Exemption from stamp duty – Charitable and benevolent bodies (DUT 034 Ruling)
Ruling DUT 034, issued by Revenue NSW, provides useful guidance in relation to the transfer duty exemption available for charitable and benevolent bodies under Sections 275 and 275A of the Duties Act 1997 NSW. Importantly, the exemption applies differently to two types of ‘exempt charitable or benevolent bodies’ as defined in s 275(3).
Type 1: Entities for the relief of poverty or promotion of education (s 275(3)(a))
Entities which fall under these subtypes must have governing documents which clearly demonstrate that their objects include the relief of poverty or promotion of education. Additionally, those entities must use their resources wholly or predominantly for either of these purposes.
Type 2: Transactions are charitable/benevolent in nature (s 275(3)(b))
Transactions falling under this section apply to a broader category of charitable or benevolent bodies, however whether the exemption will apply depends on approval by the Chief Commissioner. In order to obtain this approval, the entity will need to demonstrate that:
(a) it is an entity which, in the opinion of the Chief Commissioner, is of a charitable or benevolent nature, or has the primary object of promoting the interests of Aboriginal people; and
(b) the transaction or land use is for a purpose approved by the Chief Commissioner under guidelines approved by the Treasurer.
Purposes which may be approved include (DUT 034):
- Relief of poverty
- Relief and prevention of sickness and disability
- Relief of suffering and distress caused by old age
- Promotion of education
- Establishment of organisations to assist sections of the community with special needs
- Relief of distress caused by natural disasters or sudden catastrophes
Note: Most religious bodies purchasing residential property will not enjoy the exemption, but if they acquire a property for an approved charitable and benevolent purpose the acquisition may be exempt, so long as it is not primarily for religious purposes.
Generally, any charitable organisation operating a school, or a social service or welfare program, or an aged care facility, or a health facility for persons suffering mental illness, or an entity that is a public benevolent institution, will be exempt from stamp duty
Transactions Eligible for Exemption (s 275(1))
It is useful to know the mind of the Commissioner when discerning whether or not to acquire a property and if so, whether or not stamp duty will be payable.
The Commissioner has published DUT 034 Ruling which contemplates the following transactions as exempt from transfer duty:
Guidelines for Exemption
- The relevant transaction must relate to property to be used for the organisation’s charitable or benevolent purpose.
- The transaction cannot involve property acquisition which is for the purpose of being leased or sold for profit. However, short-term leases or leasebacks do not necessarily disqualify a transaction from duty exemption.
- Use of property as organisational headquarters of an approved organisation is eligible if it supports ongoing charitable and benevolent activities.
The following are examples of institutions and purposes that may be approved:
- Providing accommodation for individuals who are sick, or elderly is considered an approved purpose. Private hospitals, retirement homes, and nursing homes can qualify for an exemption even if there are financial requirements for entry and accommodation. This is permitted as long as a reasonable proportion of units or beds remain accessible to people who cannot afford the standard fees and charges.
- Accommodation for the aged will be assessed based on how residents gain entry, such as through regular fees or pensions, and whether these costs are reasonable for the average individual. Facilities requiring a large upfront payment will not be approved for exemption if this excludes those who are financially disadvantaged.
- Properties used as schools, hospitals, or sheltered workshops by organisations supporting disabled individuals are eligible for approval, even when they involve some commercial activity. Government subsidies are not a prerequisite for exemption. Property used for hostels, or clothing and food centres to support disadvantaged people also qualify for exemption.
- Property used by private schools for educational purposes, such as classrooms and playing fields, are eligible for exemption if access is not limited to a specific community group.
Partial Exemptions (s 275A):
Where a property is partly used for an approved purposes, a ‘partial’ exemption may be granted, based on the proportion of exempt use. For example, if land contains a church, a residence and school buildings, duty would be payable on the unencumbered value of the entire dutiable property, minus the value attributed to the portion used as a school.
Note: Partial exemption does not apply to land used for approved and non-approved purposes at different times. For example, the eligibility of a transaction involving a building which is used for religious activities at one time of day and educational purposes at another will depend on the property’s predominant use. Likewise, if the land is used solely for a single purpose, such as a nursing home or retirement village, eligibility will be assessed based on the criteria outlined in s 275(3)(b).
In summary, to benefit from the exemption, careful attention must be given to both the entity’s purpose and the intended use of the property, with supporting documentation required to demonstrate eligibility.