Private ruling: Fringe Benefits Tax Exemption
Published: July 2012
Ruling period: 1 July 2012 to 31 March 2013 | 1 April 2013 to 31 March 2014 | 1 April 2014 to 31 December 2014
Date scheme commenced: 1 July 2012

Ruling: Q1: Are benefits provided to employees whose activities are funded through a government program exempt under section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Yes | Q2: Are benefits provided to employees whose activities are funded through a private means exempt under section 57 of the FBTAA? | A2: Yes


Relevant legislative provisions: Section 57 of the FBTAA

Reasons for decision: Detailed Reasoning - Detailed reasoning: Section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) exempts benefits provided to employees of religious institutions under certain specified conditions. Section 57 of the FBTAA states: | Detailed Reasoning - 57 EXEMPT BENEFITS - EMPLOYEES OF RELIGIOUS INSTITUTIONS: Where: (a) the employer of an employee is a religious institution; (b) the employee is a religious practitioner; (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. Therefore, all the following conditions must be met for exemption under section 57 of the FBTAA: · the employer of the employee is a religious institution. · the employee is a religious practitioner. · the benefit is being provided to the employee (or a spouse or child of the employee). · the benefit is being provided principally in respect of either pastoral duties of the employee or for any other duties or activities of the employee that are directly related to the practice, study, teaching or propagation of religious beliefs. (a) the employer is a religious institution The term 'religious institution' is not defined in the FBTAA. However, Taxation Ruling TR 92/17, Income tax and fringe benefits tax: exemptions for 'religious institutions', provides the following guidance on the meaning of that term: | Detailed Reasoning - Religious institution: 4. A body is an 'institution' for the purposes of both the ITAA and the FBTAA if it is an establishment, organisation or association, instituted for the promotion of some object (especially one of public or general utility) that is religious, charitable, educational, etc. That definition was accepted by the High Court of Australia in YMCA of Melbourne v. FC of T (1926) 37 CLR 351 and later in Stratton v. Simpson (1970) 125 CLR 138. 5. A body is a 'religious institution' if it is instituted for religious purposes. For a body to be regarded as a religious institution: (a) its objects and activities must reflect its character as a body instituted for the promotion of some religious object; and (b) the beliefs and practices of the members of that body must constitute a religion. 6. The two most important factors for determining whether a particular set of beliefs and practices constitute a religion are: (a) belief in a supernatural Being, Thing or Principle; and (b) acceptance of canons of conduct which give effect to that belief, but which do not offend against the ordinary laws. | Detailed Reasoning - The employer is a religious institution and this condition is satisfied.: (b) the employee is a religious practitioner Subsection 136(1) of the FBTAA states that the term 'religious practitioner' for the purposes of the FBTAA has 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' as follows: | Detailed Reasoning - religious practitioner means:: (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. TR 92/17 provides the following additional guidance on what is mean by the term 'religious practitioner': 12. While the expressions 'minister of religion' and 'member of a religious order' clearly include members of the clergy in the Christian denominations, they are also intended to include persons who hold equivalent positions in other religions. 13. In determining whether a person is a minister of religion, many, if not all, of the following characteristics should be present: (a) the person is a member of a religious institution; (b) the person is recognised officially by ordination or other admission or commissioning, or, where the particular religion does not require a minister to be formally ordained, the person is authorised to carry out the duties of a minister based on a specified level of theological or other relevant training or experience; (c) the person is recognised officially as having authority in matters of doctrine or religious practice; (d) the person's position is distinct from that of the ordinary adherents of the religion; (e) the person has acknowledged leadership in the spiritual affairs of the religious institution; (f) the person is authorised to discharge the duties of a minister or spiritual leader, including the conduct of religious worship and other religious ceremonies. The government program contains requirements as to the formal ordination, commissioning, recognised religious qualifications or endorsement by a recognised or accepted religious institution or a state/ territory government of the participants in the program. The employees of the employer include ordained ministers of religion. The employees of the employer also include other persons who are in a position distinct from the ordinary adherents of the relevant religion and have acknowledged leadership in spiritual affairs and are authorised to discharge the duties of a minister or spiritual leader. It is accepted that employees of the employer fulfilling the above roles meet the requirements of being 'religious practitioners'. This condition is satisfied. (c) the benefit is being provided to the employee The employer intends to enter into valid salary sacrifice arrangements with some of its employees in return for the provision of certain benefits. This condition is satisfied. (d) the benefit is being provided principally for either pastoral duties or for any other duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs The term 'pastoral duties' is not defined in the FBTAA. However, the answer to question 8 in the Appendix to Miscellaneous Taxation Ruling MT 2021, Fringe benefits tax: response to questions by major rural organisation, advises that 'pastoral duties' is not a legal term and its meaning for the purposes of the FBTAA is as ordinarily understood. TR 92/17 also provides the following guidance on the meaning of 'pastoral duties': | Detailed Reasoning - What are pastoral duties?: 21. Pastoral duties generally are duties associated with the spiritual care of the members of the congregation of a religious body. The following are examples of pastoral duties: (a) communication of religious beliefs; (b) teaching and counselling adherents and members of the surrounding community; (c) providing adherents and members of the surrounding community with spiritual guidance and support; (d) attendance at an in-service training seminar by a person or persons conducting the seminar, provided that the seminar is of a spiritual nature; and (e) meeting with and visiting adherents, the sick, the poor, or persons otherwise in need of emotional and spiritual support. TR 92/17 additionally provides the following guidance on directly related religious activities: | Detailed Reasoning - What are directly related religious activities: i.e. practice, study, teaching or propagation of religious beliefs?: 22. The duties or activities must be related directly to the practice, study, teaching or propagation of religious beliefs to meet the requirements of paragraph 57(d) of the FBTAA. The duties or activities may include secular activities if it can be shown that there is a direct link between those activities and the religious beliefs of the person concerned. 