Private ruling: GST and FBT - reimbursement of employee religious practitioner expenses
Date of advice: 10 December 2025
Published: 27 January 2026
Ruling period: Four years from date of issue

Ruling: Q1: Are the benefits provided to an employee of Entity A exempt from Fringe Benefits Tax (FBT) pursuant to 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? | A1: Yes, the benefits provided to an employee of Entity A are exempt benefits pursuant to section 57 of the FBTAA as benefits provided by a registered religious institution to an employee who is a religious practitioner. Issue 2 - GST issues | Q2: Are payments made by Entity A from a specified account for the following acquisitions made by employee religious practitioners, consideration for an acquisition pursuant to paragraph 111-5(1)(ab) of the A New Tax System (Goods and Service Tax) Act 1999 (GST Act)? a. general household purchases of items from supermarkets, hardware stores and other retail outlets; b. personal clothing items; c. electricity costs in privately owned or rented houses (i.e. no housing fringe benefit is being provided); d. the acquisition of a motor vehicle; e. petrol and/or other fuel type expenses (where such expenses are not related to any provision of a motor vehicle fringe benefit); f. travel expenditure such as a train, bus, plane costs for the religious practitioner and their family; g. non-compulsory uniforms; h. recreational club activities/services; i. ownership of a leisure facility or rights to use a leisure facility; j. non-cash business benefits under an agreement to which section 51AK of the Income Tax Assessment Act 1936 (ITAA 1936) applies. | A2: Yes, payments made by Entity A from a specified account for the following acquisitions made by employee religious practitioners are consideration for an acquisition pursuant to paragraph 111-5(1)(ab) of the GST Act. a. general household purchases of items from supermarkets, hardware stores and other retail outlets; b. personal clothing items; c. electricity costs in privately owned or rented houses (i.e. no housing fringe benefit is being provided); d. the acquisition of a motor vehicle; e. petrol and/or other fuel type expenses (where such expenses are not related to any provision of a motor vehicle fringe benefit); f. travel expenditure such as a train, bus, plane costs for the religious practitioner and their family; g. non-compulsory uniforms; h. recreational club activities/services; i. ownership of a leisure facility or rights to use a leisure facility; j. non-cash business benefits under an agreement to which section 51AK of the Income Tax Assessment Act 1936 (ITAA 1936) applies. | Q3: If so, does subparagraph 111-5(3)(a)(ii) of the GST Act apply to prevent these acquisitions by Entity A being creditable acquisitions? | A3: Yes, subparagraph 111-5(3)(a)(ii) of the GST Act does apply to prevent the following acquisitions by Entity A being creditable acquisitions: • travel for a relative to accompany the religious practitioner in the relative's private capacity; • non-compulsory uniforms; • recreational club activities/services; • ownership of a leisure facility or rights to use a leisure facility; and • non-cash business benefits under an agreement to which section 51AK of the Income Tax Assessment Act 1936 (ITAA 1936) applies No, subparagraph 111-5(3)()(ii) of the GST Act does not apply to prevent the following acquisitions by Entity A being creditable acquisitions: • general household purchases of items from supermarkets, hardware stores and other retail outlets; • personal clothing items; • electricity costs in privately owned or rented houses; and • motor vehicle expenses | Q4: For any acquisitions Entity A makes under section 111-5 of the GST Act relating to payments from the specified account for employee religious practitioners' acquisitions, which are not prevented from being creditable acquisitions under subsection 111-5(3) of the GST Act, is Entity A entitled to claim an input tax credit under section 11-20 of the GST Act for those acquisitions? | A4: Yes, for acquisitions Entity A makes under section 111-5 of the GST Act relating to payments from the specified account for employee religious practitioners' acquisitions, which are not prevented from being creditable acquisitions under subsection 111-5(3) of the GST Act, Entity A is entitled to claim an input tax credit under section 11-20 of the GST Act for those acquisitions.

