Edited version of your written advice

Authorisation Number: 1012925993555

Date of advice: 23 December 2015

Ruling

Subject: PAYG withholding; FBT

Question 1

Is the payment of salary to an individual from Country X in connection with employment to be exercised in Australia for an Australian entity, subject to Pay As You Go withholding under section 12-35 of Schedule 1 to the Taxation Administration Act 1953,('TAA') where the payment is made by a Country X entity?

Answer

Yes. However the Australian entity is not required to withhold under section 12-35 of Schedule 1 to the TAA. It is considered the Country X entity, being the payer of the salary, is obliged to withhold an amount from the payment for the purposes of section 12-35. (Refer to 'Reason for decision' and 'Further issues for you to considered')

Question 2

Are accommodation and payment of utility expenses to be provided to the individual by the Australian entity exempt benefits pursuant to section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes. The provision of accommodation and payment of utility expenses by the Australian entity will be exempt from fringe benefits tax.

The scheme commences on:

The scheme will commence in the income year ending 30 June 20XX.

Relevant facts and circumstances

The Australian entity is a religious institution.

An individual from Country X will be seconded to the Australian entity for an initial 12 months, with the option to extend their secondment. The individual has been offered a position at the Australian entity.

The individual is a Country X resident for Country X's tax purposes.

The individual is currently employed by the Country X entity.

The Country X entity will continue to pay the individual's salary and other employment contribution in Country X and will remain employed by the Country X entity while in Australia. No reimbursement of the salary is required by the Australian entity.

The Australian entity will provide accommodation and utility expenses, which will be paid directly to the service provider hence no payment will be made to the individual directly.

The individual is a dual Australian and Country X citizen. The individual's spouse will be accompanying the individual to Australia during the secondment. The parents and siblings of the individual and the spouse are in Country X.

The individual's home in Country X has been sold. The individual and their spouse will live with either family prior to departure for Australia and upon their return to Country X.

Whilst working in Australia the individual is expected to take a few weeks annual leave, returning to Country X for a holiday as most of the family members are in Country X.

An employment contract will be entered into between the Australian entity and the individual. Terms and conditions of the employment are provided in a draft letter of offer for position.

Relevant legislative provisions

Taxation Administration Act 1953

subsection 12-1(1) in Schedule 1

section 12-35 in Schedule 1

Income Tax Assessment Act 1997

section 6-5

subsection 995-1(1)

Income Tax Assessment Act 1936

subsection 6(1)

Fringe Benefits Tax Assessment Act 1986

section 57

Convention between the Government of Australia and the Government of Country X for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, and Protocol [1983] ATS 16

Article 4

Article 15

Article 22

Article 27

Reasons for decision

Question 1

Summary

The payment of salary to the individual is subject to Pay As You Go withholding. In this instance, the Country X entity, being the payer of the salary, is obliged to withhold an amount from the salary it pays to the individual pursuant to section 12-35 of Schedule 1 to the TAA.

Detailed reasoning

The PAYG provisions contained in Part 2-5 of Schedule 1 to the Taxation Administration Act 1953 ('TAA') require amounts to be withheld from various types of payments made to individuals. The obligation to withhold and pay an amount to the Commissioner is imposed on the entity making the payment to the individual.

Section 12-35 of the TAA requires an entity to withhold an amount from a payment of salary, wages, commission, bonuses or allowances to an individual as an employee (whether of that or another entity). With respect to non-resident payers, section 12-35 will require the non-resident payer to withhold where payments are made to an employee working in Australia in circumstances where Australia has taxing rights in respect of that income. The question of taxing rights is discussed below.

However, pursuant to subsection 12-1(1) of the TAA, an entity need not withhold an amount under section 12-35 if the whole of the payment is exempt income of the employee.

Accordingly, it is necessary to determine if the payment is assessable income in Australia prior to determining whether the payer is obliged to deduct PAYG withholding from the salary it pays to the individual as an employee.

Assessability of salary income of the individual

Subsection 6-5(2) of the Income Tax Assessment Act 1997 ('ITAA 1997') provides that the assessable income of an Australian resident includes income derived directly or indirectly from all sources, whether in or out of Australia.

Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident includes all ordinary income derived by foreign resident directly or indirectly from Australian sources and other ordinary income that a provision includes in the foreign resident's assessable income for the income year on some basis other than having an Australian source.

