Edited version of private advice

Authorisation Number: 1052152114737

Date of advice: 24 September 2023

Ruling

Subject: Religious practitioner and exempt fringe benefits

Question

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

Answer

Yes.

This ruling applies for the following periods:

FBT Year Ended 31 March 2022

FBT Year Ended 31 March 2023

FBT Year Ending 31 March 2024

FBT Year Ending 31 March 2025

FBT Year Ending 31 March 2026

FBT Year Ending 31 March 2027

FBT Year Ending 31 March 2028

The scheme commenced on:

1 July 2022

Relevant facts and circumstances

The Employer

•         The Employer is a registered charity under the Australian Charities and Not-for-Profits Commission Act 2012 (Cth) that exists for the purpose of promoting religion. The Employer has endorsement as a tax concession charity.

•         The Employer's vision includes collaborating to resource churches and to mission strategically on behalf of their movement ('the Movement').

•         The Employer's Constitution determines that Charter Group Head are members of the Employer's Assembly.

•         Charter Group A is owned and operated by the Employer with campsites and expeditions at several strategic locations. The Employer has had Charter Group A as a camping ministry for many years and continues to be a significant ministry which intends to further the purposes and objects of the Employer's Constitution.

•         The Employer has appointed the Employee as a director of Charter Group A, being an employee of the Employer, charged to assume a ministry development role to grow and enhance the ministry of Charter Group A and the Employer in accordance with the Employer's Constitution.

•         The Employer provides benefits to the Employee as part of his remuneration package.

The Employee

•         The Employee is a participant in the Employer's Leadership Team as a recognised Head of a Charter Group in accordance with the Employer's Constitution.

•         The Employee is appointed by the Employer's Assembly, and by virtue of that appointment, is a member of the Assembly and thus a member of the Employer.

•         The Employee attends X Church and is involved in the strategic planning of that church by contributing to the missional engagement with the surrounding community of X. The Employee also preaches at X Church when the Senior Pastor is unable to preach.

•         According to the Employee's Position Description, the purpose of the Employee's role is to further the purpose and mission of Charter Group A through strategic ministry development. Strategic Ministry Development includes management of ministry-focused outdoor education programs, human resource, financial marketing and strategic operations in collaboration with Charter Group A's Council.

•         The Employee is appointed and commissioned to be the Director of Charter Group A by the Employer's Assembly in accordance with the Employer's Constitution.

•         As part of the appointment, the Employee has been given authority by the Employer's Assembly to develop the ministry of Charter Group A. The Employee is a person authorised by the Employer to carry out the spiritual duties of that position.

•         The minimum requirements for the Employee's role includes:

(a)          Significant and demonstrated experience in the Employer's Mission and Business.

(b)          Minimum graduate-level qualifications in a theology-related degree and/or business/commerce.

(c)           Qualifications in outdoor education would be an advantage but not essential.

(d)          Holds a Blue Card - QLD Working with Children Check.

•         The Employee was chosen by the Employer for the position based on his religious training and ministry experience having demonstrated XX years of continuous ministry experience and holds a theology-related Masters degree.

•         The Employee's role has been specifically designed with a level of authority and requirement for spiritual oversight and knowledge. The spiritual affairs of the position are primarily focused on the ministry activities of Charter Group A (ministry in a camping context) as distinct from a church context.

•         The Employee is expected to chiefly pursue activities which are directly related to the practice, teaching and propagation of religious beliefs. It is expected that the Employee's time is chiefly given to Ministry and mission enhancement, growth and development, imbedding staff in this culture. This has been enshrined with the appointment of a Chief Operations and Financial Officer role as a facilitative report to the Employee to fulfil more 'secular' preoccupations.

•         The Employee's primary role is to:

(a)          Develop and deliver training in appropriate mission and ministry strategies for Charter Group A staff.

(b)          Provide vision and leadership to continue and update Charter Group A's purpose which is as a mission initiative of the Employer.

(c)           Be appraised of, and advocate, mission and ministry strategies and advocate, through example and teaching, these to the Employer's churches.

(d)          Investigate and pursue options to grow the ministry to expand the reach of the Employer as a service to the wider community through high quality camping and outdoor education programs and facilities.

•         The Employee was appointed and commissioned by the Employer's Assembly to facilitate and implement spiritual oversight of Charter Group A employees and pastors, implement a ministry plan and foster the spiritual direction of Charter Group A.