Relevant facts and circumstances: Entity A (you) is registered for goods and services tax (GST). You are registered with the Australian Charities and Not-for-profits Commission (ACNC) as a charity with the subtype of 'advancing religion' and are endorsed to access the following tax concessions: GST Concession FBT Rebate Income Tax Exemption You are not entitled to receive tax deductible gifts. You have ministry personnel who undertake religious duties and in return, these individuals are provided with remuneration through the provision of an agreed stipend and other benefits. There is a combination of employed ministry personnel and non-employee ministry personnel. A sample employment contract for an employee ministry personnel member and an appointment letter for a non-employee ministry personnel member were provided and form part of the scheme of this private ruling. A sample duty statement was provided which also forms part of the scheme of this private ruling. Specified Account One mechanism you use to deliver benefits to ministry personnel is through the operation of a specified account. The specified account operates to allow ministry personnel to effectively salary sacrifice parts of their cash remuneration in return for receiving various benefits. The expenses you provide payment for from a specified account include (but are not limited to): • general household purchases of items from supermarkets, hardware stores and other retail outlets; • personal clothing items; • electricity costs in privately owned or rented houses (i.e. no housing fringe benefit is being provided); • the acquisition of a motor vehicle; • petrol and/or other fuel type expenses (where such expenses are not related to any provision of a motor vehicle fringe benefit); • travel expenditure such as a train, bus, plane costs for the religious practitioner and their family. In the identification of general and personal living expenses, this does not include the payment of, or reimbursement of a credit card liability the person in ministry personnel has (even if the credit card has been used to acquire general and personal living expenses). Payments from the specified account may be: • a payment in discharge, in whole or part, of an obligation of the ministry personnel member to a third party in respect of expenditure incurred by the ministry personnel member; or • a reimbursement of expenditure incurred by the ministry personnel member. An example of a specified account direct payment form was provided. Additionally, a sample reimbursement payment form was provided. Allowances may also be paid to a person in ministry personnel from the specified account for expected expenses. However, these allowances are not the subject of the ruling and are separate to the expense payments in question 2. For specified account funds to be utilised, the person in ministry personnel is required to provide appropriate invoices and documentation to you to evidence the expense at the time the specified account funds are expended. Sample invoices were provided to illustrate the documentation required to be provided by a person in ministry personnel for payments from the specified account. Employee ministry personnel members are not entitled to an input tax credit for the acquisitions they make which Entity A pays for from the specified account.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 11-5 | A New Tax System (Goods and Services Tax) Act 1999 section 11-15 | A New Tax System (Goods and Services Tax) Act 1999 section 111-5 | A New Tax System (Goods and Services Tax) Act 1999 section 111-10 | A New Tax System (Goods and Services Tax) Act 1999 section 111-25 | A New Tax System (Goods and Services Tax) Act 1999 section 69-5 | A New Tax System (Goods and Services Tax) Act 1999 section 50-5 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1 | Fringe Benefits Tax Assessment Act 1986 section 20 | Fringe Benefits Tax Assessment Act 1986 section 57 | Fringe Benefits Tax Assessment Act 1986 subsection 136(1) | Income Tax Assessment Act 1997 section26-5 | Income Tax Assessment Act 1997 section 26-30 | Income Tax Assessment Act 1997 section 26-40 | Income Tax Assessment Act 1997 section 26-45 | Income Tax Assessment Act 1997 section 26-50 | Income Tax Assessment Act 1997 Division 34 | Income Tax Assessment Act 1997 subsection 995-1(1) | Income Tax Assessment Act 1936 section 51AK

Reasons for decision: Detailed Reasoning - Issue 1 - Fringe Benefits Tax issue (Question 1): The benefits provided to an employee of Entity A are exempt benefits pursuant to section 57 of the FBTAA as benefits provided by a registered religious institution to an employee who is a religious practitioner. | Detailed Reasoning - Issue 2 - GST Issues (Questions 2 to 4): Payments made by Entity A from the specified account for acquisitions made by employee religious practitioners that are exempt benefits under section 57 of the GST Act are consideration for an acquisition pursuant to paragraph 111-5(1)(ab) of the GST Act. Subparagraph 111-5(3)(a)(ii) of the GST Act applies to some of these acquisitions paid for by Entity A from the specified account to prevent them being creditable acquisitions of Entity A. For acquisitions Entity A makes under section 111-5 of the GST Act relating to payments from the specified account for employee religious practitioners' acquisitions, which are not prevented from being creditable acquisitions under subsection 111-5(3) of the GST Act, Entity A is entitled to claim an input tax credit under section 11-20 of the GST Act for those acquisitions. | Detailed Reasoning - Issue 1 - FBT Issue (Question 1): The term 'benefit' is defined broadly in subsection 136(1) of the GST Act: benefit includes any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under: (a) an arrangement for or in relation to: (i) the performance of work (including work of a professional nature), whether with or without the provision of property; (ii) the provision of, or of the use of facilities