunity shop must, through its operations, directly provide relief of poverty for its shoppers, as distinct from raising funds)
  • goods must be sold at nominal prices
  • goods sold by the opportunity shop must be predominantly donated to the charitable organisation, and
  • goods sold in the opportunity shop must be predominantly secondhand.

In addition, other factors may also be taken into account in support of an application for the exemption, including whether the opportunity shop is predominantly staffed by volunteers.

Vacant land charity exemption

The vacant land charity exemption applies to vacant land owned by a charity and declared by the charity to be held for future use and occupation by the charity or another charity exclusively for charitable purposes. 

Vacant land means unoccupied land. To qualify for the vacant land charity exemption from the 2022 tax year, the Commissioner must be satisfied that the vacant land will be eligible for the current charity exemption under section 74(1)(a) of the Act within 2 years, or a longer period approved by the Commissioner from the tax year to which the Commissioner’s determination applies. 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. The Commissioner will make a determination by looking at all relevant information and documentation and will only grant the exemption if he is satisfied as to the validity of the declaration of future charitable use and occupation. 

If a charity does not use and occupy the land exclusively for its charitable purposes at the end of the vacant land charity exemption period, the land will cease to be exempt from land tax from that point onwards. 

Outdoor leasing charity exemption

Prior to the 2022 tax year, land leased for outdoor sporting, recreational, cultural or similar activities was exempt from land tax under section 71 of the Act if the proceeds from the lease were applied for charitable purposes, regardless of who owned the land. From the 2022 tax year onwards, this exemption was amended and incorporated under section 74(1)(c) of the Act with the added requirement that the land must be owned by a charity. 

Partial exemption

In situations where only a part of land meets the requirements for the exemption, that part of the land is exempt from land tax. The remaining part of the land is subject to land tax unless another exemption applies to that part of the land. For example, if a charity uses and occupies one floor of an office building for administrative work connected with its charitable purposes and leases another floor of the office building to a commercial tenant, a partial exemption will be applied on the basis of the floor area of the office building used for the charitable purpose.

Land tax is generally calculated on the total taxable value (i.e. aggregated) of a taxpayer’s landholdings. However, as provided by section 37 of the Act, land or part of land owned by a charity that is not exempt from land tax is assessed as if it is the only land owned by the charity. This means that each taxable land is assessed for land tax on a single holding basis for the relevant tax year.  No land tax will be imposed if the site value of the land is below the tax-free threshold.

Evidentiary requirements

To claim the exemption under section 74 of the Act, the owner of the land must submit a written application to the Commissioner. A person entitled to land under a lease from the Crown is deemed to be the owner of the land (section 10(b) of the Act) and is eligible to claim an exemption for the land.

The written application must clearly state the grounds on which the exemption is sought and include the following information and documents:

  1. full details of the location and ownership of the land (if the land is the subject of an agreement including a lease or a license, details of the lessee/licensee, copy of the agreement and any other relevant information relating to the agreement must be provided)
  2. the governing document of the charitable institution that uses and occupies the subject land(s), being:
    1. for a company or an incorporated association, evidence of its incorporation and a copy of its current Constitution (or Memorandum and Articles of Association, as appropriate)
    2. for an incorporated association, evidence of its incorporation (as outlined above) and a copy of its Rules of Association (and Statement of Purpose / Objects, if in a separate document)
    3. for a trust, a copy of the trust deed (including any schedules) and any amendments and alterations to the trust deed, or
    4. for an unincorporated association, a copy of its Rules of Association.
  3. details of the organisation’s aims, objectives and rules
  4. financial statements for the current and past three financial years
  5. other information to indicate that the organisation is charitable, such as a description of services provided,
  6. evidence of a wind-up clause stating that assets:
    • will be passed onto another charitable organisation in the event of wind-up
    • will not be distributed to members of either organisation
  7. details of all the activities conducted on the land including promotional material of these activities, and
  8. information relating to the future use and occupation of the vacant land including any lease, licence or other relevant agreements entered into in relation to the land. 



Rulings do not have the force of law. Each decision made by the State Revenue Office is made on the merits of each individual case having regard to any relevant ruling. All rulings must be read subject to Revenue Ruling GEN.001.

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