On 26 June 2014, the State Government of Western Australia introduced the Tax Legislation Amendment Bill 2014 (WA) (Bill).

Broadly, the amendments contained in the Bill seek to narrow the scope of the existing payroll tax, transfer duty and land tax exemptions as they apply to “fourth limb charities” (i.e. organisations that promote other purposes considered beneficial to the community).

Current Concessions for Charities

The following concessions and exemptions apply in respect of charitable organisations:

  1. Duty is not chargeable on a dutiable transaction that has been entered into or occurred for charitable or similar public purposes.
  2. Land tax is not chargeable in respect of land that at midnight on 30 June in the previous financial year, is owned by or vested in or held in trust for a public charitable or benevolent institution and is used solely for the public charitable or benevolent purposes for which the institution was established.
  3. Charitable bodies or organisations may be granted an exemption from payroll tax.

Proposed Amendments

The proposed amendments specifically exclude organisations that are established and carried on for the promotion of trade, industry or commerce as well as professional associations from accessing the available tax concessions unless the sole or dominant purpose of that organisation is in fact the relief of poverty, the advancement of education or the advancement of religion.

The amendments are in response to the State Government’s concerns following the decision in Chamber of Commerce v Industry of WA (Inc) v Commissioner of State Revenue [2012] WASAT 146 where the Tribunal held that a taxpayer was a charitable body and entitled to the exemption under s 41 of the Payroll tax act.

The Bill also proposes to grant a regulation making power which will allow the relevant authorities to exclude other classes of organisations in future.

Implications for Organisations with Existing Exemptions

For existing organisations who have been granted an exemption but who will be considered “taxable” following the amendments, the legislation will operate to remove the exemption prospectively.

The Minister for Finance will have the power to reinstate the exempt status of organisations which have lost their exemption where it is appropriate and in the public interest to do so. 

An organisation will need to apply for a reinstatement and if successful the organisation will have its exempt status reinstated across all three taxes.

The Bill was referred to the Standing Committee on Legislation on 23 September 2014 for consideration.