for, entertainment, recreation or instruction; or (iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; (b) a contract of insurance; or (c) an arrangement for or in relation to the lending of money. In the context of expenses incurred by an employee and paid for by their employer, section 20 of the FBTAA relevantly states: Where a person(in this section referred to as the provider): (a) makes a payment in discharge, in whole or in part, of anobligation of another person(in this section referred to as the recipient) to pay an amount to a third personin respect of expenditure incurred by the recipient; or (b) reimburses another person (in this section also referred to as the recipient), in whole or in part , in respect of an amount of expenditure incurred by the recipient ; the making of the payment referred to in paragraph (a), or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient. A fringe benefit is relevantly defined in subsection 136(1) of the FBT Act as: in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit: (a) provided at any time during the year of tax; or (b) provided in respect of the year of tax; being a benefit provided to the employee or to an associate of the employee by: (c) the employer; or (d) an associate of the employer; (e)... Subsection 136(1)(g) of the definition of fringe benefit in the FBTAA states that a fringe benefit does not include a benefit that is an exempt benefit. In this case, you make payments from the specified account to reimburse your employee ministry personnel for various expenses they incur as part of their agreed remuneration package. The making of such payments constitutes the provision of benefits by you to the employee ministry personnel pursuant to section 20 of the FBTAA. The benefits may be fringe benefits unless they are exempt benefits. Types of exempt benefits can include housing, school fees, provision of motor vehicles and holiday benefits. 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; (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 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). | Detailed Reasoning - (a) Is Entity A 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 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. Entity A has demonstrated the required characteristic of an institution. Entity A is a registered charity with the ACNC with the subtype of 'advancing religion'. Entity A satisfies the definition of a 'registered religious institution' in subsection 136(1) of the FBTAA and, accordingly, it is accepted that it is a registered religious institution. | Detailed Reasoning - (b) Is the benefit provided to an employee religious practitioner, or their spouse or child?: Paragraph 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 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 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. Each of these characteristics are discussed below. | Detailed Reasoning - Member of a Religious Institution: The person in the identified role is a member of a religious institution in his capacity as an employee and as a member of Entity A. 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 Therefore, it is accepted that this characteristic is met. | Detailed Reasoning - Officially recognised as having authority on doctrine or religious practice: Therefore, it is accepted that this characteristic is met. | Detailed Reasoning - Is distinct from ordinary adherents of the religion and is an acknowledged leader in spiritual affairs of the institution: The predominant purpose of the role is to act as a teacher of religion. The person in the identified role is distinct from ordinary adherents of the religion and is an acknowledged leader in spiritual affairs of the institution. Therefore, it is accepted that the duties are distinct from other members of the religion and they would be an acknowledged leader in the spiritual affairs of Entity A. | Detailed Reasoning - Is authorised to act as a minister or spiritual leader, including the conduct of religious worship and other religious ceremonies.: Based on the facts, we consider that the role satisfies the definition of a minister of religion, as defined in paragraph 14 of TR 2019/3. | Detailed Reasoning - (c) Will the benefits be provided to the employee?: In this case, the benefits are being provided directly to the person in the identified role, in their capacity as a member of Entity A ministry staff. (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 57(d) 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. It is considered that the benefits provided to the person in the identified role are principally in respect of pastoral duties and/or are directly related to the practice, study, teaching or propagation of religious beliefs. Hence the requirement under paragraph 57(d) of the FBTAA will be met. | Detailed Reasoning - Conclusion: In this case, Entity A is a registered religious institution and the person in the identified role is a religious practitioner. Based on the duties of the role, it is accepted that the benefits to be provided are principally in respect of the pastoral duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs. Therefore, the benefits to be provided will be exempt pursuant to section 57 of the FBTAA. | Detailed Reasoning - Issue 2 - GST Issues (Questions 2 to 4): An entity is entitled to input tax credits on its creditable acquisitions. You make a creditable acquisition if all the requirements of section 11-5 of the GST Act are met. Section 11-5 states: You make a creditable acquisition if: (a) you acquire anything solely or partly for a creditable purpose; and (b) the supply of the thing to you is a taxable supply; and (c) you provide, or are liable to provide, consideration for the supply; and (d) you are registered, or required to be registered. Subsection 11-15(1) of the GST Act states: You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. Subsection 11-15(2) of the GST Act states: However, you do not acquire the