•         It is a Key Performance Indicator for the Employee's role to make valuable contributions to the Employer's strategic plan. This plan requires the Employee to participate and ensure Charter Group A makes the following contributions as the lead agency:

(a)          Offer discipleship training experiences

(b)          Grow leaders in Service Areas through access to the Employer's resources and experiential placements.

(c)           Host missional experiences/events at the Employer's facilities.

(d)          Promote, and where practical facilitate, cross cultural missional experiences.

(e)          Facilitate and run combined/across church mission focused activities, including gatherings and outreach events.

(f)            Strategic Mission on behalf of the Employer.

(g)          Explore the acquisition or conversion of a facility for the purpose of a spiritual retreat centre.

(h)          Explore the development of cross/inter church camps and events.

(i)            Future conventions of the Employer to be planned by the leadership of the Employer's Movement.

•         The Employee has authority and has conducted Baptisms, leads international mission trips for interns and staff, is available to preach and teach in his home church, the Employer's churches and at events hosted at Charter Group A venues.

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 provided by the Employer to the Employee are 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 propagation of religious beliefs.

All four conditions must be met for the exemption from fringe benefits tax (FBT) 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).

Is the Employer 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 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 Australian Charities and Not for Profits Commission (ACNC) registration with a subtype of 'advancing religion'.

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 characteristic of an institution.

The Employer is a registered charity with the ACNC with the subtype of 'advancing religion'. Charter Group A is a charity program that falls within the umbrella of the Employer. Charter Group A is a ministry of the Employer and does not exist as a separate legal entity. Therefore, the Employer satisfies the definition of a 'registered religious institution' in subsection 136(1) of the FBTAA and, accordingly, it is accepted that the Employer is a registered religious institution.

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 purposes 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 of these characteristics:

(a)          is a member of a religious institution

(b)          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

(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.

Each of these characteristics are discussed below:

Member of a Religious Institution

The Employee is a participant in the Employer's Leadership Team alongside the leaders of other ministries of the Employer, is appointed by the Employer's Assembly and as a result of that appointment is a member of the Assembly and is therefore a member of the Employer.

It is a requirement for the Employee to attend X Church. The Employee attends X Church and is involved in the strategic planning of X Church by contributing to the missional engagement with the surrounding community of X.

Therefore, it is accepted that this characteristic is met.

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

The Employee is appointed and commissioned to be the Director of Charter Group A by the Employer's Assembly in accordance with the Employer's Constitution.

As part of the appointment, the Employee has been given authority by the Employer's Assembly to develop the ministry of Charter Group A. Hence the Employee is a person authorised by the Employer to carry out the spiritual duties required of that position.

In addition, the Employee has XX years of continuous ministry experience and holds a theology-related Masters degree demonstrating theological training and relevant experience.

Therefore, it is accepted that this characteristic is satisfied.

Officially recognised as having authority on doctrine or religious practice

The Employee was chosen for the position based on his religious training and ministry experience, having demonstrated XX years of continuous ministry experience and holds a theology-related Master degree.

Therefore, it is accepted that this characteristic is satisfied.

Distinct from ordinary adherents of the religion

The Employee holds a unique position and one which is distinct from ordinary members of the Employer's Church and church bodies.

The role of Director of Charter Group A has been specifically designed with a level of authority and requirement for spiritual oversight and knowledge. The requirements of the role include ministry development of the camping ministry of the Employer. The spiritual affairs of this position are focused on the ministry activities of Charter Group A and the Director of Charter Group A is part of the Employer's Leadership Team as a recognised Head of a Charter Group in accordance with the Employer's Constitution.

In addition, the Employee's position as the Director of Charter Group A requires special appointment by the Employer's Assembly in accordance with the Employer's Constitution. This position is distinct from other members of the religion.

Therefore, it is accepted that this characteristic is satisfied.

Is an acknowledged leader in spiritual affairs of the institution

The Employee's role primarily involves the spiritual oversight of the camping ministry; it is expected that the Employee's time is chiefly given to Ministry and mission enhancement, growth and development, imbedding staff in this culture. This has been enhanced with the appointment of a Chief Operations and Financial Officer role as a facilitative report to the Employee to fulfill more 'secular' preoccupations.

