Edited version of private advice

Authorisation Number: 1012630233017

Ruling

Subject: Exempt benefits

Question

Will the reimbursement of expenses of the Employee from the bank account operated by the Employer be an exempt benefit in accordance with section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

This ruling applies for the following periods:

Year ended 31 March 2014

Year ended 31 March 2015

Year ended 31 March 2016

Relevant facts and circumstances

You are a registered charity for the advancement of religion.

You employed a part-time Employee.

The employee completed their degree in 20XX.

The terms of employment of the employee are set out in the Memorandum of Understanding (MoU).

Since their appointment you have paid the employee salary or wages.

You have also paid a weekly payment into a bank account in the name of the Employer. As at 31 March 20YY, no withdrawals had been made from the account. However, you have advised that you will be using the funds in this account to reimburse the employee for expenses incurred by the employee.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 57

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision

Will the reimbursement of expenses of the Employee from the bank account operated by the Employer be an exempt benefit in accordance with section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Under the arrangement you will reimburse the employee for expenses that he incurs. A reimbursement of expenses is an expense payment benefit that comes within paragraph 20(b) of the FBTAA.

However, section 57 of the FBTAA provides that a benefit provided to a religious practitioner who is an employee of a registered religious institution will be an exempt benefit where four conditions are met.

Section 57 states:

Where:

(a) the employer of an employee is a registered 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 benefit is an exempt benefit.

The four conditions are discussed below in relation to the expense payment benefit provided to the employee:

(a) Are you a registered religious institution?

Subsection 136(1) of the FBTAA defines 'registered religious institution' to mean:

an institution that is:

(a) a registered charity; and

(b) registered under the Australian Charities and Not-for-profits Commission Act 2012 as the subtype of entity mentioned in column 2 of item 4 of the table in subsection 25-5(5) of that Act.

Column 2 of item 4 in subsection 25-5(5) of the Australian Charities and Not-for-profits Commission Act 2012 applies to an:

Entity with a purpose to which paragraph (d) of the definition of charitable purpose in subsection 12(1) of the Charities Act 2013 applies

The purpose to which paragraph (d) in subsection 12(1) of the Charities Act 2013 applies is 'the purpose of advancing religion'.

The ACNC register lists you as a registered charity for the purpose of advancing religion. Therefore, you are a registered religious institution.

(b) Is the Employee a religious practitioner?

A 'religious practitioner' is defined in subsection 136(1) of the FBTAA as having the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997).

Subsection 995-1(1) of the ITAA 1997 defines a 'religious practitioner' 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.

Guidance as to the application of this definition is provided in paragraphs 11 to 19 of Taxation Ruling TR 92/17 Income tax and fringe benefits tax: exemptions for 'religious institutions' (TR 92/17).

In discussing the circumstances in which a person will be considered to be a minister of religion, paragraph 12 of TR 92/17 states:

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 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.

On the basis of the information provided, it is accepted that the employee is a religious practitioner for the purposes of section 57 of the FBTAA.

(c) Will the benefits be provided to an employee, spouse or child of the employee?

The benefits will be provided to the employee.

(d) 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?

In discussing this requirement, paragraphs 20 to 22 of TR 92/17 state:

20. For a benefit to be exempt, it must not be provided principally in respect of duties of the employee other than pastoral duties (subparagraph 57(d)(i) of the FBTAA), or other duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs (subparagraph 57(d)(ii) of the FBTAA). The latter duties and activities are referred to in this Ruling as 'directly related religious activities'.

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.

Each of the roles listed in the MoU can be considered to be pastoral duties. Therefore, as the benefits are provided in relation to these duties, the benefits are wholly in respect of the pastoral duties.

Conclusion

As all of the four criteria in section 57 of the FBTAA are met the reimbursement of expenses will be an exempt benefit under section 57 of the FBTAA.

However, it should be noted that this conclusion only applies to the arrangement described. It will not apply if the employee receives an allowance, rather than a reimbursement of expenses.