Our client is a national not-for-profit organisation, registered as a charity, which holds property as trustee and builds community and religious facilities around Australia. We have reviewed its Victorian contracts, protected its position on title through long settlements, and had land transfer duty assessed at nil on each transfer under section 45 of the Duties Act 2000 (Vic).
An overview of the matter at a glance.
A national not-for-profit organisation, registered as a charity, buying as trustee of a charitable trust
Contract review, title and planning due diligence, duty exemption application, settlement
Rural and englobo land for places of worship and community facilities
Greater Melbourne, Victoria
Duty assessed at nil on every transfer; every purchase settled
A growing national charity needed land, and needed each purchase to survive years of planning risk.
Our client is a national not-for-profit organisation, registered as a charity, which builds and operates community and religious facilities around Australia. It holds property through a corporate trustee. Its Victorian membership had outgrown the buildings it was using, and the organisation set out to secure land for purpose-built premises.
Land of that kind is bought long before there is anything to build on it. A site large enough for a major community facility on Melbourne’s fringe is rarely already zoned for one, so the land is acquired first and the planning case is made afterwards – a process that runs for years and does not always succeed. We act on the property acquisitions, not on the planning application, but the two are connected. Land bought ahead of a permit has to be bought in a way that survives the wait.
That is the real difficulty in charitable land acquisition. A congregation raises money over years and buys in stages. Settlement dates are set far out, deposits are paid in instalments, vendors keep living on the land, and titles pick up encumbrances in the gap between contract and settlement. Meanwhile every dollar paid in transfer duty is a dollar that does not go into the building.
We were engaged to review each contract before it was signed, to protect the client’s position on title through those long settlement periods, and to obtain the charitable duty exemption on each transfer.
Four issues decided whether these acquisitions would hold together.
Section 45 of the Duties Act 2000 (Vic) exempts a transfer to a body established for religious, charitable or educational purposes where the land is to be used for those purposes. The exemption is not automatic and it is not granted on the strength of an ACNC registration alone. The State Revenue Office reads the governing documents, and it looks hardest at the winding-up clause: if surplus assets can revert to members on dissolution, the objects are not treated as entirely charitable and the exemption is refused.
On several sites the vendor served a section 27 statement asking for the deposit to be released before settlement. Whether there were reasonable grounds to object depended on what the title and the vendor’s financial position showed. On one acquisition, that assessment was complicated by a third-party commission caveat lodged by a real estate agency that was not a party to our client’s contract. The claim related to an earlier rescinded sale and was denied, but the caveat remained on title and settlement could not complete over it. That title issue therefore had to be resolved before both the deposit position and settlement could be dealt with safely.
The purchaser was a company acting as trustee of a charitable trust. That capacity had to appear consistently on the contract, the Digital Duties Form and the transfer, and had to be evidenced by an unbroken chain of trust documents - the original declaration of trust and every deed of variation since. A mismatch between the named purchaser and the trustee on the deed is one of the most common reasons a charitable exemption stalls.
More than one vendor asked to rent back after settlement, in one case for a fixed six-month term at a weekly rent. For a buyer who intends to develop, the form of that arrangement matters more than the rent. A residential tenancy agreement brings the Residential Tenancies Act 1997 (Vic) with it, including the grounds and notice periods needed to recover possession. A licence to occupy does not. That choice has to be made before settlement, not after.
What we did on each acquisition, from contract through to title.
Each contract of sale and section 32 statement was read before execution: title and plan, easements and covenants, planning zone and overlays, outgoings, GST treatment, withholding notices and the special conditions. On rural and englobo land the planning controls matter far more than they do on a suburban house, because they decide what the site can eventually be used for.
We confirmed the corporate entity and its trustee capacity against the ASIC record, the ACNC register and the trust deed chain, then made sure the contract, the Digital Duties Form and the transfer all named the purchaser the same way.
Where settlement was a year or more away we lodged a caveat over the client's equitable interest as purchaser. It costs little, it records the interest on title, and it stops the land being dealt with behind the contract during the wait. It is withdrawn at settlement.
Each transfer went to the State Revenue Office as a complex Duties Online assessment with a full evidence bundle: the declaration of trust and each deed of variation, the ACNC extract, evidence of income tax exemption, a description of the organisation's services and activities, promotional material, evidence of a compliant not-for-profit winding-up clause, and details of exemptions previously granted. Where a settlement date was close we wrote to the SRO seeking an expedited assessment and told them the booked date.
We put the third-party caveat to the vendor's representatives in writing, required confirmation that it would be removed at or before settlement, and dealt with the solicitors engaged to remove it. On each section 27 statement we set out the client's three options - object on reasonable grounds, consent, or let it lapse after 28 days - with our view on whether grounds to object existed on that title.
Where a vendor stayed on, we drafted the agreement and settled the rent, term and form with the other side before settlement rather than after it. Settlements were then booked, funded and completed electronically in PEXA, with adjustments, council and water authority notifications and duty all attended to.
The State Revenue Office assessed the transfers under section 45 – transfer to or in trust for religious, charitable or educational bodies – and duty was assessed at nil. To put that in context using published rates rather than the client’s figures: general land transfer duty on a $5 million acquisition is $110,000 plus 6.5 per cent of the excess over $2 million, which is $305,000. Across a programme of acquisitions the exemption is not a saving at the margins. It is the difference between a project being affordable and not.
The commission caveat was resolved and that site settled within days of the date the contract had set, on terms agreed between the parties rather than imposed on our client. Every acquisition we were engaged on has settled.
Six things worth knowing before you sign anything in Victoria.
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