Salary and wages are ordinary income under section 6-5 of the ITAA 1997 and therefore, are assessable income.

Accordingly, in order to determine if the individual will have to pay any Australian income tax on the income the individual receives while in Australia, the individual's residency status and the source of the salary for Australian income tax purposes will have to be determined.

Residency for the purposes of Australian income tax law

Subsection 995-1(1) of the ITAA 1997 defines an Australian resident as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 ('ITAA 1936').

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936.

According to that definition, there are four tests that can be applied to determine whether a person is a resident of Australia for income tax purposes.

These tests are the:

• 'resides' test (ordinary concepts test);

• domicile and permanent place of abode test;

• 183 day test; and

• Commonwealth superannuation fund test.

The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word 'reside'.  Where it is determined that an individual 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the 'resides' test.

The 'resides' (ordinary concepts) test

There is no definition of the word "reside" in Australian income tax law, therefore the ordinary meaning of the word needs to be ascertained. The Macquarie Dictionary defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time' and the Shorter Oxford English Dictionary defines it as 'to dwell permanently or for a considerable time, to have ones settled or usual abode, to live, in or at a particular place'.

Generally speaking if an individual resides in Australia within the ordinary meaning of resides they will be considered to be a resident of Australia.

The Tax Office has released Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia (TR 98/17) that deals with the residency status of individuals entering Australia. According to TR 98/17 an individual's behaviour over the time spent in Australia may reflect a routine or habit that is consistent with residing in Australia.

The following factors are useful in describing the quality and character of an individual's behaviour:

• Intention and purpose of presence;

• Family and business/employment ties;

• Maintenance and location of assets; and

• Social and living arrangements.

Relevantly, paragraphs 55 and 57 of TR 98/17 state:

"55. An individual who enters Australia to take up an employment contract or to set up a business usually establishes and maintains behaviour that may indicate the individual is residing here. An individual who is dwelling here for a considerable time while on an employment contract would be residing here, whereas a mere traveller or visitor on holiday would not. (See Examples 11 and 12 at paragraphs 107 to 117.) "

"57. Occupation of a dwelling in Australia, that the individual owns or is purchasing, suggests establishment of a home in Australia. An individual may have a home and other assets outside Australia and still be residing here for the duration of the stay. Other assets in Australia, such as motor vehicles and bank accounts, add further weight to the individual having established behaviour consistent with residing here."

In addition, Paragraph 62 states

"62. In most cases, the Commissioner accepts that a visit to Australia of less than six months is not sufficient time to be regarded as residing here. When determining whether individuals are residing here, if their visit is for six months or more, the Commissioner considers their behaviour while in Australia. (See Example 14 at paragraphs 120 to 122.)"

In the present case, the individual would be considered to be residing in Australia (under the ordinary meaning of that term) for the following reasons:

• the individual will be present in Australia for employment purposes. They will be taking up a full time position at the Australian entity;

• The terms of employment will be for an initial period of one year and may be extended to another year. The employment in Australia is for a considerable time;

• The individual's spouse will be accompanying the individual to Australia;

• Whilst in Australia, the individual and the spouse will be staying in accommodation provided by the Australian entity.

According to the Commissioner's view as expressed in TR 98/17, the above factors establish a degree of continuity, routine or habit which is consistent with residing in Australia under ordinary concepts and thus the individual would be classed as a resident of Australia under the 'reside' test for the purposes of section 6(1) of the ITAA 1936.

As we have determined that the individual is a resident of Australia under the 'resides' test, it is therefore not necessary to cover the remaining tests.

Residency for purposes of the tax treaty

As the individual is a resident of both Australia and Country X under each country's domestic income tax laws (a dual resident), it will be necessary to consider the relevant tax treaty between Australia and Country X ('the tax treaty') and, in particular, the tie-breaker test in the Resident Article of the tax treaty.

The Resident Article of the tax treaty sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the double tax agreement. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes.

The Resident Article provides that if an individual is a resident of both Australia and Country X, the individual shall be deemed to be a resident of the country:

(a) in which the individual maintains a permanent home,

(a) if they have a permanent home in both countries or neither, the country in which the individual has a habitual abode, or

(b) if they have a habitual abode in both countries or neither, the country in which the individual's personal and economic relations are closer.

