Charitable organisations are part and parcel of Australia’s social fabric. With that, they are subject to interesting and complex legal regimes. Among these complexities are stamp duty exemptions in cases of property purchases. In this Insight, we explore the legal technicalities pertaining to charitable or benevolent organisations, with a primary focus on demonstrating whether or not your organisation is eligible for an exemption.
Did you know that your charitable organisation may be eligible for a stamp duty exemption and/or concession when purchasing a property? The Duties Act 1997 (NSW) (the Duties Act) allows certain organisations to apply for an exemption and/or concession from stamp duty – and in some cases up to 5 years after the transaction.
THE “CHARITABLE OR BENEVOLENT BODY” EXEMPTION
Section 275 (1) of the Duties Act 1997 (NSW) states that duty is not chargeable on the following transactions:
(a) A transfer, or agreement for the sale or transfer, of dutiable property to an exempt charitable or benevolent body,
(b) A declaration of trust over dutiable property held or to be held on trust for an exempt charitable or benevolent body,
(c) A surrender of an interest in land in New South Wales to an exempt charitable or benevolent body,
(d) A vesting of dutiable property in an exempt charitable or benevolent body,
(e) A lease of dutiable property to an exempt charitable or benevolent body,
(f) A mortgage given by or on behalf of an exempt charitable or benevolent body.
WHAT IS AN EXEMPT CHARITABLE OR BENEVOLENT BODY?
Section 275(3) of the Duties Act defines the term “exempt charitable or benevolent body” as follows:
(a) any body corporate, society, institution or other organisation for the time being approved by the Chief Commissioner for the purposes of this paragraph whose resources are, in accordance with its rules or objects, used wholly or predominantly for—
(i) the relief of poverty in Australia, or
(ii) the promotion of education in Australia, or
(b) any body corporate, society, institution or other organisation that, in the opinion of the Chief Commissioner, is of a charitable or benevolent nature, or has as its primary object the promotion of the interests of Aborigines and if—
(i) … the dutiable transaction or instrument is for such purposes as the Chief Commissioner may approve in accordance with guidelines approved by the Treasurer …
(c) any person acting in the person’s capacity as trustee for a body corporate, society, institution or other organisation referred to in paragraph (a) or (b).
An entity applying under section 275(3)(a) would be considered generally exempt from stamp duty; however an entity applying under section 275(3)(b) would be applying on a transaction by transaction basis subject to the purpose of the particular property. This is explained further below.
SECTION 275(3)(a) – BLANKET EXEMPTION
To be eligible for a complete exemption under section 275(3)(a), this sub-clause requires any body corporate, society, institution or other organisation to provide evidence that:
(a) its rules or objects include either the promotion of education or the relief of poverty in Australia or both of them and
(b) its resources are used wholly or predominantly on either or both of the promotion of education or the relief of poverty in Australia.
In determining whether the resources of the organisation are being used predominantly for the two approved purposes, consideration will be given to any current or proposed transactions being undertaken by the organisation.
Whilst the organisation must be a non-profit organisation, registered charities or organisations approved under other legislation relating to charitable purposes are not automatically eligible for this exemption and would still need to meet the above requirements.
Organisations which are approved under section 275(3)(a) will receive a blanket approval for ‘the time being approved’, meaning that the approval will apply to more than one dutiable transaction. However, the approval will cease if the organisation modifies their rules or constitution (unless they notify the Chief Commissioner of these modifications immediately and guarantee that their rules, objects and purposes have not changed).
SECTION 275(3)(b) – TRANSACTION SPECIFIC
To qualify for a complete exemption under section 275(3)(b), the organisation must satisfy the Chief Commissioner that it is of a charitable or benevolent nature or has as its primary object the promotion of the interests of Aborigines. The approval is subject to the dutiable transaction being for such purposes as the Chief Commissioner may approve in accordance with guidelines approved by the Treasurer, or the landholdings are to be used for such purposes as the Commissioner may approve in accordance with the guidelines approved by the Treasurer.
The Commissioner’s Ruling DUT 034 outlines the following purposes which may be approved:
- The relief of poverty
- The relief and prevention of sickness and disability
- The relief of suffering and distress caused by old age
- The promotion of education
- The establishment of organisations to assist sections of the community with special needs
- The relief of distress caused by natural disasters or sudden catastrophes.
This means that when an organisation purchases a property, it can only apply for a stamp duty exemption if that property serves the organisation’s purposes (which must be one of the purposes listed above).
There are additional guidelines set out in the Ruling which organisations must keep in mind:
- A property that is acquired for the purpose of being leased or sold for profit will not be approved; and
- A property that is acquired for use as the headquarters of the organisation may be approved if the use of the property is part of continuing charitable or benevolent work;
- A property which is donated will be eligible for exemption if it is to be used for approved purposes or is to be sold and the proceeds applied to a specific proposal that is for approved purposes.
THE PARTIAL EXEMPTION (CONCESSION)
Section 275A of the Duties Act allows exempt charitable or benevolent bodies to apply for a partial exemption in relation to any dutiable transaction. The Chief Commissioner must be satisfied that the organisation is:
- Acquiring land or interest in a land where the land concerned is used or to be used by the charitable or benevolent body partly for an exempt purpose;
- Acquiring a mortgage given by or on behalf of a charitable or benevolent body, that the land the subject of the mortgage is used or to be used partly for an exempt purpose; and
- In relation to an acquisition of an interest in a landholder by a charitable or benevolent body, that any of the land holdings of the landholder are used or to be used for an exempt purpose.
In these circumstances, the duty will be reduced by the portion of that dutiable value that is referable to the portion of the land used or to be used for an exempt/approved purpose.
CAN A RELIGIOUS CHARITABLE ORGANISATION APPLY FOR AN EXEMPTION?
A religious organisation that acquires a property to be used for charitable and benevolent purposes, and not predominantly religious purposes may be approved by the Commissioner.
The Commissioner’s Ruling identifies religious bodies as a common example of organisations which may not be approved – “although most religious bodies are charitable institutions, property used for churches, residences or religious activities (including religious instruction or religious education) are not used for approved purposes.”
To succeed, the religious body will be required to prove that all activities conducted by the organisation are not merely established to further religious thought and ideology but rather to further an exempt or approved purpose by the Chief Commissioner. The organisation may be entitled to a partial exemption on this basis.