Edited version of private ruling

Authorisation Number: 1011813795439

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Ruling

Subject: Fringe benefits tax - exempt benefits

Question 1

Are the benefits paid to employees exempt benefits under section 57 of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

This ruling applies for the following periods:

n Year ended 31 March 2012

n Year ended 31 March 2013

n Year ended 31 March 2014

The scheme commences on:

1 April 2011

Relevant facts and circumstances

You are an incorporated association established for the sole purpose of employing people to teach religion.

You are affiliated with and approved by certain religious institutions.

Your employees are all recognised officially at a commissioning.

Your employees' duties include teaching religious beliefs, counselling and other pastoral duties providing spiritual guidance and support.

Your employees have authority in matters of doctrine bound by the statement of faith that you have adopted.

Your employees are authorised to teach certain groups of people and have acknowledged spiritual leadership in that context.

Your employees are authorised to discharge the duties of ministers or spiritual leaders. This includes the conduct of religious worship and religious ceremonies. Your employees determine and implement programs that you approve and provide.

According to their duties of employment, your employees assume responsibility for the spiritual and pastoral care of those they teach.

Your employees must:

· be an active member of a religious institution

· demonstrate an appropriate level of character and commitment

· possess academic qualifications and or training appropriate to the position being applied for

· have an ability to apply the teaching of the religious texts in a practical and relevant manner

· have a demonstrated ability to communicate with people and a broad understanding of the issues affecting them

· have an ability to effectively undertake religious education programmes.

The academic qualifications or training your employees require is in the area of religious matters. Teaching qualifications are also well regarded. You do not have a minimum requirement in relation to theological or religious academic qualifications. You are, however, considering having a minimum requirement.

Your employees' remuneration is via a salary package that includes 50% paid in cash and 50% in various fringe benefits including car benefits.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 57 and

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1).

Reasons for decision

All references made in these reasons for decision are to the Fringe Benefits Tax Assessment Act 1986 unless otherwise stated.

Summary

As a religious institution the benefits that you provide to your employees, who are religious practitioners, in respect of their duties in teaching religious beliefs and providing pastoral care are exempt benefits under section 57.

Detailed reasoning

According to section 57:

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 to determine whether the benefits you provide to your employees will be exempt it is firstly necessary to determine whether you are a religious institution for the purposes on section 57.

There is no definition of 'religious institution' in income tax and fringe benefits tax legislation. However, Taxation Ruling TR 92/17 provides guidance as to what is a religious institution for the purposes of the Income Tax Assessment Act 1997 (ITAA 1997) and the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

Paragraphs 4 and 5 of TR 92/17 state:

A body is an 'institution' for the purpose of both the ITAA and the FBTAA if it is an establishment, organisation or association, instituted for the promotion of some object (especially one of public or general utility) that is religious, charitable, educational, etc. That definition was accepted by the High Court of Australia in YMCA of Melbourne v. FC of T (1926) 37 CLR 351 and later in Stratton v. Simpson (1970) 125 CLR 138.

A body is a 'religious institution' if it is instituted for religious purposes. For a body to be regarded as a religious institution:

(a) its objects and activities must reflect its character as a body instituted for the promotion of some religious object; and

(b) the beliefs and practices of the members of that body must constitute a religion.

If these two criteria are met it is likely that a body will be characterised as religious.

In paragraph 9 of TR 92/17 it states that the question of whether an organisation is a religious institution:

…must be determined having regard to the primary or dominant object of the body as ascertained by reference to the objects as stated in its memorandum of association or other constituent documents and by consideration of its activities: see Commissioner for ACT Revenue Collections v. Council of the Dominican Sisters of Australia 91 ATC 4602; (1991) 22 ATR 213.

The meaning of 'religious institution' has been considered in a number of decisions by Australian appellate courts. In Young Men's Christian Association of Melbourne v. Federal Commissioner of Taxation [1926] 37 CLR 351 the association was based on the declaration that it:

…seeks to unite those young men who, regarding the Lord Jesus Christ as their God and Saviour according to the Holy Scripture, desire to be His disciples in their doctrine and their life, and to associate their efforts for the extension of His Kingdom amongst young men.