Taxation Ruling TR 2001/13 Income tax: Interpreting Australia's double tax agreements (TR 2001/13) discusses the Commissioner's views on tax treaties. Paragraph 104 of TR 2001/13 provides that the Organisation for Economic Co-Operation and Development's (OECD) Model Tax Convention and Commentary will often need to be considered in interpreting tax treaties.

The terms 'permanent home', 'habitual abode' and 'personal and economic relations' are not defined in the tax treaty.

The OECD Commentary on the OECD Model Tax Convention on Income and on Capital (the OECD Commentary) on Article 4(2) explains that in relation to a 'permanent home':

12. …it is considered that the residence is that place where the individual owns or possesses a home; this home must be permanent, that is to say, the individual must have arranged and retained it for his permanent use as opposed to staying at a particular place under such conditions that it is evident that the stay is intended to be of short duration.

13. As regards the concept of home, it should be observed that any form of home may be taken into account (house or apartment belonging to or rented by the individual, rented furnished room). But the permanence of the home is essential; this means that the individual has arranged to have the dwelling available to him at all times continuously, and not occasionally for the purpose of a stay which, owing to the reasons for it, is necessarily of short duration (travel for pleasure, business travel, educational travel, attending a course at a school, etc.).

The Resident Article of the tax treaty provides that in determining an individual's permanent home, regard should be had to the place where the individual dwells with their family.

In relation to a habitual abode, the OECD Commentary explains that all stays in each country, regardless of the purpose for the stays, must be considered in order to assign a preference to a particular country. Further, the comparison must be made over a sufficient length of time for it to be possible to determine whether the residence in each country is habitual and to also determine the intervals at which the stays take place. This is not simply a test of where a person stays more frequently but also looks to whether living in a particular country is normal or customary having regard to the individual's circumstances.

In relation to an individual's personal and economic relations, the OECD Commentary adds that regard should be had to factors such as family and social relations, occupation, political, cultural or other activities and place of business.

In addition, the Resident Article of the tax treaty further provides that in determining an individual's personal and economic relations, regard should be had to their citizenship.

In the present case, the individual and their spouse will have a residence made available to them by the Australian entity while working in Australia. This dwelling is available at all times continuously for their use as their home during the secondment. The secondment period is a sufficient enough period for the dwelling to be considered to be a permanent home for the purposes of this test.

The individual remains an employee of the Country X entity during their secondment in Australia. The individual's and the spouse's wider family and circle of friends are located in Country X. They will live with their parents following the sale of their home in Country X.

In these circumstances, it is considered that the individual maintains a permanent home in both countries and each home is available at all times continuously for their permanent use, for the purposes of Article 4(2)(a) of the tax treaty.

With regard to the habitual abode test, the individual will have a place to live in both Australia and Country X during the period covered under this ruling. The individual will be in Australia for a secondment period of one to two years, taking up a full time position at the Australian entity.

During the secondment period, it is expected that the individual will take annual leave for personal purposes, such as visiting Country X where their parents and siblings are located. Having regard to the circumstances, it is considered normal or customary for the individual to live in both Australia and Country X. Hence, the individual will have a habitual abode in both countries for the purposes of the Resident Article of the tax treaty.

In relation to the third test (the Resident Article of the tax treaty), it is considered that the individual's social and economic relations are closer to Country X in the present case, having regard to the following:

• The individual maintains a connection with the Country X entity as they will remain an employee of the Country X entity and will continue to receive salary from the Country X entity during the period of secondment;

• Their wider family and circle of friends are located in Country X.

• The individual is a Country X resident for the tax purposes of Country X.

• The individual is a citizen of Australia and they are also a citizen of Country X.

• During the secondment they may also establish social and economic ties in Australia. It is considered that the individual's interests will lie predominantly in Country X.

From the information supplied on balance, it is considered the individual will be treated solely a resident of Country X for the purposes of the Resident Article of the tax treaty.

Source of income - salary

As an Australian resident under Australian income tax law, the individual's assessable income will include income derived directly or indirectly from all sources both within and outside Australia.

Broadly, the courts have considered that the source of salary and wage income will be the place where the work is performed especially if the employee is working from a fixed location for a considerable period of time. Refer to FC of T v. French (1957) 98 CLR 398; 11 ATD 288 and FC of T v. Efstathakis 79 ATC 4256.

