Background
In Australia, the government supports charities in many ways, including via grants and tax concessions.
Understanding how and when a charity can access tax concessions can be overwhelming. This short guide is designed to assist charities in navigating this complexity in Queensland.
This article discusses the following tax concessions:
- Income tax exemption;
- Transfer duty (aka stamp duty) exemptions;
- Land tax exemption;
- Payroll tax exemption;
- Refunds and backdating of State tax exemptions; and
- General rates exemptions/concessions.
Our federal system
Due to Australia’s federal system of government, different layers of government have different responsibilities and different taxes which fund those responsibilities.
For example, registration with the Australian Charities and Not-for-profit Commission (‘ACNC’) is a Commonwealth registration and not a State or Local Government registration. State Governments and Local Governments apply their own tests to what constitutes a charity worthy of concessions from their tax regimes.
Commonwealth tax concessions
The ACNC is the Commonwealth charity regulator and is responsible for regulating charities registered pursuant Australian Charities and Not-for-profits Commission Act 2012 (Cth).
Registration as a charity with the ACNC will generally entitle a charity to an exemption from income tax, GST concession, and Fringe Benefit Tax (‘FBT’) rebate. You can read more about these tax concessions here.
Some registered charities will also qualify for endorsement for Deductible Gift Recipient status and an FBT exemption. You can read more about this here.
State tax exemptions
There are a number of State taxes that affect charities, and the Queensland government provides charities with exemptions to some of them. In order to access these tax exemptions, a charity must first apply to be registered as a ‘charitable institution’ with the Queensland Revenue Office (‘QRO’).[1]
Each State tax exemption will have further qualifying criteria which must be met. Therefore, obtaining charitable institution registration on its own does not necessarily mean that your charity will automatically be entitled to every exemption in every situation.
1. Transfer Duty (also known as Stamp Duty)
The Duties Act 2001 (Qld) imposes duties on certain transactions and written documents. Transactions involving property such as real estate or certain business assets are subject to duty.[2] Duty also applies to insurance policies and applications to register or transfer vehicles.
As a general proposition, a charity will be entitled to this exemption in respect of property acquisition if the property is used solely or mainly for a ‘qualifying exemption purpose’ (i.e. charitable purpose) for a period of at least 12 months from acquisition. This can include properties which generate an income for the charity to further its charitable purposes (e.g. a property which generates rental income for the charity).
Managing the application for this exemption and the QRO’s timeframes within the context of a conveyance can be complicated. We can work with your conveyancer to manage this process.
If you have purchased a property within the past 5 years and paid transfer duty on that purchase and believe it should have been exempt, we may be able to assist you with obtaining a refund.
We discuss insurance duty and vehicle duty separately below.
2. Land Tax
The Land Tax Act 2010 (Qld) imposes tax on freehold land owned in Queensland as at midnight on 30 June each year. Landowners are liable for land tax when the aggregate taxable value of their land-holdings exceeds a certain threshold.[3]
As a general proposition, a charity will be entitled to an exemption from land tax if the property is predominantly used for an exempt purpose for that financial year. There is greater flexibility for vacant land (i.e. unimproved land) where the charity can demonstrate that it will use the property for an exempt purpose on an ongoing basis within 3 years.
If you have been paying land tax on a property which you believe should have been exempt, we may be able to assist you with obtaining a refund. Payroll Tax
3. Payroll Tax
The Payroll Tax Act 1971 (Qld) imposes tax on wages that employers pay to their Queensland employees when the total wages are more than a certain threshold.[4]
The availability of this exemption depends on the specific work employees are engaged in.
To obtain this exemption, a charity must complete and lodge the form provided to it by the QRO when it receives its charitable institution registration.
4. Duty on general insurance
Provided that certain further use requirements are met, there is an exemption available on the duty paid on general insurance for property for an undertaking of a charitable institution.
This exemption is obtained by completing a prescribed qualifying use statement (provided with your charitable institution registration) and providing it to your insurance provider along with a copy of your notice of registration as a chartable institution.
5. Vehicle Registration Duty
Provided that certain further use requirements are met, there is an exemption available for vehicle registration duty.
This exemption is obtained by completing a prescribed qualifying use statement (provided with your charitable institution registration) and providing it to either your motor vehicle dealer or Queensland Transport along with a copy of your notice of registration as a charitable institution.
6. Refunds and Backdating
If you have paid these State taxes, but can demonstrate that you may have been entitled to an exemption and obtain a reassessment of those tax liabilities, you may be entitled to a refund.
Refunds can be obtained for amounts paid within the last 5 years. Please contact us for assistance if you believe that you may be entitled to a refund for tax paid within the past 5 years.
Local Government exemptions / concessions
As with Commonwealth and State laws, Local Government has a different view on what constitutes a ‘charity’ worthy of tax concessions / exemptions. Therefore, being registered as a charity with the ACNC or as a charitable institution with the QRO will not necessarily gain a charity access to local government benefits available for charities.
The Local Government Act 2009 (Qld) provides two main avenues for accessing exemptions / concessions from rates (note that this is the general component of rates and not all charges on a rates notice):
- Council Specific
By resolution of a particular Local Government, meaning that it varies from Council to Council. You should therefore check the public information available by your Council to determine what might be available
- All Councils
As prescribed in the Local Government Regulation 2012 (Qld) (‘Regulations’). As at the date of this article, the Regulations prescribe some specific narrow exemptions available for certain ‘religious entities’ and ‘community organisations’ provided that the land is less than 20 hectares and used for certain prescribed purposes.
You will generally need to engage with your Local Council regarding these exemptions / concessions as each will have a different application process. We can assist with this process.
Vocare Law is well equipped to assist our charity and not-for-profit clients with a wealth of collective knowledge and over two decades experience providing insight and advice in this area. Please don’t hesitate to contact our office if you have any questions on ensuring your charity is maximising its tax concessions. Contact us on 1300-VOC-LAW / 1300-862-529 or email: enquiry@vocarelaw.com.au
This article was written by Paul Neville, Senior Associate.
**The information contained herein does not, and is not intended to, constitute legal advice and is for general informational purposes only.
Footnote
[1] More about charitable institutions is available here: https://qro.qld.gov.au/about-qro/charitable-institutions/
[2] See transfer duty rates here: https://qro.qld.gov.au/duties/transfer-duty/calculate/rates/
[3] Tax rates for companies and trusts are available here: https://qro.qld.gov.au/land-tax/calculate/company-trust/
[4] See payroll tax thresholds here: https://qro.qld.gov.au/payroll-tax/calculate/rates-thresholds/
