Last year’s state budget made a number of changes to stamp duty. One of those changes specifically targeted the transfer of property to charities.
Previously, where a gift was made to a charity, no duty was payable on the transfer of that gift to the charity. However, if a charity was to purchase property for consideration (as opposed to receiving a gift), the charity would, like any other taxpayer, be subject to stamp duty. It was then typical practice that the charity would write to the Treasurer seeking an ex gratia exemption on the basis that the money spent on stamp duty would be better spent on the charity’s altruistic purpose.
Legislation has now passed which changes that position. Under the amended law, a transfer of property to a charitable body that will not be used wholly or predominantly for commercial or business purposes is now exempt from stamp duty. This exemption applies regardless of whether the property was received as a gift or purchased by the charity.
The scope of the exemption means that the property acquired must serve the true charitable purposes of the charity, rather than being a commercial investment which will provide a source of income. What this means is that if a commercial property is bought (such as a leased office building) and the proceeds of that commercial property are fully diverted to the charity’s charitable purposes (for example, the rent), then the acquisition is not subject to the exemption and full duty is still payable. It seems that this is an attempt to override the application of Word Investments Pty Ltd v Commissioner of Taxation, a case where a for-profit company was considered to be a charity because all of its proceeds were fully invested in the charitable activities of its shareholder.
In circumstances where an exemption does not automatically apply, such as in the example given above, then the charity is advised to write to the Treasurer and seek an ex gratia exemption in order to avoid paying stamp duty.
Clearly this exemption will be of great benefit to charities that frequently purchase property for their primary activities, such as retirement villages, aged care facilities and child care facilities. It will also be relevant to charities that purchase a property to act as their head office.
Coupled with this new exemption are a significant number of existing exemptions that apply to charities. These include income tax exemptions, FBT exemptions, GST concessions and the most coveted of concessions, endorsement as a deductible gift recipient.
Mellor Olsson’s specialist team of business advisory lawyers have significant experience in advising charities and not-for-profit organisations. Please do not hesitate to contact a member of our team below should you have any questions.