thing for a creditable purpose to the extent that: (a) the acquisition relates to making supplies that would be input taxed; or (b) the acquisition is of a private or domestic nature. | Detailed Reasoning - Creditable purpose: With respect to whether an acquisition is made in carrying on an enterprise or is of a private or domestic nature for the purposes of section 11-15 of the GST Act, paragraph 65 of Goods and Services Tax Ruling GSTR 2008/1 Goods and services tax: when do you acquire anything or import goods solely or partly for a creditable purpose? states: 85. Expenditure that is characterised as living expenses would ordinarily also be characterised as being private or domestic in nature. However, it is not possible to determine whether an acquisition is private in nature simply by considering the type of acquisition. For example, an employer may pay an employee's child minding costs as part of the remuneration package paid to the employee. This acquisition is made to provide a benefit in respect of employment in the enterprise. It is made in carrying on the enterprise and is not of a private or domestic nature for the purposes of section 11-15. Further, paragraph 52 of Goods and Services tax Ruling GSTR 2001/3 Goods and services tax: GST and how it applies to supplies of fringe benefits discusses acquisitions made by an employer to provide fringe benefits to employees. It states: 52. An acquisition or importation you make to provide a fringe benefit in respect of employment in your enterprise is made in carrying on the enterprise and is not of a private or domestic nature for the purposes of section 11-15 and section 15-10. It is your purpose at the time of making the acquisition or importation that is relevant to whether the acquisition or importation is for a creditable purpose. For example, an acquisition made to provide a car for the private use of your employee is made for a creditable purpose. Paragraph 15 of GSTR 2001/3 states "In this Ruling, unless otherwise indicated, 'fringe benefit' means a fringe benefit as defined in the GST Act." Accordingly, a 'fringe benefit' referred to in paragraph 52 of GSTR 2001/3 includes exempt benefits. This means that acquisitions made to provide exempt benefits for employee religious practitioners, are made for a creditable purpose. Additionally, paragraph 11-5(c) of the GST Act will be satisfied with respect to a Division 111 reimbursement because the reimbursement is deemed to be consideration under subsection 111-5(1) of the GST Act. | Detailed Reasoning - Application of Division 111 of the GST Act to Entity A's reimbursements of employees: Relevant to this private ruling, under paragraph 111-5(1)(ab) of the GST Act, if you reimburse an employee for an expense that the employee or the employee's associate incurs, and the reimbursement constitutes an expense payment benefit, the reimbursement is treated as consideration for an acquisition that you make from the employee, associate, agent, officer or partner. Section 195-1 of the GST Act defines expense payment benefit as a fringe benefit that is a benefit of a kind referred to in section 20 of the FBTAA. Section 20 of the FBTAA relevantly states: Where a person (in this section referred to as the provider): (a) makes a payment in discharge, in whole or in part, of an obligation of another person (in this section referred to as the recipient) to pay an amount to a third personin respect of expenditure incurred by the recipient; or (b) reimburses another person(in this section also referred to as the recipient), in whole or in part, in respect of an amount of expenditure incurred by the recipient; the making of the payment referred to in paragraph (a), or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient. Section 195-1 of the GST Act defines fringe benefit as having the meaning given by section 995-1 of the ITAA 1997 but includes a benefit within the meaning of subsection 136(1) of the FBTAA that is an exempt benefit for the purposes of that Act. As explained in Issue 1 above, benefits provided to employee religious practitioners of Entity A are exempt under section 57 of the FBTAA. Since the payments for expenses are exempt benefits under section 57 of the FBTAA, they satisfy the definition of a fringe benefit for the purposes of the GST Act. These fringe benefits are of a kind referred to in section 20 of the FBTAA and, therefore, meet the definition of an expense payment benefit in section 195-1 of the GST Act. GSTR 2001/3 provides an explanation of Division 111 of the GST Act, including in the context of expense payment benefits. Paragraph 89 of GSTR 2001/3 states: 89. Division 111 also requires that the reimbursement be made for a particular expense. Employers need to have some understanding or agreement with their employees about the types of expenses they will reimburse so that a particular acquisition is involved. Types of requirements that indicate such agreements include: • the employer requiring the employee's invoices to demonstrate that relevant purchases have been made; or • the employer requiring the employee's credit card statement to evidence particular purchases (or all of the particular purchases) that are itemised on the statement. For Division 111 to apply, the arrangement between the employer and the employee needs to be for the reimbursement of a particular purchase incurred on the credit card. An arrangement that involves no more than reimbursing the balance owing on the employee's credit card statement, an input taxed financial supply, does not meet the requirements of Division 111. Additionally, paragraph 95 of GSTR 2001/3 states that the payment of an allowance is not a reimbursement. Input tax credits cannot be claimed on payment of an allowance to an employee and there can be no input tax credit entitlement under Division 111 of the GST Act. For payments from the specified account which constitute an allowance, there is no input tax credit entitlement under Division 111 of the GST Act. In your