Edited version of private advice

Authorisation Number: 1052045699730

Date of advice: 24 January 2023

Ruling

Subject: Fringe benefits tax

Question 1

Are the benefits provided by X to its employee exempt benefits pursuant to section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

This private ruling applies for the following periods:

Fringe Benefits Tax (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 April 20XX

Relevant facts and circumstances

X is an institution that maintains current ACNC registration with a subtype of advancing religion.

X is registered as an Australian Public Company limited by guarantee and is controlled by a separate, independent board of directors.

X is endorsed as a charitable institute for the advancement of religion.

X consists of the board, missionaries, supporters, churches, volunteers, and families of such. It is a broad group.

The employee is the organisation's spiritual leader and will be the person in receipt of the fringe benefits.

In addition to being the Spiritual head the employee is also the Executive Director of the mission.

There is no requirement for the employee to be ordained.

However, they should have a solid Christian faith, sound biblical knowledge, a strong prayer life, a heart for reaching the unreached, ability in pastoral leadership and preferable cross-cultural ministry experience.

The employee is commissioned by the Council at a suitable event. The current employee was introduced and Commissioned at the Company conference.

The employee also holds the office of Public Officer.

As the organisation's spiritual leader, the employee is distinct from ordinary adherents, is an acknowledged leader in spiritual affairs of the institution, is officially recognised as having authority on doctrine or religious practice, and is authorised to act as a spiritual leader, including the conduct of religious worship and other religious ceremonies.

The employee is to provide spiritual leadership for X and its members. The position is responsible for achieving X's visionary objectives, including advancing the Christian faith. The employee provides for the ethical treatment and spiritual wellbeing of members and appoints staff and missionary members who must satisfy X's religious and spiritual standards.

The employee provides spiritual encouragement to X's supporters, building and maintaining a prayer base, and proclamation and advancement of spiritual objectives of X in Australia and abroad.

The employee conducts religious worship and other religious ceremonies when required. Worship and ceremonies are held for supporters, missionaries and sending churches and can involve sermons, blessings, and Holy Communion.

Pastoral Duties

•         Communication of Religious Beliefs

•         Teaching and Counselling Adherents and Members of the Community

•         Providing Adherents and Members of the Community with Spiritual Guidance and Support

•         Conducting an In-service Seminar of a Spiritual Nature

•         Meeting with or Visiting Adherents, the Sick, the Poor, and Others Who need Emotional and Spiritual Support

•         Providing Pastoral Supervision to those Engaged in Pastoral Duties

Study

•         Teaching

•         Propagation

The position necessarily has a spiritual function and oversight along with the administrative duties.

The employee does not work Monday to Friday from 9 to 5. He is on call 24 hours a day, 7 days a week.

To allow the employee to carry out pastoral duties, the organisation employs two office staff and has a number of volunteers. These staff are employed to take care of the majority of the administrative duties so that the employee can carry out pastoral duties.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 57

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

Question 1

Are the benefits provided by X to its employee exempt benefits pursuant to section 57 of the FBTAA?

Summary

Yes, the benefits provided by X to its employee will be exempt benefits under section 57 of the FBTAA.

Detailed reasoning

Benefits provided to employees of religious institutions are exempt under section 57 of the FBTAA, where:

(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

iii.            propagation of religious beliefs.

All four conditions must be met for the exemption from fringe benefits tax to apply.

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).

(a) Is X a registered religious institution?

A registered religious institution is defined under subsection 136(1) of the FBTAA 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.

Paragraph 7 of TR 2019/3 explains 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. X demonstrates the required characteristics of an institution.

X is registered with the ACNC as a charity with the purpose of advancing religion, therefore satisfies the definition of a registered religious institution in subsection 136(1).

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

Subsection 57(b) of the FBTAA requires that an employee be a religious practitioner to receive an exempt benefit.

Subsection 136(1) of the FBTAA states that 'religious practitioner' has the meaning given to that term under subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). A 'religious practitioner' is defined under subsection 995-1(1) as:

(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.

