Edited version of private advice

Authorisation Number: 1051684915605

Date of advice: 17 August 2020

Ruling

Subject: Fringe benefits tax - exemption of benefits to a religious practitioner

Question:

Are benefits provided to the Chief Executive Officer (CEO) exempt from fringe benefits under section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), as they are provided by a registered religious institution to an employee who is a religious practitioner?

Answer

Yes.

Relevant facts and circumstances

The employer is registered with the Australian Charities and Not-for-profits Commission (ACNC) with the subtype of 'advancing religion'.

The employee is an ordained elder and a recognised member of the church, who undertakes a recognised and authorised leadership role.

The employee has been placed on secondment with another organisation to work in the role of CEO. This is a leadership position that is authorised and recognised by other churches and church bodies.

The role that will be undertaken is distinct from other members of churches and church bodies.

The details of the position requirements, duties and remuneration for the CEO rule are set out in the agreed service contract.

The agreed service contract states that duties of the employee are primarily in respect of the propagation of religious beliefs and/or pastoral duties.

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)

Income Tax Assessment Act 1997 Subdivision 50B

Reasons for decision

Section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986) 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:

(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 Australian Taxation Office's position concerning the above conditions is discussed in Taxation Ruling TR 2019/3 - Fringe benefits tax: benefits provided to religious practitioners

The employer of the employee is a religious institution.

Paragraph 7 of TR 2019/3 explains that in considering whether a benefit is provided by a registered religious institution, administration by the ATO is limited to determining that the entity is an institution that maintains current ACNC registration with a subtype 'advancing religion'. This employer is registered with the ACNC with the subtype of 'advancing religion' with its role to provide services for religious organisations. In the context of the FBTAA, the word 'institution' refers to a significant body which is a recognised part of society, and for which the grant of an exemption is seen to provide a public benefit. The employer meets this requirement.

The employee is a religious practitioner

Paragraph 14 of TR 2019/3 states that except in rare cases, a minister of religion would have all of these characteristics:

·         is a member of a religious institution

·         is recognised by ordination or other admission or commissioning, or has authority from the religious institution to carry out the duties of a minister based on theological training or other relevant experience

·         is officially recognised as having authority on doctrine or religious practice

·         Is distinct from ordinary adherents of the religion

·         is an acknowledged leader in spiritual affairs of the institution, and

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

The employee is an ordained elder and a recognised member of the church, who undertakes a recognised and authorised leadership role. The employee has been placed on secondment with another organisation to work in the role of CEO. This is a leadership position that is authorised and recognised by other churches and church bodies. The role that will be undertaken is distinct from other members of churches and church bodies.

The employer confirms that the position occupied by the employee will time will be primarily devoted and directly related to the practice, study, teaching or propagation of religious beliefs and/or pastoral duties.

The benefit is provided to the employee, or to a spouse or a child of the employee.

The benefits are provided to the employee on the basis of an agreed service contract in respect of their employment activities.

The benefit is in respect of duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs.

To be exempt, paragraph (d) of section 57 of the FBTAA requires that a benefit must not be provided principally for duties other than pastoral duties, or duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs ('directly related religious activities').

The agreed service contract states that duties are primarily in respect of the propagation of religious beliefs and/or pastoral duties.

Conclusion

The employer is a registered 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 1986