case, you make payments from the specified account to reimburse your employee religious practitioners for various expenses. In accordance with payment guidelines, the religious practitioner is required to provide appropriate invoices and documentation to you to evidence the particular expense at the time the specified account funds are expended. You provided sample copies of the documentation a religious practitioner is required to provide. Accordingly, in line with paragraph 89 of GSTR 2001/3, paragraph 111-5(1)(ab) of the GST Act is satisfied when you make payments from the specified account to reimburse your employee religious practitioners for these particular expenses which are expense payment benefits. The reimbursements are treated as consideration for an acquisition you make from the employee religious practitioner. As explained above, under subsection 111-5(2) of the GST Act, the fact that the supply (i.e. the deemed supply) made by the employee religious practitioner to you is not a taxable supply does not stop the acquisition being a creditable acquisition as defined in section 11-5 of the GST Act. | Detailed Reasoning - Tax invoice requirements for Division 111 reimbursements: In relation to the requirement for the employer to hold a tax invoice, paragraph 90 of GSTR 2001/3 provides an explanation of section 111-15 of the GST Act, stating: 90. Where a creditable acquisition arises under Division 111, the employer is entitled to claim an input tax credit of 1/11 of the reimbursement. The requirement to hold a tax invoice, in order to claim the input tax credit, is satisfied if the employer holds the employee's tax invoice for the particular expense. Alternatively, where the employer holds the employee's credit card statement listing the expense, the statement may satisfy the need for a tax invoice. However, ATO ID 2013/13 provides that the amount of the input tax credit for a creditable acquisition under section 111-10 of the GST Act is reduced under section 11-30 of the GST Act if the acquisition is partly creditable. | Detailed Reasoning - Limitations on acquisitions being creditable acquisitions: Subsection 111-5(3) of the GST Act provides that the acquisition (referring to the acquisition the employer is taken to have made from the employee pursuant to subsection 111-5(1) of the GST Act) is not a creditable acquisition: (a) to the extent (if any) that: (i) the employee is entitled to an input tax credit for acquiring the thing acquired in incurring the expense; or (ii) the acquisition would not, because of Division 69 of the GST Act, be a creditable acquisition if you made it; or (b) unless the supply of the thing acquired, by the employee, in incurring the expense was a taxable supply; or (c) if the employer would, because of Divisions 71 of the GST Act, not have been entitled to an input tax credit if it had made the acquisition that the employee made. Paragraph 87 of GSTR 2001/3 explains that, in accordance with paragraph 111-5(3)(b) of the GST Act, an expense payment benefit is not a creditable acquisition unless the supply of the thing acquired by the employee is a taxable supply. For instance, where an employee is reimbursed for an expense incurred in acquiring a GST-free supply, such as a secondary school education for the employee's child, the reimbursement is not a creditable acquisition for the employer. Similarly, reimbursement by the employer of an employee's home rental payments to a landlord is not a creditable acquisition of the employer. Further, pursuant to subparagraph 111-5(3)(a)(i) of the GST Act, paragraph 88 of GSTR 2001/3 explains that the acquisition is not a creditable acquisition to the employer to the extent that the employee is entitled to an input tax credit for the thing acquired in incurring the expense. The employee religious practitioners are not entitled to an input tax credit for any of the acquisitions, therefore this limitation does not apply. | Detailed Reasoning - Division 69 of the GST Act: Subparagraph 111-5(3)(a)(ii) of the GST Act states that the acquisition is not a creditable acquisition to the extent it would not, because of Division 69 of the GST Act, be a creditable acquisition if you made it. The meaning of the word 'you' is described in section 195-1 of the GST Act as follows: If a provision of this Act uses the expression you , it applies to entities generally, unless its application is expressly limited. Note : The expression you is not used in provisions that apply only to entities that are not individuals. In the case of subparagraph 111-5(3)(a)(ii) of the GST Act, the term 'you' is not expressly limited and so applies to entities generally. Subparagraph 111-5(3)(a)(ii) of the GST Act was inserted into the GST Act by the Tax Laws Amendment Act (No. 8) 2000 (156 of 2000) . The Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 8) 2000, in relation to subparagraph 111-5(3)(a)(ii) of the GST Act states: 3.48 Item 23 rearranges paragraph 111-5(3)(a) and inserts new subparagraph 111-5(3)(a)(ii) to ensure that an entity is not able to claim input tax credits for a reimbursement for an acquisition that is not creditable because of Division 69. | Detailed Reasoning - Example 3.8: ABC Pty Ltd reimburses an employee $638 for library fines he incurs. The library fines include $58 of GST. ABC Pty Ltd is unable to claim input tax credits for 1/11 of the reimbursement because of new subparagraph 111-5(3)(a)(ii) as the reimbursement is in respect of a non-deductible expense under paragraph 69-5(3)(a). Division 69 of the GST Act provides that some acquisitions that an entity makes which are not deductible for income tax purposes are not creditable acquisitions. The Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 2000 provides the following explanation about the operation of Division 69 of the GST Act: 6.77 Some provisions of the Income Tax Assessment Acts prevent you from deducting certain amounts, or limit the amount you can deduct. Generally this is because they have a private element. This category includes certain relative's travel, club and leisure facilities or boats, entertainment and non-compulsory uniform expenses. It also includes certain business benefits and car parking expenses that the Income Tax Assessment Act 1936 prevents you from deducting. 