The individual will be deriving a salary from work performed in Australia. Accordingly, the salary received by the individual while working in Australia has an Australian source.

In determining liability to tax on Australian-sourced income received by a non-resident it is necessary to consider not only the income tax laws in Australia but also any applicable tax treaty.

The Dependent Personal Services Article of the tax treaty outlines the treatment of income from employment. It provides that remuneration derived by a resident of Country X shall be taxable in Country X unless the employment is exercised in Australia. If the employment is exercised in Australia then the income may also be taxed in Australia.

However the Dependent Personal Services Article of the tax treaty provides that the income will only be taxed in Country X if all of the following conditions are met:

(a) the Country X resident recipient is present in Australia for a period or periods not exceeding in the aggregate 183 days in the taxable year or year of income of Australia;

(b) the remuneration is paid by, or on behalf of, an employer or company who is not a resident of Australia; and

(c) the remuneration is not deductible in determining taxable profits of a permanent establishment, a fixed base or a trade or business which the employer has in Australia.

With regard to the first condition, the OECD Commentary refers the "days of physical presence" as the method of calculating the 183 day period. For instance, the days of physical presence in a country may alter if the individual takes holiday and away from that country. In this regard, paragraph 5 of the OECD Commentary explains:

"…Under this method the following days are included in the calculation: part of a day, day of arrival, day of departure and all other days spent inside the State of activity such as Saturdays and Sundays, national holidays, holidays before, during and after the activity, short breaks (training, strikes, lock-out, delays in supplies), days of sickness (unless they prevent the individual from leaving and he would have otherwise qualified for the exemption) and death or sickness in the family. However, days spent in the State of activity in transit in the course of a trip between two points outside the State of activity should be excluded from the computation. It follows from these principles that any entire day spent outside the State of activity, whether for holidays, business trips, or any other reason, should not be taken into account. A day during any part of which, however brief, the taxpayer is present in a State counts as a day of presence in that State for purposes of computing the 183 day period."

Australia's year of income runs from 1 July to 30 June.

The second condition provides that the remuneration is paid by, or on behalf of, an employer; and that employer must not be a resident of Australia. This condition requires the identification of who the employer is in respect of the non-resident individual's employment services in Australia.

Key indicators of employment relationship are discussed in Taxation Ruling TR 2013/1 Income tax: the identification of 'employer' for the purposes of the short-term visit exception under the Income from Employment Article, or its equivalent, of Australia's tax treaties (TR 2013/1).

Relevantly, paragraphs 5 and 6 of TR 2013/1 states.

5. The term 'employer' for the purposes of the short-term visit exception in provisions of Australia's tax treaties equivalent to Article 15(2) of the OECD Model Tax Convention on Income and on Capital⁵ ('the OECD Model') is undefined. Unless a particular tax treaty requires the term to have a different meaning, the term takes its meaning from Australian domestic law and the context, object and purpose of the short-term visit exception.

6. The employer for the purposes of the short-term visit exception is the enterprise to which a non-resident individual renders his or her services in what would be considered an employment relationship.

Paragraph 13 lists a number of factors to be taken into consideration when determining which entity is the real employer, which includes:

• who exercises ultimate control over the worker - the right to control in terms of the ability to withdraw a worker from an assignment and/or terminate the relationship with the worker

• who exercises day to day control over the worker - that is, the degree of actual control exercised in terms of, for example, how, when and what is to be done

• integration - the nature of the services rendered by the worker and whether they are an integral part of the business activities carried on by the enterprise to which the services are provided

• the terms of the engagement - for example, entitlements to leave and who has obligations to deduct PAYG instalments, pay superannuation contributions and workers' compensation insurance

• who is responsible for payment of remuneration for the worker's services

• who bears the responsibility or risk for the results produced by the worker

• whether or not the contract is for the achievement of a specified result

• who provides or maintains the necessary equipment and resources to perform the work; and

• whether or not the work can be delegated by the worker.

Application of the conditions in the Dependent Personal Services Article of the tax treaty to the circumstances of the present case

In the present case, the individual will be seconded to Australia, where they will be working for the Australian entity for a period of one to two years.

With regard to the first condition as set out in the Dependent Personal Services Article, the individual will be present in Australia for more than 183 days in two of the three income years.

