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Questions raised over churches’ ability to become property developers without paying tax

An array of Sydney churches have been accused of exploiting loopholes to become pseudo-property developers and keep their tax-free status, prompting renewed calls to examine whether religious organisations should retain such exemptions.

Opponents pointed to four developments across the city as examples why further examination of churches’ ability to pay no tax is warranted.

A leading expert, University of Melbourne taxation professor Ann O’Connell, said churches were beneficiaries of significant tax exemptions on projects that were in competition with entities required to pay tax.

“It’s most obvious at the local government level of concessions. If they’re not paying rates then other residents are subsidising them and you can make the same arguments at the state and federal levels,” Ms O’Connell said.

She said if revenue was collected from churches and other charities, it would reduce the burden on existing taxpayers. 

“But because we don’t even collect data on their income, we don’t know how much tax that we’re not collecting,” Ms O’Connell said. “We don’t know the income of the Catholic Church that we could levy tax on and I think it’s less than desirable.”

A 2018 investigation by The Sydney Morning Herald andThe Age found the Catholic Church in Australia was worth an estimated $30 billion.

Ms O’Connell said despite several reviews suggesting a reassessment of charities’ exceedingly generous tax-free status, nothing has changed due to the lack of political will.

NSW Greens MP David Shoebridge has also questioned whether sweeping tax concessions are appropriate for some church developments.

“It is one thing for an entirely charitable development to get a tax concession but this is very rarely the case,” he said. “Many of these developments are large mixed-use projects with a minority of the project having a charitable aim, but the whole lot gets tax-free status.”

He pointed to four examples of tax-free church developments in Sydney:

Catholic Health Care Seniors Housing, Maroubra Bowling Club Site

  • Catholic Health Care outbid 39 others to acquire the 10,850-square-metre site in 2016 for $28.5 million;
  • It later lodged plans worth $76 million with Randwick City Council for a dual aged care precinct with a 108-bed facility and 63 seniors living units;
  • In 2018, Catholic Healthcare Limited reported a gross income of $291 million, with 85 per cent from tax-free goods and services.
  • Artist’s impression of Catholic Healthcare’s $76 million development. Photo: Supplied

Seventh-Day Adventist Church, Wahroonga

  • The Seventh-Day Adventist Church’s current proposal with NSW Planning is in the eighth modification of its original 3A approval – a now-defunct planning law;
  • The modified application can be approved regardless of local planning laws, if the Planning Minister agrees to it;
  • It currently seeks approval for 175 apartments in four buildings, six storeys high;
  • There were no up-to-date financial details available.
  • An artist’s impression of the proposed apartment development next to the Wahroonga Adventist School, which is opposed by parents, residents and members of the Wahroonga Seventh-Day Adventist Church. Photo: Capital Bluestone

Catholic Cemetery Trust proposal, Varroville

  • The trust’s proposal to develop a $30 million cemetery consists of two chapels, an office, landscaped parklands and walking tracks as part of a five-stage plan in the Campbelltown Scenic Hills;
  • In 2017, Catholic Cemeteries & Crematoria reported a gross income of $31 million, with 82 per cent from tax-free goods and services;
  • A spokeswoman for the Catholic Metropolitan Cemeteries Trust said it was an independent organisation, not a church entity, and any surplus funds were reinvested back into the Trust;
  • Its website says the trust was established by the Archdiocese of Sydney and is a not for profit Catholic organisation.
  • Varroville site and artist’s impression of Macarthur Memorial Park. Photo: Supplied

Greek Orthodox Church-affiliated Estia Foundation, Blakehurst

  • In 2014 the foundation bought a historic waterfront house and the associated pristine bushland on the shores of Kyle Bay, totalling almost 24,000 square metres;
  • It was previously operated by a trust as a small respite home for convalescent children;
  • The foundation subsequently negotiated and gained council approval to rezone the land to redevelop it a $2.5 million respite care centre comprising five new buildings on the ground and surrounding the heritage home;
  • In 2017, Estia Foundation reported gross income of $4 million, with 80 per cent from government grants.
  • View of Estia’s development site from Kyle Bay. Photo: Supplied

But Mr Shoebridge argued the religious organisations were also often given generous planning concessions to facilitate developments like senior housing at densities that would otherwise be unacceptable.

He said Catholic Cemetery Trust secured what was effectively spot rezoning, bypassing local council and directly appealing to the NSW Planning Minister.

Meanwhile, the Seventh-Day Adventist Church continued to exploit a planning loophole that was abolished eight years ago, according to Mr Shoebridge.

Urban Taskforce chief executive Chris Johnson said there should be an even playing field when it came to lucrative developments by churches.

“It depends how much development is occurring … if the churches do get a leg-up then it’s probably OK if it equates to producing social or community housing [for good],” he said.

“A line does need to be drawn somewhere particularly now when apartment dwelling is much more accepted, which means land values go up. Churches have had a lot of land that were worth a small amount but are now probably worth a lot more [because of high-density developments].”

Gosford Anglican Church’s Father Rod Bower said some property transactions were now occurring to create an income-producing venture to fund compensation schemes.

“The Anglican Diocese of Newcastle absolutely wants proper redress for victims. In order to do that we need to liquidate property and we are prepared to that.”

But he believed a review of tax concessions for not-for-profit organisations should occur when there was complete rethink of the general taxation system.

“Looking at [it] individually is not really going to achieve anything at the moment … because what we have to do is if we take money away from the non-profit sector then we have to look at what we replace that with.”

But Victorian MP Fiona Patten called for greater transparency and accountability of the complex tax structures to re-instill trust that has been lost after the Royal Commission into Institutional Responses to Child Sexual Abuse.

“Given the cover-ups in the church, given the attempts by the church to not recognise the victims of abuse warrants greater scrutiny of those organisations,” Ms Patten, who has long campaigned on these issues, said.

“No one would question the benefits of health, education and other charitable acts like feeding the poor. But I would question what benefits ‘advancing religion’ has on a largely secular society.”

The charitable head of most churches are tax-exempt for the purpose of “advancing religion”.

But subsidiaries, such as Catholic Healthcare Limited and Adventist Health Limited, which are one of the main income-producing vehicles for their respective churches, are granted tax exemptions for other purposes, including relief of poverty, advancing social and public welfare and provision of aged-care accommodation.

Ms Patten said profit-making businesses owned by churches should be transparent as current requirements were insufficient.

Domain contacted all four religious organisations for comment. A Seventh-Day Adventist Church spokesperson said it operated a wide range of services to the benefit of communities around Australia.

NSW Treasurer Dominic Perrottet said charities, benevolent organisations and churches made invaluable and irreplaceable contribution to communities and excessive taxation would put them out of business.

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