6.78 In most cases, an input tax credit is not allowed for acquisitions to the extent that you cannot deduct the expense for income tax because of these provisions. Section 69-5 . 6.79 If you are exempt from income tax, an acquisition that you make that would be a non-deductible expense if the provisions of the Income Tax Assessment Acts that deny deductions applied to you, is not a creditable acquisition. 6.80 A further rule in some of the deduction provisions is that you are not stopped from deducting an expense you incur in providing a fringe benefit. Division 69 does not stop an acquisition being a creditable acquisition where you provide it as a fringe benefit. Subsection 69-5(1) of the GST Act states that an acquisition is not a creditable acquisition to the extent that it is a non-deductible expense . Under subsection 69-5(3) of the GST Act, an acquisition is a non-deductible expense if it is not deductible under Division 8 of ITAA 1997 because of: (i) section 26-5 of the ITAA 1997 (Penalties); (ii) section 26-30 of the ITAA 1997 (Relative's travel expenses); (iii) section 26-40 of the ITAA 1997 (Maintaining your family); (iv) section 26-45 of the ITAA 1997 (Recreational club expenses); (v) section 26-50 of the ITAA 1997 (Expenses for a leisure facility); (vi) Division 32 of the ITAA 1997 (Entertainment expenses); (vii) Division 34 of the ITAA 1997 (Non-compulsory uniforms); (viii) Section 51AK of the ITAA 1936 (Agreements for the provision of non-deductible non-cash business benefits). Subsection 69-5(4) of the GST Act states: (4) If the entity making the acquisition or importation is an exempt entity, the acquisition or importation is a non-deductible expense if it would have been a non-deductible expense under subsection (3) or (3A) had the entity not been an exempt entity. In your case, you are an income tax exempt entity. Therefore, subsection 69-5(3) or (3A) of the GST Act can still apply to you where the acquisition is a non-deductible expense.. Under subsection 111-5(1) of the GST Act, the employer is taken to have made an acquisition from the employee for which the reimbursement is consideration. That is, the employer makes a deemed acquisition from the employee. Since the employer is viewed as having made an acquisition from the employee of the thing the employee acquired, where the employer's reimbursement is in respect of a non-deductible expense of the employee under the provisions of the Income Tax Assessment Acts specified in Division 69 of the GST Act, the employer is not making a creditable acquisition. GSTR 2001/3 explains the special rules for input tax credits relating to Division 111 of the GST Act reimbursements of expense payment benefits. Paragraph 88 of GSTR 2001/3 provides that the special rules set out in Division 69 may prevent the acquisition from being a creditable acquisition. Paragraph 97 of GSTR 2001/3 states that some of the provisions of the Income Tax Assessment Acts mentioned in subsection 69-5(3) of the GST Act allow an exception where the benefit is provided by way of a fringe benefit. This applies to fringe benefit acquisitions for entertainment, recreational club expenses and expenses for a leisure facility. There is also an exception in subsection 26-30(3) of the ITAA 1997 for expenditure incurred in providing a fringe benefit for relative's travel expenses. However, paragraph 98 of GSTR 2001/3 explains that even though acquisitions made to provide a fringe benefit are an exception to the Division 69 denial of deductions for entertainment expenses, exempt benefits are not fringe benefits for these purposes. Under Division 69 of the GST Act these FBT exempt entertainment benefit expenses are not creditable acquisitions. By extension, even though acquisitions made to provide a fringe benefit are an exception to the Division 69 of the GST Act denial of deductions for recreational club expenses, expenses of a leisure facility and relative's travel expenses, these exempt benefits are not fringe benefits for these purposes. Following the principle in paragraph 98 of GSTR 2001/3, under Division 69 of the GST Act, FBT exempt recreation club expenses, leisure facility expenses and relative's travel expenses are not creditable acquisitions. Paragraph 100 of GSTR 2001/3 illustrates how this applies in the case of a public benevolent institution, an income tax exempt entity: 100. Where an entity, such as a public benevolent institution, provides any benefits to employees which are in respect of employment, section 57A of the FBTAA provides that these are exempt benefits. As the fringe benefit exception rule in section 32-20 of the ITAA 1997 does not apply where entertainment benefits are exempt from FBT, paragraph 69-5(3)(f) can apply to deny any input credits for entertainment acquisitions and importations for public benevolent institutions. As subsection 69-5(4) applies the rules in subsection 69-5(3) to entities that are exempt from income tax as if they were subject to that tax, the fact that the benefit is exempt from FBT means that subsection 69-5(3) can apply to these entities in addition to entities that are subject to income tax. That is, the fact the benefit is exempt from FBT means that subsection 69-5(3) of the GST Act can apply to entities who provide these exempt benefits, including to public benevolent institutions that are income tax exempt entities. In your case, the benefits provided by you to your employee religious practitioners are exempt benefits under section 57 of the FBTAA. Since an exempt benefit is not a fringe benefit in the context of the income tax provisions referred to in subsection 69(3) of the GST Act, the fringe benefit exception rules in section 26-30(relative's travel expenses), 