Edited version of private advice

Authorisation Number: 1051862978680

Date of advice: 22 July 2021

Ruling

Subject: Religious practitioner and exempt fringe benefits

Question

Is the specified employee that conducts biblical counselling for XX a 'religious practitioner' for the purposes of section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

This ruling applies for the following periods:

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

The scheme commences on:

1 February 20XX

Relevant facts and circumstances

1.     The Employer is registered as a religious institution with the Australian Charities and Not-for-profits Commission with a subtype 'Advancing Religion'

2.     Renumeration for the specified employee will be $XX for the first 12 months

3.     The Employer has employed the specified employee since 1 February 20XX to develop and teach the course. The employee's duties also include communication of religious beliefs, the teaching of Christian scripture, teaching and counselling adherents and members of evangelical churches, in-service seminars of a spiritual nature, as well as providing adherents and members of Christian churches with spiritual guidance, support and ad-hoc pastoral supervision to those engaged in formal and informal pastoral duties.

4.     The course aims to help ordained or lay church leaders and other attendees with their own pastoral needs and trains them to provide pastoral care for others. The course uses two religious textbooks as the key course materials in addition to scripture.

5.     The Employer is intending to provide the specified employee (or their spouse or children) with living expense benefits (payments and non-cash benefits) with respect to the above duties. The specified employee's total salary, including living expense benefits, for the first 12 months of their appointment will be approximately:

$XX cash salary

$XX super

$XX non-cash/living expense benefits (none of which have yet been transferred to the employee)

6.     The specified employee has previously been employed as a board member and pastor within the Christian Community Churches in XX and XX and registered as a Minister of Religion with XX.

7.     The specified employee has served in various pastoral leadership roles, including pastor of XX and church planter/lead pastor of XX.

8.     The specified employee has experience providing pastoral leadership as well as consultancy, support and training for those engaged in biblical counselling in XX.

9.     The specified employee has a Master of Divinity (MDiv), a Master of Arts in Biblical Counselling (MAbc) and is currently undertaking a PHD in biblical counselling

Relevant legislative provisions

FBTAA Section 57

FBTAA Subsection 136(1)

FBTAA Subsection 995-1(1)

Reasons for decision

These reasons for decision accompany the Notice of private ruling

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Question

Is the specified employee that conducts biblical counselling for the Employer a 'religious practitioner' for the purposes of section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Summary

Yes

Detailed reasoning

Section 57 of the FBTAA provides an exemption for benefits provided to employees of religious institutions where four conditions are met. The conditions are as follows:

(a) the employer of an employee is a 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 Australian Taxation Office's (ATO) position concerning the above conditions is discussed in Taxation Ruling TR 2019/3 - Fringe benefits tax: benefits provided to religious practitioners (TR 2019/3),

Also, all four conditions from Section 57 of the FBTAA 1986 have to be met for the exemption from fringe benefits tax to apply.

(a) Is the Employer a registered 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 status has been confirmed.

An institution may take various forms, including a company limited by guarantee, an incorporated association, an unincorporated association, a trust, or a body established under statute or letters patent.

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 demonstrates the required characteristics of an institution.

The Employer is registered as a religious institution with the Australian Charities and Not-for-profits Commission with a subtype 'Advancing Religion' since XX.

Accordingly, it is accepted they are a registered religious institution.

(b) Is the benefit provided to an employee religious practitioner, or their spouse or child?

Paragraph 11 of TR 2019/3 explains that to be exempt, the benefit must be provided by a registered religious institution to an employee who is a religious practitioner. 'Employment' is given a wider meaning than its ordinary meaning and includes holding an office or appointment Employees are recipients of salary or wages. Here the term 'salary or wages' has a wider meaning than might ordinarily be the case. It includes payments and non-cash benefits made by a religious institution to a religious practitioner for activities done as a member of the institution in pursuit of the practitioner's vocation.

Paragraph 12 of TR 2019/3 notes that 'Religious practitioner' is defined to mean (under subsection 136(1) of the FBTAA 1986 and subsection 995-1(1) of the Income Tax Assessment Act 1997):

•        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, or

•        a student at a college conducted solely for training persons to become members of religious orders.

