Edited version of private advice

Authorisation Number: 5010066607654

Date of advice: 3 December 2020

Ruling

Subject: FBT exempt benefits provided by a religious institution to its employees

Question

Is the provision of benefits by the employer religious institution to its two employees fringe benefits tax (FBT) exempt under section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes. The provision of benefits by the employer religious institution to its two employees is FBT exempt under section 57 of the FBTAA.

This ruling applies for the following periods:

FBT year 1 April 20XX to 31 March 20XX

FBT year 1 April 20XX to 31 March 20XX

FBT year 1 April 20XX to 31 March 20XX

FBT year 1 April 20XX to 31 March 20XX

FBT year 1 April 20XX to 31 March 20XX

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

The employer is a religious institution based in Australia.

The employer is registered with the Australian Charities and Not-for-profits Commission (ACNC) as a charitable institution with a subtype 'advancing religion'.

The employer has two employees:

•         The first employee is an ordained minister within the religious institution. The first employee will work x hours a week as a Kids Pastor for the religious institution and xx hours a week providing pastoral care services in a chaplaincy role for x local schools.

•         The second employee is the Youth Pastor for the religious institution who is employed to provide pastoral care services in x local schools in a chaplaincy role. This employee holds a certification IV in Chaplaincy and Pastoral Care. This employee is not an ordained minister with the religious institution. However, this employee is working towards being an ordained minister within the religious institution.

Both employees are providing pastoral care, social and emotional wellbeing, spiritual wellbeing and support to children and young people.

The religious institution intends to provide non-cash benefits to these two employees.

The benefits these chaplains will receive will be directly in respect to their pastoral duties.

Relevant legislative provisions

Section 57 Fringe Benefits Tax Assessment Act 1986

Subsection 136(1) Fringe Benefits Tax Assessment Act 1986

Subsection 995-1(1) Income Tax Assessment Act 1997

Reasons for decision

Section 57 provides that:

Where:

(a) the employer of an employee is a registered religious institution; and

(b) the employee is a religious practitioner; and

(c) a benefit is provided to, 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) any pastoral duties; or

(ii) any other duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs;

the benefit is an exempt benefit.

A registered religious institution is defined in subsection 136(1) 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.

The entity referred to in paragraph (b) is an:

Entity with a purpose that is the advancement of religion

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

Subsection 136(1) defines a religious practitioner to have the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997).

Subsection 995-1(1) of the ITAA 1997 defines a religious practitioner to mean:

(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.

In paragraph 6 of Taxation Ruling TR 2019/3 Fringe benefits tax: benefits provided to religious practitioners, we accept that: "Religious practitioners are, in essence, ordained ministers of religion, lay persons commissioned to perform the ministry of a minister of religion, other persons acting in those capacities from time to time, members of religious orders, and students undertaking certain religious studies or training".

The religious institution does not have religious orders. Therefore, paragraphs (c) and (d) of the definition of religious practitioner concerning religious orders are not applicable in the present circumstances. circumstances.

A minister of religion and a student at an institution who is undertaking a course of instruction in the duties of a minister of religion are the relevant parts of the definition of religious practitioner in paragraphs (a) and (b) for consideration in the present circumstances.

(a)  Minister of religion

The term 'minister of religion' is not defined in the FBTAA and takes on its ordinary meaning in the context of where it appears. It covers members of the clergy (or their equivalent) across religions (paragraph 13 of Taxation Ruling TR 2019/3).

Paragraph 14 of Taxation Ruling TR 2019/3 states:

Except in rare cases, a minister of religion would have all of these characteristics:

•         is a member of a religious institution

•         is recognised by ordination or other admission or commissioning, or, where the religion does not require formal ordination, has authority to carry out the duties of a minister based on theological training or 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.

The first employee is an ordained minister within the religious institution and is then a minister of religion under paragraph (a) of religious practitioner for the purposes of section 57 of the FBTAA.

(b)  A student at an institution who is undertaking a course of instruction in the duties of a minister of religion

The second employee is not an ordained minister within the religious institution. However, this employee is working towards being an ordained minister within the religious institution and is then a religious practitioner under paragraph (b) for the purposes of section 57 of the FBTAA.

We also accept that the benefits that the employer will provide to each employee will be provided principally in respect of the employee's pastoral duties or directly related religious activities.

As all the requirements of section 57 of the FBTAA are met, the provision of benefits by the employer religious institution to the two employees will be the provision of FBT exempt benefits under that provision.