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 14 of TR 2019/3 provides that except in rare cases, a 'minister of religion' would have all 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.

Each of these characteristics are discussed below:

Member of a Religious Institution

In this case, the employee is a member of a religious institution in their capacity as the spiritual leader of X as outlined in the letter of appointment.

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

X submits that there is no requirement for the employee to be ordained. However, the person appointed should have a solid Christian faith, sound biblical knowledge, a strong prayer life, a heart for reaching the unreached, ability in pastoral leadership and preferable cross-cultural ministry experience. The current employee has been appointed as they satisfy the above criteria. The current employee was introduced and commissioned at the company conference.

Therefore, it is accepted that this characteristic is satisfied.

Officially recognised as having authority on doctrine or religious practice

As the organisation's spiritual leader, the employee is distinct from ordinary adherents, is an acknowledged leader in spiritual affairs of the institution, is officially recognised as having authority on doctrine or religious practice, and is authorised to act as a spiritual leader, including the conduct of religious worship and other religious ceremonies.

Given the pre-conditions of employment of the employee and given the current employee experiences and qualifications, it is accepted that any individual to be considered for the role of employee at X, would have satisfied the requirements to be a spiritual leader and is officially authorised or recognised as distinct from that of the ordinary adherents of the religion due to their academic training and experience in the Christian ministry.

Therefore, it is accepted that this characteristic has been satisfied.

Is an acknowledged leader in spiritual affairs of the institution

The employee is to provide spiritual leadership for X and its members. The position is responsible for achieving X's visionary objectives, including advancing the Christian faith. The employee provides for the ethical treatment and spiritual wellbeing of members and appoints staff and missionary members who must satisfy X's religious and spiritual standards.

The employee provides spiritual encouragement to X's supporters, building and maintaining a prayer base, and proclamation and advancement of spiritual objectives of X in Australia and abroad.

The employee conducts religious worship and other religious ceremonies when required. Worship and ceremonies are held for supporters, missionaries and sending churches and can involve sermons, blessings, and Holy Communion. The employee has performed funerals and baptisms but is not licensed to do so.

Therefore, it is accepted that the employee would be an acknowledged leader in spiritual affairs of X.

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

As outlined in the above criteria the employee acts as a Spiritual Leader by carrying out the tasks listed in the above criteria. The employee is authorised to perform sermons, blessings, and holy communion.

The employee's role is a ministry role within X. The predominant focus of the role is providing pastoral care and leadership to X staff and the community. The position is responsible for achieving X's visionary objectives, including advancing the Christian faith.

It can be concluded the employee is considered a religious practitioner.

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

It can be concluded that the employee is considered an employee for the purposes of fringe 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, subsection 57(d) 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.

X is registered with the Australian Charities and Not-for-profits Commission for the charitable purpose of advancing religion. X commits to its charitable purpose of advancing religion by establishing Christ-centred churches among people. Their priority is to reach the unreachable people and transform lives that proclaim Christ.

The role of the employee is to be the spiritual leader of the organisation. With that responsibility comes administrative tasks as outlined in the employment letter of offer. The principal focus of the employee is providing pastoral and spiritual leadership to X staff, missionaries, and the community. The pastoral duties are essential to the role and are directly related to the practice, study, teaching and propagation of religious beliefs. The pre-requisites for the role require a strong spiritual life, completion of biblical training, a prayerful life and dependence on God and someone who actively lives a lifestyle in accordance with biblical principles.

The employee's role is both pastoral and administrative. Other paid staff and volunteers undertake the majority of the administrative tasks so that the employee can focus on the pastoral aspect of the role.

On this basis, we consider that the benefits provided to the employee by X are principally in respect of pastoral duties and are directly related to the practice, study, teaching or propagation of religious beliefs. Hence the requirements under subsection 57(d) of the FBTAA would be met.

Conclusion

In this case, X, being the employer, is a registered religious institution, and the employee, is a religious practitioner. Based on the duties of the role, it is accepted that the benefits to be provided to the employee of X are 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 provided to the employee of X would be exempt pursuant to section 57 of the FBTAA.