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Some not-for-profit organisations are eligible for certain federal tax exemptions or concessions. These can relate to income tax, goods and services tax and fringe benefits tax. However, when you establish and operate a not-for-profit organisation, you should be aware of your state and territory tax obligations. This includes whether there are any concessions available to reduce the amount of tax you are required to pay. This article will outline what payroll tax, land tax and stamp duty are and explain when a not-for-profit organisation will be required to pay them.
What is Payroll Tax, Land Tax and Stamp Duty?
Payroll tax, land tax and stamp duty are all imposed at the state and territory level by the relevant local revenue office. Each state and territory has different laws in respect of these taxes, so you need to check the relevant jurisdiction. Broadly, these taxes can be described as:
| Payroll tax | A tax imposed on an employer when the total amount of wages that the employer pays across Australia is over a particular region’s “threshold”. |
| Land tax | An annual tax levied on land that a landowner owns where the value of the land is above the land tax threshold. |
| Stamp duty | A tax imposed on the “dutiable value” of “dutiable transactions” occurring in a state or territory, such as the transfer of land. |
Does Each State and Territory Have the Same Rules?
While each state and territory’s payroll tax, land tax and stamp duty legislation can be similar, there are nuances in each region. As such, it is important to consider the rules in the state or territory where your organisation is based. In certain circumstances, you may also have to consider other regions, such as where an employee is based in a different state or territory.
The following paragraphs are based on the New South Wales regulations.
Continue reading this article below the formIs My Not-for-Profit Organisation Required to Pay Payroll Tax?
Specific categories of not-for-profit organisations do not have to include certain wages in their “taxable wages”. These organisations are:
- religious institutions;
- certain public benevolent institutions; and
- not-for-profit organisations with a charitable, benevolent, philanthropic or patriotic purpose as their sole or dominant purpose.
Generally, the exemption applies if your organisation pays wages in connection with charitable, benevolent, philanthropic, or patriotic purposes. It requires that your employee who receives payment exclusively performs work of that nature for your organisation.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Is My Not-for-Profit Organisation Required to Pay Land Tax?
There are a number of organisations which, when they hold land, are exempt from paying land tax. These organisations include:
- registered charities;
- religious bodies; and
- educational institutions.
To qualify for this exemption, your organisation must provide that it has a charitable, educational or religious purpose. Additionally, you must demonstrate that it does not operate a business to generate a profit for its members. Further, the exemption will not apply if your organisation is able to transfer ownership of the relevant land to a member if it dissolves.
Land owned by other not-for-profit organisations can also be exempt from land tax, such as land owned by or on trust for:
- public health organisations;
- societies, clubs and associates which do not use the land to make a profit;
- health facilities and hospitals; and
- clubs or persons who use the land primarily for games or sports and not to make a profit.
Is My Not-for-Profit Organisation Required to Pay Stamp Duty?
Transactions involving dutiable property are usually exempt from stamp duty if they involve a “charitable and benevolent body.” In New South Wales, this refers to an organisation whose main objectives are to relieve poverty or promote education in Australia.
Checking how each state or territory defines the term “charitable and benevolent body” is important. They may have different requirements to qualify for exemption from stamp duty.
Key Takeaways
Your not-for-profit organisation may qualify for specific state and territory tax exemptions or concessions contingent on meeting specific criteria. These potential benefits are in addition to any federal tax advantages your organisation may be entitled to. Examples of such exemptions include payroll tax, land tax, and stamp duty, each offering relief for qualifying not-for-profit entities that would otherwise be liable for these taxes. It is essential to understand that regulations for payroll tax, land tax, and stamp duty vary across each state and territory. Therefore, it is crucial to thoroughly examine the rules applicable to your specific region to ascertain eligibility.
If you need help determining if your organisation is required to pay payroll tax, land tax, or stamp duty, our experienced business lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
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