In relation to the second condition, the Dependent Personal Services Article of the tax treaty, it is considered that an employment relationship will exist between the Australian entity and the individual in respect of the secondment to Australia. In making this conclusion we have taken into consideration facts and information presented and the key indicators of employment relationship as discussed in TR 2013/1.

In this case the Australian entity:

• exercises ultimate control over the individual as evidenced by certain terms of the contract such as the termination clause.

• exercises day to day control over the individual. The individual is required to undertake their employment duties at the request of the Australian entity and be available to undertake these duties.

• is responsible for leave entitlements.

• has the responsibility or risk for the results produced by the individual.

• provides the necessary equipment and resources to enable the individual to perform the work.

In addition, the nature of the duties performed by the individual is an integral part of the activities of the Australian entity.

The Country X entity is responsible for:

• the payment of salary and other employment contribution for the individual's duties in Australia.

From the information supplied on balance, it is considered that the Australian entity will be the real employer with regard to the individual's employment rendered in Australia.

In these circumstances, the second condition which requires the remuneration be paid by, or on behalf of, an employer will not be satisfied. This is because the Country X entity who pays the salary of the individual is not an employer to which the individual renders their employment services in Australia, for the purposes of the Dependent Personal Services Article of the tax treaty.

As a result, the individual will not satisfy the short term visit exception under the Dependent Personal Services Article which requires all three conditions must be satisfied concurrently.

Accordingly, the salary income will also be taxable in Australia in each of the income years covered by the ruling for the purposed of the Dependent Personal Services Article the tax treaty.

The tax treaty provides that the income is deemed to have an Australian source.

Consequently, the salary income of the individual will be assessable in Australia pursuant to section 6-5 of the ITAA 1997 in the relevant income years.

Note that the tax treaty provides that Country X shall allow a resident or citizen of Country X as a credit against Country X's tax the appropriate amount of income tax paid to Australia.

PAYG withholding obligation

Section 12-35 of schedule 1 to the TAA provides that an entity is obliged to deduct PAYG withholding from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity).

Taxation Ruling TR 2005/16 Income Tax: Pay As You Go - withholding from payments to employees (TR 2005/16) provides guidance as to whether an individual is paid as an employee.

Paragraph 6 of TR 2005/16 states that the term 'employee' is not defined in the TAA. For the purposes of withholding under PAYG withholding provisions the word 'employee' has its ordinary meaning by reference to common law principles.

In paragraph 12 of TR 2005/16 the Commissioner considers that a payment does not necessarily have to be between an employer and employee for the payment to be covered by section 12-35 of Schedule 1 to the TAA. However, it is a requirement that the payment be made to the employee in their capacity as an employee, either of the payer or another entity.

In the circumstances of this case, PAYG withholding will apply to the salary payment. Under the secondment arrangement salary will continue to be paid by the Country X entity while the individual is in Australia. The Commissioner has determined previously that the individual's employment's duties performed in Australia for the Australian entity constitutes an employer and employee relationship. Therefore, the payment is considered to be made to the individual in their capacity as an employee. Additionally, the salary payment of the individual is assessable income in Australia in terms of section 6-5 of the ITAA 1997 as previously determined under "Source of income - salary".

With regard to the obligation to deduct, the PAYG withholding provisions impose upon the payer of salary, wages, commission, etc. a requirement to deduct PAYG withholding from the relevant payment. In these circumstances, the Country X entity, being the payer of the salary, must withhold an amount from the salary it pays to the individual pursuant to section 12-35 of Schedule 1 to the TAA.

Accordingly, there is no requirement that the Australian entity is to withhold from the individual's salary under section 12-35 of Schedule 1 to the TAA.

Question 2

Summary

The accommodation and payment of utility expenses to be provided to the individual by the Australian entity are exempt benefits pursuant to section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

It is considered that the provision of accommodation and payment of utility expenses by the Australian entity qualifies as housing benefit and expense payment benefit respectively for the purposes of the fringe benefits tax provisions. These benefits are exempt benefits pursuant to section 57 of the FBTAA.

Accordingly, the provision of accommodation and payment of utility expenses by the Australian entity will be exempt from fringe benefits tax.

Detailed reasoning

The Australian entity will provide accommodation and utility expenses to the individual while in Australia under the terms of the employment agreement between the Australian entity and the individual.

Section 25 of the FBTAA provides that where a housing right is provided to a person, a housing benefit will arise.

