Edited version of private advice

Authorisation Number: 1052337550668

Date of advice: 10 December 2024

Ruling

Subject: FBT - benefits provided by a registered religious institution

Question

Are benefits provided to the Employee be 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

Yes.

This ruling applies for the following periods:

Fringe Benefits Tax (FBT) year ended 31 March 20XX

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 January 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 for services in relation to the advancement of religious education and to operate as a 'religious practitioner'.

Education

The Employee Holds a Bachelor of Theology and was awarded the Graduate Certificate of Pastoral Care for Mental Health.

Role of the Employee

They will be an active member of a religious institution.

They will have authority to act as a spiritual leader and conduct Sermons and religious services.

Provide pastoral care, spiritual advice, comfort, and support.

They will provide positive links between other local churches.

They will promote opportunities for a strong and growing Christian ministry.

Plan and facilitate the smooth running of Chapel including worship, preaching, prayer, and other creative expressions.

Program and deliver Biblical Studies lessons.

Coordinate bible study or prayer focused lunchtime groups.

Encourage and support unchurched families to connect to a local church.

Build positive connections with other local pastors and their churches, including youth and children's pastors.

Investigate options and facilitate an annual student Mission Trip.

Oversee the Student Leadership Council.

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

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.

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'.

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.

Member of a Religious Institution

The specified Employee is a member of a religious institution in their capacity as Employee.

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

TheEmployee is authorised to carry out the duties of a minister holding a Graduate Certificate of Pastoral Care for Mental Health and a Bachelor of Theology and has authority to act as a spiritual leader.

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 their employment as a teacher of religion, they are distinct from ordinary adherents of the religion and is an acknowledged leader in spiritual affairs of the institution.

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

The Employee has authority to act as a spiritual leader to plan and facilitate the smooth running of Chapel- including worship, preaching, prayer, and other creative expressions.

Based on these facts, we consider 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 Employer has stated that the specified Employee will receive a salary packaging component, which will cover costs for home loan, rent and credit cards.

(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.

Activities of the Employee 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 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 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 to be provided to the Employee will be exempt benefits in accordance with section 57 of the FBTAA.