26-45(recreational club expenses) and section 26-50(leisure facility expenses) of the ITAA 1997 do not apply to you. This means that, in line with paragraph 98 of GSTR 2001/3, subsection 69-5(3) of the GST Act can apply to you with respect to acquisitions to make exempt benefits of this type. While there are no FBT exemptions with respect to the remaining types of expenses referred to in the income tax provisions in subsection 69(3) of the GST Act, subsection 69-5(3) of the GST Act can apply to you with respect to making exempt benefits of this type also. In conclusion, we consider that Division 69 of the GST Act can apply to you where you make reimbursements to employee religious practitioners for expenses that constitute expense payment benefits where the expenses are of a type listed in the income tax provisions referred to in subsection 69-5(3) of the GST Act, being: • penalties • relative's travel expenses; • non-compulsory uniforms; • maintaining your family • recreational club activities/services; • ownership of a leisure facility or rights to use a leisure facility; and • non-cash business benefits under an agreement to which section 51AK of the Income Tax Assessment Act 1936 (ITAA 1936) applies Where the reimbursement of expenses are not excluded from being a creditable acquisition under Division 69 of the GST Act, the acquisition is a taxable supply to the employee and the employee religious practitioner is not entitled to input tax credits, you are entitled to input tax credits for those expenses. These include general household expenses, hardware store expenses and other retail outlet expenses; personal clothing items; electricity costs in privately owned or rented houses; and motor vehicle expenses. | Detailed Reasoning - Division 50 of the GST Act: The following information is provided as guidance only to assist you with regard to the application of Division 50 of the GST Act. Section 50-5 of the GST Act provides that the activities of a religious practitioner done in pursuit of their vocation as a religious practitioner and as member of a religious institution will be treated as activities done by the religious institution, unless the religious practitioner does the activities as an employee or agent of the religious institution. The activities of the religious practitioner will be treated as being part of the enterprise of the religious institution under subsection 9-20(1) of the GST Act and not an enterprise of the religious practitioner. For the religious institution to be entitled to input tax credits for these acquisitions under section 11-20 of the GST Act, the acquisitions need to meet the definition of a creditable acquisition in section 11-5 of the GST Act. The Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 2001 (EM to No. 5 2001) explains that section 50-5 of the GST Act was introduced as part of a suite of amendments to the Taxation Administration Act 1953 (TAA 1953), the ITAA 1997, the FBTAA, the GST Act and the A New Tax System (Australian Business Number) Act 1999 to ensure that religious practitioners who are not employees of religious institutions are treated in the same way as those who are for tax purposes. Example 1.6 in the EM to No. 5 of 2001 illustrates the operation of section 50-5 of the GST Act with respect to acquisitions by a religious practitioner who is not an employee: | Detailed Reasoning - Example 1.6: When Mr Kennedy buys his prayer books, GST is included in the price of the supply to him. Mr Kennedy will not be entitled to claim any input tax credits on the acquisition of the prayer books. However, if his religious institution is GST registered, it will generally be entitled to claim input tax credits for the GST included in the price of the prayer books. Employees are specifically excluded from the operation of section 50-5 of the GST Act so that a double credit situation does not arise. As paragraph 1.27 of the EM to No. 5 of 2001 states, if employees were not excluded from section 50-5 of the GST Act, it would be possible for the religious institution to claim an input tax credit for a reimbursement under Division 111 of the GST Act and under section 50-5 of the GST Act. Further, Division 111 does not apply to non-employee religious practitioners as if they were your employee since the new PAYG withholding event introduced by the amendments in section 12-47 of Schedule 1 to the TAA 1953 is not included in the table in subsection 111-20(2) of the GST Act. | Detailed Reasoning - Religious practitioner: The meaning of 'religious practitioner' is defined in section 195-1 of the GST Act to mean, among other things: (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. For FBT Act purposes, 'religious practitioner' is defined in section 136(1) of the FBT Act as having the meaning given by subsection 995-1(1) of the ITAA 1997. Subsection 995-1(1) of the ITAA 1997 has the identical definition of 'religious practitioner' as in section 195-1 of the GST Act. Since the definition of 'religious practitioner' for GST purposes mirrors the definition in the FBTAA, the explanation provided in Taxation Ruling TR 2019/3 Fringe benefits tax: benefits provided to religious practitioners about the meaning of 'religious practitioner', which was discussed in Issue 1 above, is also relevant in a GST context . | Detailed Reasoning - Religious Institution: The term 'religious institution' is not defined in the GST Act and so takes its ordinary meaning. The Commissioner's position on the meaning of 'religious institution' is set out in TR 2019/3, in the context of the FBTAA which uses the terminology 'registered religious institution'. Paragraph 7 of TR 2019/3 states that administration by the ATO is limited to determining that the entity is an institution that maintains current ACNC registration with a subtype 'advancing religion'. Paragraphs 8 and 9 of TR 2019/3 consider the ordinary meaning of 'institution' and provide: 8. In its ordinary sense, an 'institution' is an establishment, organisation, or association, instituted for the promotion of an object, especially one of public or general utility. Such a body is called into existence to translate a defined purpose into a living and active principle. 