Edited version of your private ruling

Authorisation Number: 1011994601650

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: Exempt benefits-religious practitioner

Question 1

Will the benefits provided by the employer to an employee exempt from fringe benefits tax in accordance with section 57 of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes.

This ruling applies for the following periods:

1 April 2011 to 31 March 2014

The scheme commences on:

April 2011.

Relevant facts and circumstances

The employer is endorsed as a charitable institution, in accordance with Subdivision 50B Income Tax Assessment Act 1997.

The employer's purpose is the advancement of religion and therefore a religious institution.

The employer is involved in training cadets in the beliefs and practices of their religion. They train them to be teachers of their religion, so the cadets can teach and preach to others of their respective denominations.

Cadets can be from different denominations of their religion.

The employee is a religious practitioner as defined in the fringe benefits tax legislation as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997.

The employer deducts pay-as-you-go withholding tax as required by tax law in accordance with section 12-47 of the Tax Administration Act 1953

Benefits are provided to the employee principally in respect of duties of the employee, which relate to pastoral or directly related pastoral duties.

The pastoral or directly related pastoral duties take up more than 50% of the employee's time.

Relevant legislative provisions

Tax Administration Act 1953 Section 12-47

Fringe Benefits Tax Assessment Act 1986 Section 57

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Assessment Act 1997 Subdivision 50B

Reasons for decision

Section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides an exemption for benefits provided to employees of religious institutions where four conditions are met. The conditions are as follows:

· the employer of an employee is a religious institution;

· the employee is a religious practitioner;

· the benefit is provided to the employee, or to a spouse or a child of the employee; and

· the benefit is not provided principally in respect of duties of the employee other than:

· pastoral duties; or

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

The tax office's position concerning the above conditions is discussed in Taxation Ruling TR 92/17: Income tax and fringe benefits tax: exemptions for religious institutions.

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

Is the organisation a religious institution?

TR 92/17 states that a body is an institution if it is an establishment, organisation or association, instituted for the promotion of some object that is religious, charitable, educational, etc. A body is a religious institution if it is instituted for a religious purpose.

The organisation's objects and activities indicate it has been instituted solely for promotion of a religious object and their beliefs and practices of the organisation constitute a religion.

The organisation's main activity is to train cadets who will become members of certain denominations of their religion, so they can preach and teach their members promoting their specific religious beliefs. The organisations' members have to follow acceptable canons of conduct, which give effect to their religious beliefs and principles. The organisation follows established religious and remuneration guidelines.

The organisation is a non-profit income tax exempt charitable institution endorsed under subdivision 50B of the Income Tax Assessment Act 1997. It was endorsed as a charitable institution because its purpose is the advancement of religion and benefits a portion of the community.

The organisation is a religious institution.

Is the employee a religious practitioner?

A 'religious practitioner' is defined in subsection 136(1) of the FBTAA 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.

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:

· the person is a member of a religious institution;

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 theological or other relevant training or experience;

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

· the person's position is distinct from that of the ordinary adherents of the religion;

· the person has acknowledged leadership in the spiritual affairs of the religious institution;

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

The employee is a full time member of the organisation.

The employee will deal with both administrative and religious practitioner duties as outlined in the taxation ruling.

The employee will be carrying out more religious practitioner duties then administrative duties.

The employee is currently studying to be a qualified religious practitioner. The employer agrees that the employee has sufficient knowledge to teach and preach their religious beliefs.

The organisation accepts the employee to be distinct from normal members of the organisation, has the ability, and therefore has authority to use the skills and knowledge in religious doctrines and practices, necessary to discharge the duties of spiritual leader, including preaching the doctrines and canons of conduct to the normal members of their religious organisation.

The employee will carry out numerous practitioner duties whilst on the employer's premises and at home.

The employee is a religious practitioner.

Will the benefits be provided to the employee?

PAYG withholding is deducted from the employee's wages, hence an employee for FBT purposes.

The employee can receive up to 20% of the remuneration paid as housing and car fringe benefits. The employee can receive up to a further 30% of the remuneration paid to cover other major costs, some of which will be exempt as they are work related expenses.

Therefore, benefits are provided to the employee.

Will the benefits provided be 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?

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.

The duties or activities must be related directly to the practice, study, teaching or propagation of religious beliefs to meet the requirements of paragraph 57(d) of the FBTAA. The duties or activities may include secular activities if it can be shown that there is a direct link between those activities and the religious beliefs of the person concerned.

Although a full-time member of a religious order may not be involved exclusively or predominantly in pastoral duties, he or she generally is engaged in duties or activities that are directly related to the practice, study, teaching or propagation of their religious beliefs.

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 employee will be carrying out a range of duties that include administrative duties. However, the amount of time spent carrying religious practitioner duties are more than 50% of the total time spent on administrative related duties.

The employee's time will primarily be devoted and directly related to the practice, study, teaching or propagation of religious beliefs and/or pastoral duties.

The employer states that the provision of the house is principally in respect of his practice, study, teaching or propagation of religious beliefs and/or pastoral duties and as such the exemption under section 57 of the FBTAA should apply.

The car will be used to travel to other churches, counselling cadets who are in need of spiritual guidance, liaising with other church leaders and volunteers, bible reading and prayers with current and potential apprentices.

Conclusion

The employer is a religious institution, and the employee is a religious practitioner, it is concluded that the benefits provided to the employee is principally in respect of the pastoral duties of a religious practitioner.

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