The constitution gave the association's objects as 'the improvement of the spiritual, intellectual, social and physical condition of young men'. Membership was limited to Evangelical Christians. The association was carried out its object by:

…the provision of lectures on religion, and economic, literacy, geographical, hygienic, civic and national subjects, by the equipping of writing-rooms, billiard rooms, library and gymnasium, by the holding of religious services, prayer meetings and bible study circles, and by the formation of sports clubs such as cricket, football, tennis, harriers, baseball and basket-ball' (at CLR 352).

The YMCA was accepted as a religious institution.

The beliefs of your association are in a supernatural being. The basis for establishing the association comes from religious texts.

The association has been established to provide religious education.

In order to achieve this, your association:

· employs the people to teach religion on behalf of certain religious institutions

· is affiliated with and approved by an association of religious institutions

· works in consultation with teachers to determine and implement programs

· receives and manages money for the promotion of your objective.

The association therefore is considered to be a religious institution.

Having established that you are a religious institution it is then necessary to determine if your employees are religious practitioners.

In section 136(1) religious practitioner has the meaning given in subsection 995-1(1) of the ITAA 1997. It states that a religious practitioner means:

(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.

Your employees are not students at an institution undertaking a course of instruction in the duties of a minister of religion. They do not belong to a religious order and they are not students at a college conducted solely for training persons to become members of religious orders. Therefore, your employees will be religious practitioners if they are ministers of religion.

The question of whether your employees are ministers of religion is one of fact which needs to be determined according to whether the particular religion requires a minister to be formally ordained or authorises a person to carry out the duties of a minister based on a specified level of theological training or other relevant training or experience.

Paragraph 13 of TR 92/17 states that 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 some 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 persons 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.

(a) Are your employees a member of a religious institution?

Your employees should be active members of a religious institution. They must also pursue the ethos, aims and objectives of your association as indicated in its articles and the Statement of Faith.

Therefore this characteristic is present.

(b Are your employees recognised officially by ordination or some 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?

Your employees are recognised officially at a commissioning ceremony. They are commissioned to teach and to act on behalf of certain religious institutions.

Your employees are required to have academic qualifications or training in relation to religious or spiritual matters. They should also have some pastoral experience.

Therefore this characteristic is present.

(c) Are your employees recognised as having authority in matters of doctrine or religious practice?

Part of the selection criteria for the position is that the teacher must have the ability to apply the teaching of the religious in a practical and relevant manner.

Your employees must also have appropriate academic qualifications or training and as part of their position are required to undertake studies to further their training.

They are required to teach religious beliefs to people within a certain context, therefore they would have authority in matters of doctrine in that context.

Therefore this characteristic is present.

(d) Is the position of your employees distinct from that of the ordinary adherents of the religion?

Your employees are people who have leadership roles in the religious community. They assume responsibility within the place they work for the spiritual and pastoral care of those they teach.

Their position is therefore distinct from that of ordinary adherents of the religion.

Therefore this characteristic is present.

(e) Do your employees have acknowledged leadership in the spiritual affairs of the religious institution?

Your employees are recognised as having authority on spiritual matters in the place they work. They also have a level of recognition within local religious institutions.

Therefore this characteristic is present.

(f) Are your employees authorised to discharge the duties of a minister or spiritual leader, including the conduct of religious worship and other religious ceremonies?

Your employees are authorises to discharge the duties of ministers or spiritual leaders. This includes the conduct of religious worship and religious ceremonies.

Therefore this characteristic is present.

Since many, if not all of the above characteristics are present in your employees, they are considered to be ministers of religion and therefore religious practitioners.

The benefits provided to your employees will be exempt if they are provided principally in respect of their pastoral duties or any other duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs.

As your employees are employed solely to teach religious beliefs, counsel and perform other pastoral duties, it is accepted that this condition is met.

Since you meet all of the conditions in section 57 in relation to the benefits provided to your employees, the benefits provided to your employees will be exempt.