A housing right is defined in subsection 136(1) of the FBTAA as a lease or licence granted to the person to occupy or use a unit of accommodation, insofar as that lease or licence subsists at a time when the unit of accommodation is the person's usual place of residence.

A unit of accommodation is defined in s136 FBTAA 1986 which includes-

(a) a house, flat or home unit;

(aa) accommodation in a house, flat or home unit;

(e) a caravan or other mobile home.

In this case, the provision of accommodation constitutes a housing benefit pursuant to section 25 of the FBTAA.

Section 20 of the FBTAA provides that an expense payment fringe benefit arises when an employer pays for, or reimburses, expenses incurred by an employee or associate.

An expense payment fringe benefit, as defined in subsection 136(1) of the FBTAA, is a fringe benefit that is an expense payment benefit.

It is considered that the utility expenses to be paid for the individual by the Australian entity will constitute expense payment fringe benefits.

For the purposes of claiming the exemption under section 57 of the FBTAA, the benefits provided to employees must meet the following criteria:

a) the employer of an employee is a registered religious institution; and

b) the employee is a religious practitioner; and

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 Commissioner's position concerning the above conditions is discussed in Taxation Ruling TR 92/17: Income tax and fringe benefits tax: exemptions for 'religious institutions' (TR 92/17). Paragraph 2 of TR 92/17 states:

"2. Benefits provided to certain employees of a 'religious institution' are exempt benefits under section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). A benefit provided by a religious institution to an employee is an exempt benefit under section 57 of the FBTAA if:

(a) the employee is a religious practitioner (i.e. a minister of religion, a full-time member of a religious order, or a person training to become a minister of religion or a member of a religious order); and

(b) the benefit is provided to the employee, the employee's 'spouse' as defined in subsection 136(1) of the FBTAA, or the employee's 'child' as defined in subsection 136(1) of the FBTAA; and

(c) the benefit is not provided principally in respect of duties of the employee, other than pastoral duties or any other duties or activities directly related to the practice, study, teaching or propagation of religious beliefs. "

All four conditions have to be met for the exemption from fringe benefits tax to apply.

a) Is the Australian entity a religious institution?

On the basis of the information provided, the Australian entity is a religious institution.

b) Is the individual a religious practitioner?

Religious practitioner is defined in section 136(1) of the FBTAA as having the 'meaning given by subsection 995-1(1) of the ITAA 1997.

A 'religious practitioner' is defined in subsection 995-1(1) of the ITAA 1997 to mean:

a) a minister of religion; or

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

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.

Paragraph 13 of TR 92/17 states:

"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) 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 this case, the individual will be taking up a full time position at the Australian entity and is required to take part in ministry activities on a full time basis.

On the facts presented, the individual is a minister of religion.

c) Will benefits be provided to the employee?

Subsection 57(c) of the FBTAA requires that the benefits are provided to either the employee themselves or to their spouse or child. The benefits are provided to the individual, this criterion will be satisfied.

In addition, Para 15 of TR 92/17 states:

"15. Religious practitioners who receive a stipend or other form of remuneration (including non-cash benefits) are employees for the purposes of the FBTAA (see the definitions of 'current employee' in subsection 136(1) of the FBTAA and 'employee' in subsection 221A(1) of the ITAA). Consequently, if the requirements of section 57 of the FBTAA are satisfied, any fringe benefits provided to a religious practitioner who is an employee of a religious institution are exempt benefits. (It should be noted that the consequence of a view that religious practitioners are not employees is that non-cash benefits provided to a religious practitioner generally would be assessable income on ordinary concepts in the hands of the religious practitioner.) "

The benefit, being accommodation and utility expenses, will be provided by the Australian entity to the individual as an employee of the Australian entity. Therefore this requirement is satisfied

d) Is the benefit provided principally in respect of the individual's pastoral duties or any other duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs?

For a benefit to be exempt, section 57 of the FBTAA requires it must be provided principally in respect of the employee's ministry activities that are directly related to the practice, study, teaching or propagation of religious beliefs.

As the individual is a full time religious practitioner, the benefits provided to them is principally in respect of their ministry activities for the Australian entity.

Accordingly, the benefits in respect of accommodation and utility expenses to be provided to the individual will be exempt under section 57 of the FBTAA, and therefore will not be subject to fringe benefits tax.

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