Paragraph 14 of TR 2019/3 provides a definition of 'minister of religion'.

14. Except in rare cases, a minister of religion would have most of these characteristics:

•        is a memberof 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.

•        Member of a Religious Institution

The specified employee is a member of a religious institution in their capacity as employee and board member of the Employer.

•        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

•        Officially recognised as having authority on doctrine or religious practice

There is no indication that the specified employee is officially authorised to act as a Minister on behalf of the employer specifically, however, given their existing and in progress theological training, former experience as pastor in a range of Christian Ministries and registration as a Minister of Religion within Christian Community Churches in XX and XX, the specified employee would be considered to be recognised officially as having authority in matters of doctrine or religious practice within an institutional hierarchy of the Christian Church.

•        Is distinct from ordinary adherents of the religion

•        Is an acknowledged leader in spiritual affairs of the institution

It is recognised that, as the predominant purpose of his employment, the specified employee will write and present training material on pastoral duties and care to ordained or lay church leaders and other attendees with their own pastoral needs. These attributes would distinguish them on matters of doctrine or religious practice compared to ordinary adherents of the various denominations of Christianity.

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

The specified employee's former position as a minister within Christian Community Churches in XX and XX would have included ordination or other admission in order to conduct religious worship and other religious ceremonies. The Employer's course that the specified employee will be running has clear outcomes of advancing spiritual leadership for attendees.

We consider that due to the specified employee status as outlined above, they satisfy the definition of minister of religion, as defined in paragraph 14 of TR 2019/3.

Each of the other three elements of the definition of 'religious practitioner' do not need to be considered.

On this basis, we accept that the specified employee is employed as a religious practitioner.

(c) Will the benefits be provided to the employee?

The Employer has stated the specified employee will receive the following renumeration:

•        $xx cash salary

•        $xx super

•        $xx non-cash/living expense benefits

(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?

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').

Paragraph 49 of TR 2019/3 explains that 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.

Example 7 of TR 2019/3 outlines how duties that may have characteristics of incidental secular activities can still be considered directly related religious activities, provided there is a direct link between the conduct of those activities and the religious beliefs of the participants:

54. Sam is an ordained minister and the executive officer of an inter-denominational religious organisation registered with the ACNC, which is committed to the advancement of religion through the development of church leadership.

55. Sam's duties mainly involve training and mentoring church pastors to make them more effective leaders and advising church denominations about their leadership development programs.

56. The organisation provides Sam with a residence and motor vehicle in addition to a stipend for these duties.

57. The benefits provided to Sam are exempt from FBT. Although generally the provision of training and mentoring in effective leadership skills is a secular activity, effective leadership skills are incidental to the conduct of the religious beliefs of the church pastors and their denominations. Sam's duties are directly related religious activities as the support he provides to pastors and denominations is directly related to their ability to practice, teach and propagate the religious beliefs of their churches.

The specified employee duties to which benefits from the Employer will be paid, include:

•        oversight and development of training in faith and ministry leadership skills in the form of the Employers course

•        conducting Bible studies and teaching Christian scripture in the form of the Employers course provided to adherents and members of evangelical churches as well as ordained and lay church leaders

•        prayer, support, counselling and advice for leaders of evangelical churches, providing adherents and members of Christian churches with spiritual guidance and support

•        conducting in-service seminars of a spiritual nature

•        providing ad-hoc pastoral supervision to those engaged in formal and informal pastoral duties.

These activities are predominantly pastoral duties, associated with the spiritual care of young people and others, or directly related to the practice, study, teaching or propagation of religious beliefs.

On this basis, we also consider that the benefits will be provided 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. Hence the requirement under paragraph (d) of section 57 of the FBTAA will be met

Conclusion

On the basis of the employer being a religious Institution, and the employee being a religious practitioner, we conclude that the benefits to be provided to the employee is principally in respect of the employee's pastoral duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs.

Therefore, the benefits to be provided will be exempt benefits in accordance with section 57 of the FBTAA.