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Ruling

Subject: Provision, of car

Question 1

Does the provision of the religious institution owned car for Fr X to visit parish members and also for his private use constitute car fringe benefits under section 7 of the Fringe Benefits Tax Assessment Act 1986?

Answer

No

This ruling applies for the following periods:

On or after 1 April, 2012 to 31 March 2014.

Relevant facts and circumstances

The Religious institution is a not for profit religious institution. It has income tax exempt and/FBT rebatable status. It conducts prayer and religious services for the parish members and caters to their religious needs.

Fr serves as a parish priest/minister of the religious institution.

Fr conducts weekly service for the parish throughout the year on a voluntary basis.

Fr also undertakes all religious needs of all parish members spread over the whole Metropolis. Examples of this include:

· Weddings

· House blessings

· Baptism

· Conducts service in other congregation on a monthly basis

· Funeral services

Fr X does not receive any income from the religious institution or the parish members for any of his services rendered to the Religious institution or the community.

Religious institution wishes to pay an honorarium amount every year for his voluntary services, as a church minister to the Religious institution.

The payment won't be made on a weekly/fortnightly or monthly basis.

There is no written contractual agreement between the religious institution and Fr X regarding the work Fr X will be performing for the religious institution and the honorarium payment.

Expenses are incurred by the religious institution and paid by the religious institution. Honorarium payments are not reimbursements for expenses incurred by Fr on behalf of the Religious institution.

There are no expenses incurred by Fr X and paid for by the religious institution connected with services conducted in other congregations. Fr is accommodated and looked after by religious institution members in their homes during these travels.

The religious institution also provides Fr X a Religious institution owned car to visit parish members and also for his private use. He uses the car to commute to his other full time job. The usage of the car between his private use and that for the use of religious institution will be on a 50: 50 ratio.

The religious institution pays for the running costs of the car e.g. petrol, service, rego, insurance etc.

Relevant legislative provisions

Section 7 of Fringe Benefits Tax Assessment Act 1986

Section 57 of Fringe Benefits Tax Assessment Act 1986

Section 136(1) of Fringe Benefits Tax Assessment Act 1986

Reasons for decision

Question 1

Summary

The provision of the religious institution owned car constitutes a car benefit. However, as Fr is a religious practitioner the car benefit is exempt under section 57 of the Section 57 of Fringe Benefits Tax Assessment Act 1986 (FBTAA)

Detailed reasoning

A car benefit is defined in subsection 136(1) of the FBTAA as a fringe benefit that is a car benefit.

Fringe benefit

A fringe benefit is defined in section 136(1) Fringe Benefits Tax Assessment Act 1986 (FBTAA) as:

A benefit provided during or in respect of a year of tax

The benefit is provided to an employee or an associate of the employee

The benefit is provided in respect of the employment of the employee

The benefit is provided by the employer, an associate of the employer or a third party (

The benefit is not an excluded benefit

Fringe benefits may be rights, privileges or services. For example, a fringe benefit is provided when an employer:

· allows an employee to use a work car for private purposes

· pays an employee's green fees at golf days.

FBT may apply when non-profit organisations provide benefits to their employees.

In general terms, subsection 7(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides that a car fringe benefit will arise when a car held by the employer is either used for a private purpose by an employee, or is taken to be available for the private use of an employee.

In determining whether a car is taken to be available for the private use of an employee subsection 7(2) of the FBTAA provides that a car will be taken to be available for the private use of an employee when it is garaged or kept at or near a place of residence of an employee or of an associate of an employee.

Alternatively, subsection 7(3) of the FBTAA provides that a car held by the employer will be taken to be available for the private use of an employee when the car is not at business premises of the employer, or an associate of the employer and one of the following conditions applies:

· the employee is entitled to apply the car to a private use; or

· the employee is not performing the duties of his or her employment and has custody or control of the car; or

· an associate of the employee is entitled to use, or has custody or control of the car.

In this case a car fringe benefit will arise if Fr is considered an employee of the Religious institution.

Taxation, Ruling TR 92/17 Income tax and fringe benefits tax: exemptions for 'religious institutions' (TR 92/17) paragraph deems a religious practitioner who receives a stipend to be an employee.

TR92/17 also discusses the meaning of 'religious institution' and 'religious practitioner'.

Religious practitioner

A religious practitioner is someone who is any of the following:

· 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

· a student at a college conducted solely for training people to become a member of a religious order.

Religious institution

An organisation will be a religious institution if it is an establishment, organisation or association that is instituted to advance or promote religious purposes.

An institution may have the legal structure of an unincorporated association or a corporation. However, incorporation is not enough, on its own, for an organisation to be an institution. Its activities, size, permanence and recognition will be relevant.

An organisation that is established, controlled and operated by family members and friends would not normally be an institution

The facts surrounding the religious institution suggest that in accordance with the principles set out in TR 92/17:

Religious institution qualifies as a religious institution.

Fr X would come within the meaning of a religious practitioner

Paragraph 15 TR 92/17 states:

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,

Therefore as:

· The institution is a religious institution

· Fr X is a religious practitioner

· The amount intended to be paid to Fr is equivalent to a stipend

· Fr X is an employee for fringe benefits tax purposes. Consequently, the car provided to Fr Xwill be a car fringe benefit as it is used 50% for private purposes and garaged at Fr X's residence, unless an exemption applies.

If the provisions of section 57 FBTAA are satisfied, the provision of the car for Fr use will be an exempt benefit and not taxable.

Paragraph 2 of TR 92/17 sets out the criteria under section 57 FBTAA that need to be satisfied for benefits provided by a religious institution to be exempt. The criteria are:

· provided by a religious institution

· to a religious practitioner

· principally because of the religious practitioners' pastoral duties or other duties relating to the practice, study ,teaching or propagation of religious beliefs

As stated earlier the institution is a religious institution and Fr is a religious practitioner. Therefore, it only leaves the third criteria to be satisfied for the car befit to be an exempt benefit under section 57 FBTAA.

It is considered that, although the car is used 50% for private use it was provided principally so Fr could carry out his pastoral duties. Therefore, the third criterion for the exemption is satisfied.

Accordingly, the requirements of section 57 of the FBTAA for exemption are satisfied and the provision of the car to Fr will give rise to an exempt benefit under section 57 of the FBTAA.