Edited version of private advice

Authorisation Number: 1051899601927

Date of advice: 28 September 2021

Ruling

Subject: Religious practitioners and exempt fringe benefits

Question

Are benefits provided to the employee exempt from FBT under section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) as benefits provided by a registered religious institution to an employee who is a religious practitioner?

Answer

No

This ruling applies for the following period periods:

FBT Year ended 31 March 20XX

FBT Year ended 31 March 20XX

FBT Year ended 31 March 20XX

FBT Year ended 31 March 20XX

The scheme commences on:

31 March 20XX

Relevant facts and circumstances

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

The Employee has been employed by the employer for services in relation to the advancement of religious education, including:

•         liaising between the Department of Education and Faith leaders/representatives, local coordinators and teachers;

•         development and implementation of the strategic plan as approved by the board.

•         stewardship of supporters - including communications, financial support, prayer support and engagement; and

•         oversight of Grant Monies including financial reporting to the Board

•         operation of religious education in state schools as it pertains to the teaching of doctrine, religious practice, age appropriateness and sensitivity of materials being taught

•         engaging with churches and providing local religious education providers an age appropriate and sensitive curriculum to be used in public schools from kindergarten to Year 12;

•         appropriate training for teachers of religious education to meet the requirements of the Department of Education;

•         development and provision of resources for teachers of religious education

•         working with churches at both a state and local level as to what religious practices and ceremonies are appropriate in local schools and how they are to be conducted

•         regular communication with and encouragement of coordinators of joint-denominational SRE; and

•         pastoral care and advising of key denominational and local faith leaders on the ground to assist them in their roles of supporting local religious education teachers.

The employee, as an ordained elder is called upon to lead prayer groups and bible studies and be prepared to preach as required in church services.

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

Summary

The benefits to be provided byemployer to the employee are not exempt from fringe benefits tax under section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

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 ATO view concerning the above conditions is discussed in Taxation Ruling TR 2019/3 - Fringe benefits tax: benefits provided to religious practitioners.

All four conditions of 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. As a recognised member of Presbyterian Church, the employer demonstrates this characteristic.

Accordingly, it is accepted that employer is a 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'.

Except in rare cases, a minister of religion would have most 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

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

We have considered these characteristics in relation to your employee's situation:

•         The employee is an ordained elder of the Presbyterian Church.

•         The employee is required as an ordained elder, to lead prayer group, lead weekly bible studies and be prepared to preach as required in church services;

•         The employee has authority over the operation of religious education in state schools.

•         The employee has authority over the standards set for the operation of religious education in state schools nationally.

Based on these facts, we consider that the employee satisfies the definition of a minister of religion, as defined in paragraph 14 of TR 2019/3.

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

The employee's remuneration includes a non-cash benefit component.

(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 principally provided 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 word 'principally' is not defined in the FBTAA. Paragraph 20 of TR 2019/3 provides that 'principally' takes its ordinary meaning of 'mainly' or 'chiefly'.

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.

The employee's duties for which benefits from the employer will be provided include:

•         Oversight of Christian SRE/religious education in Schools, including:

­   liaising between the Department of Education and Faith leaders/representatives, local coordinators and teachers;

­   operation of religious education in state schools as it pertains to the teaching of doctrine, religious practice, age appropriateness and sensitivity of materials being taught;

­   appropriate training for teachers of religious education to meet the requirements of the Department of Education;

­   development and provision of resources for teachers of religious education

­   regular communication with and encouragement of coordinators of joint-denominational SRE; and

­   pastoral care and advising of key denominational and local faith leaders on the ground to assist them in their roles of supporting local religious education teachers.

We have taken into consideration that the employee's duties include an element of pastoral duties, and a minor component of activities that are directly related to the practice, study, teaching or propagation of religious beliefs. However, the test requires the benefit is not provided principally in respect of duties of the employee other than pastoral duties or any other duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs.

The roles encompasses oversight of Christian SRE/religious education in Schools. Furthermore, general duties include responsibility for overseeing the administration, programs and strategic plan of the company. Other key duties include support raising and providing clear direction and communication to the Board of Directors. Our view is that these duties are not directly related religious activities.

As such, it is our view the benefits are not principally provided in respect of the directly related religious activities. The benefits are provided principally in relation to the employee's duties as an executive officer.

The employee's role has numerous and diverse responsibilities, encompassing financial, media, government liaison and curriculum aspects of the program and therefore would not meet the requirements of subsection 57(d) of the FBTAA.

Conclusion

Based on the evidence provided, it is concluded that the benefits provided to the employee do not satisfy the requirements of section 57 of the FBTAA and therefore are not exempt from FBT.