Edited version of private advice

Authorisation Number: 5010080542627

Date of advice: 18 May 2022

Ruling

Subject: FBT - exempt benefits

Issue

Will the provision by the Employer of fringe benefits to its Ministry Co-ordinator (the Employee) constitute exempt benefits pursuant to section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Summary

As the Employee would not be classified as a 'religious practitioner' pursuant to subsection 57(b) of the FBTAA, the provision by the Employer of fringe benefits to the Employee will not be exempt under section 57 of FBTAA.

This 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

The Employer is endorsed as a charitable institution with the Australian Charities and Not-for-profit Commission (ACNC), with a subtype of 'advancing religion'.

The Employer is proposing to employ a Ministry Co-ordinator (the Employee).

The Employee will be required to have the minimum level of education as stated in the Position Description and be willing to become a member of the Employer.

The core duties of the Employee will entail overseeing and growing the existing ministry programs of the Employer through:

•         establishing teaching programs for young people

•         consulting on teaching content through discussions with authorised leaders

•         overseeing, in collaboration with key department leaders and the ministry Recruitment Team, the recruitment and training of volunteers and the development of leaders within the relevant ministry

•         ensuring all programs are adequately resourced and rostered with volunteers across each roster cycle, and

•         monitoring and overseeing the repair or replacement of all equipment and resources associated with the ministries.

The teaching program would ordinarily be sourced from external pre-written material.

It is not expected that the Employee would be internally referred within the Employer for ordination or commissioning as a minister.

Other general duties of the Employee include, but are not limited to, the following:

•         offering general pastoral support for volunteers serving ministry teams (the Employee is not expected to be the primary source of pastoral care), with a particular focus on supporting the key department and ministry team leaders

•         keeping a record of expenditure and submitting proposed budgets, and

•         overseeing the annual camp program for young people.

The Employee will not be authorised to conduct the ordinary corporate religious worship at the Employer's premises.

The Employee will be remunerated as a lay worker by the Employer.

Relevant legislative provisions

Australian Charities and Not-for-profits Commission Act 2012 Subsection 25-5(5)

Charities Act 2013 Section 5

Charities Act 2013 Subsection 12(1)

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)

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 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;

Registered religious institution

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

A 'registered charity' is defined in subsection 136(1) of the FBTAA to mean an entity that is registered under the Australian Charities and Not-for-profits Commission Act 2012 (the ACNC Act) as the type of entity mentioned in column 1 of item 1 of the table in subsection 25-5(5) of the ACNC Act (being a 'charity'). 'Note 1' of that provision refers to the Charities Act 2013 for the definition of 'charity'. Section 5 of the Charities Act 2013 defines a 'charity' as an entity:

(a)    that is a not-for-profit entity; and

(b)    all of the purposes of which are:

                            (i)   charitable purposes (see Part 3) that are for the public benefit (see Division 2 of this Part); or

                          (ii)    purposes that are incidental or ancillary to, and in furtherance or in aid of, purposes of the entity covered by subparagraph (i); and

(c)     none of the purposes of which are disqualifying purposes (see Division 3); and

(d)    that is not an individual, a political party or a government entity.

The subtype of entity mentioned in column 2 of item 4 of the table in subsection 25-5(5) of the ACNC Act is an 'entity with a purpose to which paragraph (d) of the definition of charitable purpose in subsection 12(1) of the Charities Act 2013 applies', being the purpose of 'advancing religion'.

The Employer is registered with the ACNC as a charity (with the subtype of entity being one with a purpose of 'advancing religion'), thus satisfying the definition of a 'registered religious institution' as defined in subsection 136(1) of the FBTAA.

Subsection 57(a) of the FBTAA is therefore satisfied.

Religious practitioner

Subsection 57(b) of the FBTAA requires that an employee be a 'religious practitioner'.

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) of the ITAA 1997 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.

Minister of religion

The term 'minister of religion' (and 'member of a religious order') is not defined in the FBTAA, and takes its ordinary meaning in the context of where it appears. It covers members of the clergy (or their equivalent) across religions.