The Employee was appointed by the Employer's Assembly to facilitate and implement spiritual oversight of Charter Group A employees and pastors, implement a ministry plan and foster the spiritual direction of Charter Group A. The Employee is a member of the Employer's Leadership whose primary role is to:

(a)          Develop and deliver training in appropriate mission and ministry strategies for Charter Group A staff;

(b)          Provide vision and leadership to continue and update Charter Group A's purpose which is as a mission initiative of the Employer;

(c)           Be appraised of, and advocate, mission and ministry strategies and advocate, through examples and teaching, these to the Employer's churches; and

(d)          Investigate and pursue options to grow the ministry to expand the reach of the Employer as a service to the wider community through high quality camping and outdoor education programs and facilities.

The Employee is an active participant in the Employer's Leadership team and it is a Key Performance Indicator for the role to make valuable contributions to the Employer's strategic plan. This plan requires the Director of Charter Group A to participate and ensure Charter Group A makes the following contributions as the lead agency:

(a)          Offer discipleship training experience

(b)          Grow leaders in Service Areas through access to the Employer's resources and experiential placements

(c)           Host missional experiences/events at the Employer's facilities

(d)          Promote and where practical facilitate cross cultural mission experiences

(e)          Facilitate and run combined/across church mission focused activities including gatherings and outreach events

(f)            Strategic Mission on behalf of the Employer

(g)          Explore the acquisition or conversion of a facility for the purpose of a spiritual retreat centre

(h)          Explore the development of cross/inter church camps and events, and

(i)            Future conventions to be planned by the leadership of the Employer's Movement.

As such, the Employee's appointment to the position of a Director of Charter Group A is a spiritual leadership role, giving the Employee the authority in matters of doctrine and religious practice to enhance the mission and purpose of the Employer's camping ministry.

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

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

The Employee is directly involved in the discipleship and spiritual formation of the ministry's interns and trainees. The Employee has authority and has conducted Baptisms, leads international mission trips for interns and staff, is available to preach and teach in his home church, the Employer's churches and at the Employer's events hosted at Charter Group A venues. In addition, the Employee is involved in staff devotions and worship services and is ultimately responsible for the spiritual leadership of Charter Group A.

The Employee has theological qualifications and is given the authority to preach at his home church. There is also nothing to prevent other churches of the same religion from making similar requests of the Employee from time to time. The Employee has implied authority in any event to facilitate and lead religious ceremonies and/or religious worship.

Therefore, it is accepted that the Employee is authorised to act as a minister or spiritual leader.

Will the benefits be provided to the employee?

In this case, the benefits are being provided to the Employee directly, as a member of the Employer's ministry staff.

Therefore, it is accepted that this criterion is satisfied.

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, this refers to the Employee's duties and activities that will be directly related where 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:

The Employee's role encompasses a range of duties required of him in his position; such as financial management, promoting and advertising, management of employees, compliance to applicable legislation and accreditation requirements, administration and workplace health and safety. However, the predominant focus of the role is to spiritually oversee the direction of Charter Group A, deliver and contribute to the Employer's Ministry Plan and facilitate spiritual formation and growth for interns and trainees. The Employee has significant input into Ministry Development and Personal Spiritual Formation and Oversight. The other duties do not make up 'more than 50%' of the Employee's overall duties, so that the majority of the duties performed by the Employee are pastoral and/or spiritual.

It is also noted that the appointment of a Chief Financial Officer for Charter Group A eliminates a majority of the administrative duties required of the Employee hence allowing the Employee to focus on the Ministry Development, Personal Spiritual Formation and furthering the mission of Charter Group A. It is expected that every leader of a religious organisation needs to fulfill administrative duties; however, what is important is that their role remains primarily 'pastoral/spiritual' and not primarily 'administrative.'

The role primarily involves the spiritual oversight of the camping ministry.

The Employee is expected to chiefly pursue activities which are directly related to the practice, teaching and propagation of religious beliefs. This has been enshrined with the appointment of a Chief Operations and Financial Officer role as a facilitative report to the Employee, meaning the Employee's role is focused primarily upon:

•         Ongoing refinement and delivery of Charter Group A's Ministry Plan as an outreach of the Employer

•         Delivery of the contributions expected of Charter Group A to the Employer's Ministry Plan

•         Spiritual oversight of Charter Group A as a strategic Mission to the wider community on behalf of the Employer, and

•         Discipleship, teaching and training of interns throughout Charter Group A.

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

On this basis, it is considered that the benefits provided to the Employee are principally in respect of pastoral duties and/or 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, 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 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 would be exempt pursuant to section 57 of the FBTAA.