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Ruling

Subject: fringe benefits tax exemption for religious parishioners

Question 1

Does section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) apply to benefits provided to Employee A of the employer?

Answer

Yes.

Question 2

Does section 57 of the FBTAA apply to benefits provided to Employee B of the employer?

Answer

No

This ruling applies for the following periods:

Year ended 31 March 2013

Year ended 31 March 2014

The scheme commences on:

1 April 2012

Relevant facts and circumstances

The employer is endorsed as a tax concession charity being a charitable institution with its main purpose being the advancement of religion.

Comprehensive job descriptions and duties statements were provided for both Employee A and Employee B.

Relevant legislative provisions

FBTAA section 57

FBTAA subsection 136(1)

Reasons for decision

Summary

Section 57 of the FBTAA will apply to benefits provided to Employee A but it will not apply to Employee B.

It can be concluded that the role of Employee A is directly related to the practice, study, teaching or propagation of religious beliefs.

However the role of Employee B is to be an administrator of the employer and administration is not considered to be directly related to the practice, study, teaching or propagation of religious beliefs.

Detailed reasoning

Section 57 of the FBTAA states:

Where:

(a) the employer of an employee is a religious institution;

(b) the employee is a religious practitioner;

(c) a benefit is provided to, or to a spouse or a child of, the employee; and

(d) the benefit is not provided principally in respect of duties of the employee other than:

(i) any pastoral duties; or

(ii) any other duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs;

the benefit is an exempt benefit.

In order for this section to apply, all of the above conditions must be satisfied and Taxation Ruling TR 92/17 Income tax and fringe benefits tax: exemptions for 'religious institutions' discusses these conditions.

Employer is a religious institution

Paragraphs 4 to 10 of TR 92/17 explains the Commissioner's view on what sort of entity is a religious institution.

The Commissioner has endorsed the employer as a tax concession charity being a charitable institution with its main purpose being the advancement of religion.

Therefore based on this endorsement the employer is a religious institution.

Employee is a religious practitioner

Paragraphs 11 to 19 of TR 92/17 examines the term religious practitioner and paragraphs 11 to 13 state:

A 'religious practitioner' is defined in subsection 136(1) of the FBTAA to mean:

(a) a minister of religion;

(b) a student at an institution who is undertaking a course of instruction in the duties of a minister of religion;

(c) a full-time member of a religious order; or

(d) a student at a college conducted solely for training persons to become members of religious orders.

While the expressions 'minister of religion' and 'member of a religious order' clearly include members of the clergy in the Christian denominations, they are also intended to include persons who hold equivalent positions in other religions.

In determining whether a person is a minister of religion, many, if not all, of the following characteristics should be present:

(a) the person is a member of a religious institution;

(b) the person is recognised officially by ordination or other admission or commissioning, or, where the particular religion does not require a minister to be formally ordained, the person is authorised to carry out the duties of a minister based on a specified level of theological or other relevant training or experience;

(c) the person is recognised officially as having authority in matters of doctrine or religious practice;

(d) the person's position is distinct from that of the ordinary adherents of the religion;

(e) the person has acknowledged leadership in the spiritual affairs of the religious institution;

(f) the person is authorised to discharge the duties of a minister or spiritual leader, including the conduct of religious worship and other religious ceremonies.

In looking at the job description of employee A one of the qualifications is that this employee be an ordained minister and therefore whoever holds the position will be a religious practitioner given that they must be an ordained minister.

There is no such condition attached to Employee B role therefore although the person holding the position might be a religious practitioner they do not have to be an ordained minister to hold the position.

Pastoral duties and directly related religious activities - Employee A

Paragraphs 20 to 29 of TR 92/17 look at the application of paragraph 57(d) of the FBTAA and the duties of the employee. Paragraph 20 of TR 92/17 states:

For a benefit to be exempt, it must not be provided principally in respect of duties of the employee other than pastoral duties (subparagraph 57(d)(i) of the FBTAA), or other duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs (subparagraph 57(d)(ii) of the FBTAA). The latter duties and activities are referred to in this Ruling as 'directly related religious activities'.

In respect of pastoral duties themselves paragraph 21 of TR 92/17 states:

Pastoral duties generally are duties associated with the spiritual care of the members of the congregation of a religious body. The following are examples of pastoral duties:

(a) communication of religious beliefs;

(b) teaching and counselling adherents and members of the surrounding community;

(c) providing adherents and members of the surrounding community with spiritual guidance and support;

(d) attendance at an in-service training seminar by a person or persons conducting the seminar, provided that the seminar is of a spiritual nature; and

(e) meeting with and visiting adherents, the sick, the poor, or persons otherwise in need of emotional and spiritual support.

If we look at the duty statement of Employee A there are a number of duties that suggests the position is pastoral or directly related to religious activities as described above. The duty statement also contains duties that could be seen as administrative functions.

Paragraphs 27 to 29 of TR 92/17 state:

Whether the benefit has been provided principally in respect of pastoral duties or directly related religious activities depends on the facts of each particular case. A benefit provided to a minister of religion whose duties are exclusively or predominantly pastoral generally satisfies the 'principally' test.

On the other hand, a benefit generally is not an exempt benefit if the duties of the employee to whom it is provided are exclusively or predominantly non-pastoral duties.

However, if an employee who is a religious practitioner undertakes both pastoral and non-pastoral duties (even where the non-pastoral duties predominate), it is possible for a benefit to be provided to the employee solely or principally in respect of the employee's pastoral duties, and, therefore, be exempt under section 57 of the FBTAA.

Therefore although there are administrative duties it is possible to conclude that the benefits can be provided principally in respect of pastoral duties or directly related religious activities.

Considering paragraph 27 of TR 92/17 and reviewing the duties, we support a conclusion that the role is predominately pastoral and that the non-pastoral duties are incidental to the pastoral role.

Pastoral duties and directly related religious activities - Employee B

Paragraph 25 of TR92/17 states

The following examples, which are not intended to be exhaustive, are duties or activities which are not pastoral duties or directly related religious activities:

(a) the administration of a church; and

(b) work undertaken by a director of a department of a Diocese or similar unit of ecclesiastical administration; and

(c) the administration of a school.

The majority of the duties of Employee B could be viewed as administrative which, per paragraph 25 of TR92/17, are not pastoral duties or directly related religious activities.

Although Employee B may engage in some activities which could be seen as directly related religious activities it would be difficult to conclude that any benefits provided in respect of these directly related to religious activities.

It would be more likely that benefits would be provided in respect of the administrative aspects of the role as the job description does not require Employee B to engage in pastoral or directly related religious activities in the same way Employee A's Job Description does.

This is supported by the fact that Employee B does not have to be an ordained minister and that the key performance indicators are mainly administrative in nature whilst those of Employee A are mainly pastoral in nature.

Benefit is provided to, or to a spouse or a child of, the employee

This would need to determined by looking at the recipient of the benefit provided and has not been addressed here.

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