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Edited version of private advice

Authorisation Number: 7910156152666

Date of advice: 4 May 2023

Ruling

Subject: Religious practitioner and exempt fringe benefits

Question

Is the provision of the Expense Accounts to their employees exempt from FBT under section 57 of the FBTAA?

Answer

Yes.

This ruling applies for the following periods:

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

The scheme commenced on:

1 April 20XX

Relevant facts and circumstances

The Employer is registered as a charity on XX 20XX with the ACNC and has a charitable purpose of 'advancing religion'.

Under the constitution, the main objective of the Employer is to share the good news of Christ every day and advance the Christian principles in their community.

The Employer employs two employees, 'Employee 1' and 'Employee 2'. Both positions are full-time employment on a 38 hours per week basis.

Expense accounts

It is proposed that each of the employees be provided with an expense account with an estimated allowed usage per annum between $XX to $XX (for the later income years) as a benefit in connection with their pastoral duties.

The expense account will not exceed 50% of their total salary package of currently around $XX.

Employee 1

The Employer employs Employee 1 to assist in leading the worship team and provide pastoral care to the staff and the members of the church.

The primary responsibilities of Employee 1 are:

•         propagation of the Employer's religious beliefs through all Sunday services/religious meetings;

•         organisation, rostering and pastoral care of service teams for 3 church services, including oversight and scheduling of musicians and other volunteers;

•         promotion of the Employer's religious beliefs through social media.

Employee 1 has 19 years of experience working for the Employer. Further, Employee 1 has relevant qualifications and ongoing theological training relevant to their pastoral duties.

Employee 2

The Employer employs Employee 2 to assist the Employer in leading and educating the children that attend the church. Employee 2 provides pastoral care to the staff and the members of the church, specifically the children.

The primary responsibilities of Employee 2 are:

•         propagation of the Employer's religious beliefs by being responsible for the religious practice it leads, develops, co-ordinates, and envisions for the children's ministry teams, such as:

•         envision & lead volunteer teams to provide a weekly Sunday Kids program for children Kindy to Grade 6;

•         oversee curriculum development and resource management; and

•         schedule team weekly meetings.

•         pastoral care for the ministry team:

o   to provide pastoral care for kids, parents, leaders and members of the congregation

o   to pray for kids, parents, leaders, and members of the congregation; and

o   maintaining regular contact with members of the congregation and the Employers' church as a whole.

Employee 2 has over 10 years of experience working in various churches. Further, Employee 2 has relevant qualifications and ongoing theological training relevant to their pastoral duties.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 57

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

FBTAA Subsection 995-1(1)

Reasons for decision

Issue 1

Question 1

Is the provision of the Expense Accounts to their employees exempt from FBT under section 57 of the FBTAA?

Summary

Yes. The benefits to be provided by the Employer to their employees in the position of Employees 1 and 2 are exempt from fringe benefits tax under section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

Detailed reasoning

Section 57 of the FBTAA provides an exemption for benefits provided to employees of religious institutions where four conditions are met. The conditions are as follows:

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

(b)  the employee is a religious practitioner;

(c)   the benefit is provided to the employee, 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.        pastoral duties; or

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

The Australian Taxation Office's (ATO) position concerning the above conditions is discussed in Taxation Ruling TR 2019/3 - Fringe benefits tax: benefits provided to religious practitioners (TR 2019/3),

Also, all four conditions from Section 57 of the FBTAA 1986 have to be met for the exemption from fringe benefits tax to apply.

(a) Registered religious institution

An employer will be a religious institution if it is:

Paragraph 7 of TR 2019/3 explains that in considering whether a benefit is provided by a registered religious institution, administration by the ATO is limited to determining that the entity is an institution that maintains current ACNC registration with a subtype 'advancing religion'. This status has been confirmed.

An institution may take various forms, including a company limited by guarantee, an incorporated association, an unincorporated association, a trust, or a body established under statute or letters patent.

In the context of the FBTAA, the word 'institution' refers to a significant body which is a recognised part of society, and for which the grant of an exemption is seen to provide a public benefit. The Employer demonstrates the required characteristics of an institution.

In this case, the Employer meets the requirements to be a registered religious institution. Further, the Employer is a charity registered with ACNC with a purpose "advancing religion".

(b) Religious practitioner

Paragraph 12 of TR 2019/3 notes that 'Religious practitioner' is defined to mean (under subsection 136(1) of the FBTAA 1986 and subsection 995-1(1) of the Income Tax Assessment Act 1997):

Paragraph 14 of TR 2019/3 provides a definition of 'minister of religion'.

Except in rare cases, a minister of religion would have most of these characteristics:

Each of these characteristics are further discussed below.

•         Member of a Religious Institution

Employees 1 and 2 are a member of a religious institution in their capacity as employees of the Employer.

•         Recognised by ordination or other admission or commissioning, or has authority from the religious institution to carry out the duties of a minister based on theological training or other relevant experience

•         Officially recognised as having authority on doctrine or religious practice

Employees 1 and 2 are officially recognised as spiritual leaders of the church. It is noted that both employees are authorised by the Employer as religious practitioners. In particular, the role description of Employee 1 gives him complete authority to undertake his role.

Furthermore, Employee 2 provides pastoral care to children who attend the church and is recognised as a leader of the church.