Paragraph 14 of Taxation Ruling TR 2019/3 Fringe benefits tax: benefits provided to religious practitioners (TR 2019/3) provides that, except in rare cases, a 'minister of religion' would have all of the following 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 characteristic listed in paragraph 14 of TR 2019/3 is discussed below in terms of whether the Employee, through their role at the Employer, would be considered a 'minister of religion'.

(a) is a member of a religious institution

In this context, the 'religious institution' is the Employer, of which the Employee is a member.

This characteristic is therefore satisfied.

(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

It is acknowledged that the Employee will have, as a minimum, the required level of education as specified in the Position Description. However, based on the facts provided, it is not expected that the Employee would be internally referred for ordination or admission/commissioning as a minister.

As official ordination as a minister/clergy (or equivalent) is a requirement for this characteristic of a 'minister of religion', this characteristic is not satisfied.

(c) is officially recognised as having authority on doctrine or religious practice

It is acknowledged that the Employee will have the minimum required level of education as provided in the Position Description and be responsible for overseeing the sourcing and delivery of material for the religious instruction of young people.

However, the information provided as part of the Private Ruling application does not provide a basis for concluding that the Employee would be recognised officially as having authority in matters of doctrine or religious practice by the Employer and its religious leaders. This is supported by the Employee's job description outlining that the Employee would ordinarily teach content sourced from external pre-written material and must discuss the teaching program with an authorised leader. It is noted, though, that one does not require authority in an official capacity in order to preach or provide training/consultation in matters of doctrine or religious practice.

This characteristic is not satisfied.

(d) is distinct from ordinary adherents of the religion

While the Employee - through their academic training and experience in the relevant ministry as part of their role with the Employer - may be considered to be more well-versed in matters of doctrine or religious practice compared to ordinary adherents of the religion, this is not recognised in an official sense.

The information submitted as part of the Private Ruling application does not provide a basis for concluding the Employee has a position that is recognised as distinct from that of the ordinary adherents of the religion.

Therefore, this characteristic is not satisfied.

(e) is an acknowledged leader in spiritual affairs of the institution

It is recognised that:

•         from a governance perspective, the Employee - as a Ministry Co-ordinator - would be involved in overseeing and growing the existing ministry programs for the Employer, and

•         the Employee would have an acknowledged role in the relevant ministry and also in broader worship and outreach activities as a lay worker, working in collaboration with the Employer's ordained minister and key department and ministry team leaders.

However, the Employee is not an acknowledged leader in spiritual affairs of the Employer in the same way as the ordained minister leading the worship community, who has had this unique leadership role recognised through the rite of ordination. In particular, the capacity to oversee the sourcing and delivery of material for the religious instruction of young people and consulting with religious leaders/ministers on matters of doctrine or religious practice is not considered to constitute spiritual leadership.

The Employee is also remunerated as a lay worker by the Employer and not as an ordained minister.

Therefore, on balance, this characteristic is not satisfied.

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

It is acknowledged that the Employee has a recognised role in the relevant ministry, and also in broader worship and outreach activities as a lay worker, working in collaboration with the Employer's ordained minister and key department and ministry team leaders.

However, the Employee is not authorised to act as a minister or spiritual leader, including the conduct of the ordinary corporate religious worship of the religious institution. In addition, it is noted that the Employee is remunerated as a lay worker and not as an ordained minister.

This characteristic is therefore not satisfied.

Conclusion

Only one of the six characteristics of a 'minister of religion' as provided in paragraph 14 of TR 2019/3 are satisfied in the Employee's circumstances. As the Employee does not meet all ofthe characteristics outlined in paragraph 14 of TR 2019/3, the Commissioner does not consider the Employee to bea 'minister of religion'.

The other elements of the definition of a 'religious practitioner' in subsection 995-1(1) of the ITAA 1997 are not applicable because the Employee would not be considered to be:

•         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.

Therefore, the Employee is not a 'religious practitioner' pursuant to the definition of that term in subsection 995-1(1) of the ITAA 1997.

As such, subsection 57(b) of the FBTAA is not satisfied.

Accordingly, as all of the requirements in section 57 of the FBTAA are not met, any fringe benefit provided by the Employer to the Employee will not be exempt under section 57 of the FBTAA.