23. Although a full-time member of a religious order may not be involved exclusively or predominantly in pastoral duties, he or she generally is engaged in duties or activities that are directly related to the practice, study, teaching or propagation of their religious beliefs. TR 92/17 provides further guidance on the so-called 'principally test': | Detailed Reasoning - The 'principally' test: 26. If the benefit has not been provided principally in respect of pastoral or directly related religious activities, the benefit is not exempt. 27. Whether the benefit has been provided principally in respect of pastoral duties or directly related religious activities depends on the facts of each particular case. A benefit provided to a minister of religion whose duties are exclusively or predominantly pastoral generally satisfies the 'principally' test. 28. On the other hand, a benefit generally is not an exempt benefit if the duties of the employee to whom it is provided are exclusively or predominantly non-pastoral duties. 29. However, if an employee who is a religious practitioner undertakes both pastoral and non-pastoral duties (even where the non-pastoral duties predominate), it is possible for a benefit to be provided to the employee solely or principally in respect of the employee's pastoral duties, and, therefore, be exempt under section 57 of the FBTAA. It is accepted that the duties performed by the employees as required by their employer's 'job description' and also the duty requirements under the government program demonstrate that the employees are providing 'pastoral duties' for the purposes of subparagraph 57(d)(i) of the FBTAA. It is also accepted, that where and when permitted under the government program, the employees may perform other duties or activities directly related to the practice, study, teaching or propagation of religious beliefs for the purposes of subparagraph 57(d)(ii) of the FBTAA. As the proposed benefits are only being provided to those employees performing the above duties it is accepted that such benefits will be provided principally in respect of such duties. It is considered the fact that such benefits will only be provided as part of valid salary sacrifice arrangements does not necessarily alter the position that the relevant benefits will be provided principally in respect of such duties. This condition is satisfied. | Detailed Reasoning - Conclusion on exemption under section 57 of the FBTAA: Benefits provided to those employees, whose activities are funded through the government program, will be exempt under section 57 of the FBTAA as all the necessary conditions are satisfied. | Detailed Reasoning - Detailed reasoning: It is irrelevant from where the employer obtains its funding to employ the relevant employees other than employees funded through the government program must provide their services only in those areas stipulated by the government program and employees funded by private means provide their to services to areas not otherwise covered as part of the government program. Despite the fact that employees performing duties under the government program are specifically subject to the government program guidelines those employees funded by private means have identical terms of employment, roles and duties albeit these are performed in areas not otherwise covered as part of the government program. It is noted that (a) the employer, (b) the duties of employees, (c) the benefits available to employees and (d) the principle reasons for providing such benefits are the same for employees funded through the government program and for employees funded by private means. It is considered, therefore, that benefits provided to employees, whose activities are funded by private means, will be also exempt under section 57 of the FBTAA, in a similar fashion to those employees funded through the government program, as all the necessary conditions are again satisfied.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | The employer employees certain individuals as casual employees to participate in a government program. | Funding for the relevant employees activities principally comes from the government program. | Employees funded from the government program provide their services only in those areas stipulated by the government program. | Some casual employees employed by the employer are funded by private means and these employees work in areas not otherwise covered as part of the government program. | The duties of the employees funded under the government program and those employees funded under private means are identical. | It is a requirement of the employer that the relevant employees must be a member or adherent of an existing religious institution consistent with the religious values and faith position of the employer. | The relevant employees are drawn from local faith communities who formally recognise the religious calling of the relevant individual and pledge support that such individuals are suitably qualified and enabled to conduct religious activities. | The relevant employees include ordained ministers of religion or equivalent. The relevant employees also include other persons who are in a position distinct from the ordinary adherents of the relevant religion and have acknowledged leadership in spiritual affairs and who are authorised to discharge the duties of a minister or spiritual leader. | The employee's job description requires that the employee's carry out pastoral work. | It is a requirement of the government program that participants carry out pastoral work. Also under the government program there are certain limited circumstances where the participants are permitted to perform other duties or activities directly related to the practice, study, teaching or propagation of religious beliefs. | The employer intends to enter into valid salary sacrifice arrangements with some of those relevant employees in return for the provision of certain benefits.