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Edited version of your private ruling
Authorisation Number: 1012464956856
Ruling
Subject: Obligation to withhold from payments made to a religious practitioner
Question
Is there an obligation on the Church to withhold an amount from payments made to the religious practitioner under section 12-47 of Schedule 1 of the Taxation Administration Act 1953 (TAA)?
Answer
Yes
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
There is no written agreement or arrangement between the Church and the religious practitioner.
The Church pays the religious practitioner a weekly amount.
Activities conducted by the religious practitioner include:
· normal services
· weddings
· funerals
· christenings.
Relevant legislative provisions
Taxation Administration Act 1953 section 12-47 of Schedule 1
Income Tax Assessment Act 1997 subsection 995-1(1)
Reasons for decision
Summary
The Church must withhold an amount from payments it makes to the religious practitioner for activities the religious practitioner conducts under section 12-47 of the TAA.
Detailed reasoning
Section 12-47 of the TAA requires entities to withhold from payments made to religious practitioners for an activity if:
(1) the activity is done in pursuit of a vocation as a religious practitioner;
(2) the activity is done as a member of a religious institution; and
(3) payment is made by the entity in the course of an enterprise that the entity carries on.
From 1 July 2002, payments to a religious practitioner for activities done in the pursuit of a vocation as a religious practitioner and as a member of a religious institution are subject to PAYG withholding. This only applies if the entity making the payment does so in the course or furtherance of an enterprise.
For these purposes, "religious practitioner'' is defined in the Income Tax Assessment Act 1997 (ITAA 1997) under subsection 995-1(1) to mean:
· a minister of religion;
· a student at an institution who is undertaking a course of instruction in the duties of a minister of religion;
· a full-time member of a religious order; or
· a student at a college conducted solely for training persons to become members of religious orders.
"Religious institution'' is not specifically defined for the purposes of section 12-47. The term is, however, discussed in Taxation Ruling TR 92/17 for the purposes of ITAA 1997 and the Fringe Benefits Tax Assessment Act 1986. The ruling states that a body is a religious institution if its objects and activities reflect its character as a body instituted for the promotion of some religious object, and the beliefs and practices of the members of that body constitute a religion.
The High Court in The Church of the New Faith v Commissioner of Pay-roll Tax (Vic) 83 ATC 4652 established that the two most important factors in deciding whether a particular set of beliefs and practices constitute a religion are:
· belief in a supernatural being, thing or principle; and
· acceptances of canons of conduct which give effect to that belief, but which do not offend against ordinary laws.
Generally, private schools, private universities and residential university colleges are not considered to be religious institutions. However, Bible colleges, seminaries and theological colleges may be. The decision must be made having regard to the primary or dominant object of the body as stated in its constituent documents.
In this case the activities conducted by the religious practitioner are considered to be in pursuit of a vocation as a religious practitioner, the activities are done in relation to the religious practitioner being a member of a religious institution and the payment is made by the Church in the course of an enterprise that it carries on.
As all conditions under section 12-47 of the TAA have been met the Church must withhold an amount from payments it makes to the religious practitioner for activities conducted.
Conclusion
The Church must withhold an amount from payments it makes to the religious practitioner for activities conducted under section 12-47 of the TAA.
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