Edited version of your private ruling

Authorisation Number: 1012490662110

Ruling

Subject: FBT: FBT-Provision of benefits to religious practitioners by religious institution

Question 1

Is XY a religious institution for the purposes of section 57 of the Fringe Benefits Tax Assessment Act 1986?

Advice/Answers

Yes

Question 2

Are XY's employees employed as religious workers considered religious practitioners for the purposes of section 57 of the Fringe Benefits Tax Assessment Act 1986?

Advice/Answers

Yes

Question 3

Do XY's employees employed as religious workers perform principally pastoral duties for the purposes of section 57 of the Fringe Benefits Tax Assessment Act 1986?

Advice/Answers

Yes

This ruling applies for the following periods:

01 July 2012 to 31 March 2017

Relevant facts and circumstances

XY is proposing to provide benefits to its eligible employees who work as religious workers under a salary sacrifice arrangement (SSA). It contends that in terms of section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) that it is a religious institution and the eligible employees are religious workers. It has provided submissions in support of its position. Its proposal would allow employees to salary sacrifice up to X% of their salaries.

XY is seeking a Private Ruling that it is a religious institution and its employees employed as religious workers are religious practitioners for the purposes of section 57 of the FBTAA for the relevant financial year and thereafter.

The application includes statements of employees setting out the nature of the work of the religious workers.

XY is a partner ministry of a Church and is focused on ministry to interested people. XY states that each of the persons for whom FBT exemption is sought discharges the functions of a religious practitioner. The statements of the employees have been submitted with the application to support this claim

XY is an incorporated association. It is registered with the Australian Charities and Not-for-Profits Commission (ACNC) as a charity. It is registered with the Australian Taxation Office (ATO) as an income tax exempt and charity for the advancement of religion and has GST concession and Fringe Benefits Tax (FBT) rebate status since. It is also registered as a charity for the purposes of public fundraising.

XY does not use the titles 'Minister of Religion or Pastor' for its religious workers in order to be more appealing to a larger population in its ministry. Instead various alternative titles are utilized. For the purposes of this submission, the neutral title of 'religious workers' is chosen.

XY exists for the purpose of promoting the Christian.

XY pursues its purpose by employing religious workers and administration staff to support the religious workers.

XY religious workers must fulfill a set of requirements relating to ministry experience and education before being recognised through a commissioning service. They are recognized officially by being commissioned into service as Ministers with XY. The Ministers are commissioned only when the Church is satisfied with the person's readiness to minister.

XY ministry is listed Church's website as a specific ministry.

The XY religious workers are not involved to any substantial degree in activities which are not pastoral duties or not directly related religious activities. As can be seen in the X Y organisation chart included with this application, XY employs separate administration staff to manage the operations elements of the organisation.

The XY religious workers spend their working hours, organizing and conducting evangelistic activities/religious services:

All or almost all of XY religious workers' time is spent on activities recognised as core Christian religious activities or on activities incidental or ancillary to these religious activities.

The following documents were submitted with the application (refer to attachments):

· Statements by employees setting out the nature of the work they carry out for their employer XY showing their activities are that of religious practitioners

· Certificate of Incorporation of XY Inc

· Rules of Association

· ATO Endorsement as an income tax charity

· A brief history of XY and its WEB home page

· Staff hiring process and application form

· XY organization chart

· Employment and Salary scales terms and conditions

· Christian community church's internal Fringe benefits user guide for their employees

· Document setting out ministers commissioning into service with XY

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 57

Fringe Benefits Tax Assessment Act 1986 Section 136

Reasons for decision

Relevant law

Section 57 of the FBTAA states:

Exempt benefits--employees of religious institutions

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:

(a) any pastoral duties; or

(b) 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.

Religious institution is not defined in the FBTAA. TR 92/17 Income tax and fringe benefits tax: exemptions for 'religious institutions' (TR 92/17) discusses:

(a)  the meaning of the term 'religious institution' and 'religious practitioner' as they appear in the ITAA and the FBTAA and the; and

(b)  the conditions which must be met before a benefit provided to an employee by a religious institution is exempt from the application of the FBTAA.

Question 1

Detailed Reasoning

Religious institution

TR 92/17 paragraphs 4, 5, 6 states:

Religious institution

4. A body is an 'institution' for the purposes 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.

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

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

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

6. The two most important factors for determining whether a particular set of beliefs and practices constitute a religion are:

(a) belief in a supernatural Being, Thing or Principle; and

(b) acceptance of canons of conduct which give effect to that belief, but which do not offend against the ordinary laws.

XY is an incorporated association instituted for the promotion of the Christian religion. Therefore, it is an 'institution' for the purposes of FBTAA 1986.