Pastoral duties are duties associated with the spiritual care of people.[1] Examples of pastoral duties undertaken by religious practitioners are:[2]

•         communication of religious beliefs

•         teaching and counselling adherents and members of the community

•         providing adherents and members of the community with spiritual guidance and support

•         conducting an in-service seminar of a spiritual nature

•         meeting with or visiting adherents, the sick, the poor, and others who need emotional and spiritual support, and

•         providing pastoral supervision to those engaged in pastoral duties.

It is recognised that, as the predominant purpose of their employment at their workplace, Employee 1 will propagate the Employers' beliefs during services and religious meetings. Further he is to provide pastoral care to the ministry team and support them during their faith journeys. This distinguishes them from other members at the church.

Employee 2 is responsible for the religious practice as she lead, develop and coordinates the children's ministry teams. They are responsible for providing pastoral care to leaders, kids and parents and are recognised as a leader at the church.

As a result, they are acknowledged as being leaders within their Employers' church and distinguished from ordinary members.

•         Authorised to act as a minister or spiritual leader, including the conduct of religious worship and other religious ceremonies.

Through their roles, both employees are authorised to act as spiritual leaders of the Employer and are responsible for leading the church. Further, both have been in this role for eleven years which gives them authority to act in the role. Similarly, the Employee 2 has prior experience in similar roles and also qualifications in Chaplaincy and Pastoral Care which has clear outcomes of advancing spiritual leadership.

We consider that Employees 1 and 2 satisfy the definition of minister of religion, as defined in paragraph 14 of TR 2019/3.

Each of the other three elements of the definition of 'religious practitioner' do not need to be considered.

On this basis, we accept that Employees 1 and 2 are employed religious practitioners.

(c) Benefits provided to employee

Paragraph 11 of TR 2019/3 provides:

To be exempt, the benefit must be provided by a registered religious institution to an employee who is a religious practitioner. 'Employment' is given a wider meaning than its ordinary meaning and includes holding an office or appointment. Employees are recipients of salary or wages. Here the term 'salary or wages' has a wider meaning than might ordinarily be the case. It includes payments and non-cash benefits made by a religious institution to a religious practitioner for activities done as a member of the institution in pursuit of the practitioner's vocation.

The Employer has advised that both Employees 1 and 2 are employees and will receive an Expense Account of up to $XX, which will be no more than 50% of their total salary package.

(d) Principally in respect of pastoral duties or any duties that are directly related to the practice, study teaching or propagation of religious beliefs

TR 2019/3 states that in order to determine whether a benefit has the required connection with a religious practitioner's duties, it is necessary to identify what that benefit was in respect of. Further, the test is concerned with the connection between the benefit and a religious practitioner's duties or activities, rather than the nature of the advantage the benefit represents.

A benefit which is provided only in respect of duties which are solely or predominantly pastoral, or which are directly related religious activities, will satisfy the test. This would also be the case where the benefit is in respect of the practitioner's duties generally, and those duties are solely or predominantly pastoral.

The Employer has advised that the Expense Account will be paid to the Employees 1 and 2 in connection with their pastoral duties.

The Employee 1's duties to which the Expense Account provided by the Employer will go towards include:

The Employee 2's duties to which the Expense Account provided by the Employer will go towards include:

•         Leading kids church.

•         Leading creche.

•         Leading mini mornings.

•         Providing support to young families and youth groups.

These activities are predominantly pastoral duties, associated with the spiritual care of young people and others, or directly related to the practice, study, teaching or propagation of religious beliefs.

As part of their role, Employee 2 is also the safe church coordinator. The responsibilities of this are to oversee the Employers' safe church policy, oversee the child protection policy, ensure all staff and volunteers have been trained, oversee recruitment and undertake risk assessments.

The Employer advised that the Expense Account would be used in connection with their pastoral duties. Duties and activities will be directly related where, in their essential nature, they promote the practice, study, teaching and propagation of religious beliefs. Directly related religious activities may include incidental secular activities, provided there is a direct link between the conduct of those activities and the religious beliefs of the participants. Directly related religious activities include the duties or activities undertaken by a full-time member of a religious order to the extent those duties or activities are related to the practice, study, teaching or propagation of their religious beliefs.

Although the duties associated with the safe church coordinator role are secular in nature, these duties are directly related religious activities as the oversight and management provided over the policy ensure that spiritual leaders can practice, teach and propagate the Employers' religious beliefs.

On this basis, we also consider that the benefits will be provided principally in respect of pastoral duties of the employee or any other duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs. Hence the requirement under paragraph (d) of section 57 of the FBTAA will be met.

Conclusion

On the basis of the Employer being a religious institution, and Employees 1 and 2 being religious practitioners, we conclude that the benefits to be provided to both employees are principally in respect of their pastoral duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs.

Therefore, the benefits to be provided will be exempt benefits in accordance with section 57 of the FBTAA.


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[1] The phrase 'pastoral duties' is not defined and so takes its ordinary, contextual meaning. Macquarie Dictionary Online, viewed 12 June 2019, relevantly defines 'pastoral' as 'relating to a priest, minister, or other member of the Christian clergy, or to their duties, especially those associated with the care of the people of their congregation' (at 6.).

[2] TR 2019/3 at [48].

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