9. 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. Whether a body has these characteristics depends on the facts in each case. Relevant factors include an entity's activities, size, permanence and recognition. A structure which conducts activities of limited scale, controlled and operated by family members or friends is not an 'institution' in this context. | Detailed Reasoning - Activities in the pursuit of a vocation as a religious practitioner and as a member of a religious institution: Paragraph 1.16 of the EM to No. 5 of 2001 states that the object of the words 'does an activity, or a series of activities in pursuit of his or her vocation as a religious practitioner, and as a member of a religious institution' in section 50-5 of the GST Act are intended to describe the activities that the practitioner does as a religious practitioner of a religious institution. A vocation covers a wider range of circumstances than the term 'employee' for the purposes of section 50-5 of the GST Act and is aimed at treating all activities done by a religious practitioner as a representative of a religious institution in the same way. Paragraph 1.18 of the EM to No. 5 of 2001 explains: 1.18 In addition to duties directly related to religion, a religious practitioner may undertake a range of activities within a religious institution and the wider community. This could include, for example, administration of a parish or teaching in a school. The amendments aim to treat all activities done by a religious practitioner as a representative of a religious institution in the same way. The term 'vocation' is intended to facilitate this'. Not all activities undertaken by a religious practitioner who is a member of a religious institution are undertaken in pursuit of a vocation. Paragraph 1.20 of the EM to No. 5 of 2001 provides an example: | Detailed Reasoning - Example 1.1: A religious practitioner who plays professional golf or conducts farming activities will not be within the amendments for these activities. Additionally, where a religious practitioner does an activity that has no connection to the religious institution with which they are practitioners, that activity is also outside the scope of section 50-5 of the GST Act. Example 1.3 in the EM to No. 5 of 2001 notes that writing a book on the history of a particular religion which is not for general distribution and is intended for followers of the religion will probably be considered an activity undertaken as part of a vocation. However, if the book is widely circulated and the intended audience is the general public, it might be considered beyond the scope of a vocation and the religious practitioner may be required to register for an ABN. The Commissioner takes this view in ATO ID 2004/766. Paragraph 1.21 of the EM to No. 5 of 2001 states that in some circumstances, a religious practitioner may undertake an activity that is connected to the skills they have developed as a religious practitioner, but is nevertheless outside the scope of a vocation. An example is provided to illustrate this: | Detailed Reasoning - Example 1.2: A religious practitioner is engaged by a large company to be a facilitator at a meeting. The religious practitioner's skill in facilitation has been developed through a vocation as a religious practitioner. This particular meeting, however, is about secular issues. In this case, the religious practitioner is not undertaking an activity in pursuit of a vocation as a religious practitioner. Paragraph 1.33 of the EM to No. 5 of 2001 states that if a religious practitioner undertakes other activities that are not in pursuit of their religious vocation or that are not done as a member of a religious institution, then that practitioner may be entitled to GST registration, or may be required to register for GST. Paragraph 1.30 of the EM to No. 5 of 2001 states that in some situations there may be a fine line between an activity pursued as part of a vocation, and one that is outside the bounds of a vocation. Individual circumstances and factors will need to be considered in each case. | Detailed Reasoning - (i) Where section 50-5 of the GST Act does not apply: For acquisitions made by a non-employee religious practitioner that are not made 'in the pursuit of his/her vocation as a religious practitioner', these acquisitions are not taken to be an acquisition of the religious institution, meaning that section 11-5 and Division 69 of the GST Act will not have applicability to the religious institution for these acquisitions. With regard to the types of acquisitions contemplated by the provisions of the Income Tax Assessment Acts listed in subsection 69-5(3) of the GST Act, it is likely that many, if not all, would not be 'made in the pursuit of the non-employee religious practitioner's vocation as a religious practitioner' due to the private nature of these types of expenses. Therefore, it is likely these acquisitions would not satisfy section 50-5 of the GST Act and sections 11-5 and Division 69 of the GST Act would have no application to the religious institution with respect to these acquisitions by the religious practitioner. | Detailed Reasoning - (ii) Where section 50-5 of the GST Act applies: Since, for section 50-5 of the GST Act to be satisfied, the activities of the non-employee religious practitioner have to be done in pursuit of the religious practitioner's vocation as a religious practitioner, it is not likely that the acquisitions contemplated by the provisions of the Income Tax Assessment Acts in subsection 69-5(3) of the GST Act would satisfy this test due to the private nature of these types of expenses. This means that it is likely Division 69 of the GST Act would have little practical application to acquisitions that satisfy section 50-5 of the GST Act.