Edited version of your written advice

Authorisation Number: 1051433410144

Date of advice: 27 September 2018

Ruling

Subject: Fringe benefits tax

Question

Is the payment of certain expenses for your employee exempt from fringe benefits tax under section 57 of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

This ruling applies for the following periods:

Year ended 31 March 20XX

Year ended 31 March 20XX

Year ended 31 March 20XX

Year ended 31 March 20XX

Year ended 31 March 20XX

Year ended 31 March 20XX

The scheme commences on:

20XX

Relevant facts and circumstances

You are a registered with the Australian Charities and Not-for-profits Commission (ACNC), as a charity with the purpose of advancing religion.

Your employee has been installed into a defined ministry position. This position is recognised formally within the church.

You have provided details of your employee’s role and activities.

Your employee has completed and is continuing theological training.

Relevant legislative provisions

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)

Reasons for decision

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

Summary

When you pay your employee’s rent and course fees you will be providing an exempt benefit as the requirements of section 57 are satisfied.

Detailed reasoning

Section 57 provides that:

Where:

(a) the employer of an employee is a registered religious institution; and

(b) the employee is a religious practitioner; and

(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.

A registered religious institution is defined in subsection 136(1) 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.

The entity referred to in paragraph (b) is 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 (advancing religion)

As you are registered with the ACNC as a charity with the purpose of advancing religion, you satisfy the definition of a registered religious institution in subsection 136(1).

Subsection 136(1) defines a religious practitioner to have 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; 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

The term ‘minister of religion’ is not defined in the Fringe Benefits Tax Assessment Act 1986 and takes on its ordinary meaning in the context of where it appears. It covers members of the clergy (or their equivalent) across religions.

Paragraph 13 of Draft Taxation Ruling TR 2018/D12 Fringe benefits tax: benefits provided to religious practitioners, provides the following:

Except in rare cases, a minister of religion would have all of these characteristics:

(a) is a member of a religious institution

(b) is recognized by ordination or other admission or commissioning, or, where the religion does not require formal ordination, has authority to carry out the duties of a minister based on theological training or experience

(c) is officially recognised as having authority on doctrine or religious practice

(d) is distinct from ordinary adherents of the religion

(e) is an acknowledged leader in spiritual affairs of the institution, and

(f) is authorised to act as a minister or spiritual leader, including the conduct of religious worship and other religious ceremonies.

We have considered each of these characteristics in relation to your employee’s situation. The characteristics of a minister of religion are evident in your employee’s situation therefore your employee is considered to be a minister of religion.

The benefits that you provide to your employee must be provided principally in respect of pastoral duties or directly related religious activities. Paragraph 19 of TR2018/D2 states that pastoral duties ‘are duties associated with the spiritual care of people’.

An explanation of what is meant by the term directly related is provided in paragraph 20 of TR 2018/D12:

The words ‘directly related’ point to a close connection between the duties or activities of the religious practitioner and the practice, study, teaching and propagation of religious beliefs. In this context, duties and activities will be directly related where, in their essential nature, they promote the practice, study, teaching and propagation of religious beliefs.

Your employee’s activities are either of a pastoral nature or are directly related to the practice, study, teaching or propagation of religious beliefs.

We consider that the provision of the benefits to your employee is in respect of these activities.

As all of the requirements of section 57 are met, the payment of your employee’s rent and course fees will be the provision of an exempt benefit.