It is also a 'religious' institution' as it was instituted for religious purposes. Its primary/ dominant object is religious in character as evidenced by its objects in Part A section 3 of its Rules of Association.

It fulfils its objects through its activities of teaching the Christian doctrine and disciplines, evangelising non-adherents, conducting religious services and providing pastoral care. The beliefs and practices of the members of XY clearly constitute a religion as they accept and believe in the Christian doctrine and disciplines/principles as provided in paragraph 6 of TR 92/17 stated above.

ATO has already endorsed it as an income tax exempt and FBT rebatable charitable institution with their main charitable purpose being advancement of religion.

Accordingly, XY satisfies the meaning of 'religious institution' as provided in TR 92/17 and is therefore a 'religious institution' for the purposes of section 57 of the FBTAA.

Question 2

Detailed Reasoning

Religious practitioner

A 'religious practitioner' is defined in subsection 136(1) of the FBTAA to mean:

(a)  a minister of religion;

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

(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.

'Minister of religion' is not defined in the FBTAA. Paragraph 13 TR 92/17 provides that:

13. 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)  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.

Criteria (a) Member of religious institution

XY religious workers are active members of the partner Church and XY. XY ministry is listed on the partner Church's website as a specific ministry.

The XY religious workers meet Criteria (a).

Criteria (b) Official recognition

They are recognised officially by being commissioned into service as Ministers with XY. The Ministers are commissioned only when the Church is satisfied with the person's readiness to minister. Their duties as employees of XY are pastoral and directly related religious activities. They work in the capacity of a minister of religion.

The XY religious workers meet Criteria (b).

Criteria (c) Authority in matters of doctrine

XY religious workers have authority in matters of doctrine and religious practice in the context of their ministry. They perform the services of an authorised minister of Christian religion to teach and lead. They have been given full authority by the partner Church and XY and responsibility for ensuring that the religious instruction they give is in line with Christian doctrine as taught by the Church and their role is one of spiritual guidance and leadership.

The XY religious workers meet Criteria (c)

Criteria (d) Distinct from ordinary adherents

XY religious workers employed by XY are clearly distinguished from ordinary adherents of Christianity and members of the congregation by their calling to full-time ministry work. They must fulfill a set of requirements relating to ministry experience and education before being recognised through a commissioning service.

The XY religious workers meet Criteria (d)

Criteria (e) Acknowledged leadership in spiritual affairs

The religious workers have been acknowledged by XY and the partner Church as spiritual leaders. They have the authority and training and knowledge to teach and lead interested parties in spiritual affairs. Their religious activities are recognized by as an important and active part of the spiritual life. Details of these activities contained in the submitted statements of the religious workers demonstrate they are distinct from ordinary adherents.

The XY religious workers meet Criteria (e)

Criteria (f) Authorised to discharge the duties of a minister

XY religious workers are authorized by XY and their partner church to discharge the duties of a commissioned minister.

The XY religious workers meet Criteria (f)

Accordingly, the religious workers are 'religious practitioners' within the meaning of the definition in section 136 of the FBTAA 1986 because they meet all the characteristics of a minister of religion as set out in paragraph 13 TR 92/1 above.

Question 3

Detailed Reasoning

Pastoral duties and directly related religious activities

Paragraph 21 to 25 TR 92/17 provides that:

What are pastoral duties?

21. 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.

What are directly related religious activities: i.e. practice, study, teaching or propagation of religious beliefs?

22. 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.

23. 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.

24. Missionary work, to the extent that it is not pastoral in character, is, in any event, directly related to the teaching or propagation of religious beliefs. .

What are not pastoral duties or directly related religious activities?

25. 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

XY religious workers act as ministers of religion. XY fulfils the role of a church and its workers fulfill the role of ministers of religion. XY ministry is listed on the partner church's website as a specific ministry.

XY religious workers are not involved to any substantial degree in activities which are not pastoral duties or directly related religious activities. Their administrative functions are minimal. As can be seen in the XY organisation chart included with this application,' XY employs separate administration staff to manage the administrative operations of the organisation.

XY exists to promote the Christian religion. Its religious workers spend their working hours preaching, teaching, proselytising, providing pastoral care, organising and conducting corporate worship services and continuing their theological education.

Accordingly, for the reasons outlined above together with the description of XY religious workers duties' and activities as submitted clearly indicate their work consists principally of pastoral duties and directly related religious activities

Conclusion

1. XY satisfies the meaning of 'religious' institution' as provided in TR 92/17 for the purpose of section 57 of the FBTAA 1986.

2. XY religious workers are 'religious practitioners' within the meaning of the FBTAA 1986 for the purpose of section 57 of the FBTAA 1986.

3. XY religious workers' employment duties consist principally of pastoral duties and directly related religious activities