Private ruling: Fringe benefits tax - benefits provided to religious practitioners
Date of advice: 14 March 2019
Published: May 2019
Ruling period: Year ending 31 March 20XX | Year ending 31 March 20XX | Year ending 31 March 20XX
Date scheme commenced: 1 April 20XX

Ruling: Q1: Are the benefits provided to the Chief Executive Officer (CEO) of the religious institution exempt benefits under section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: No.

Relevant facts and circumstances: The religious institution is a charity registered with the Australian Charities and Not-for-profits Commission (ACNC) with the entity subtype ‘advancing religion’. The religious institution is a parachurch organisation. It supports a range of churches and denominations although it does not have a congregation itself. The employee is employed part-time by the religious institution as the Chief Executive Officer (CEO). The religious institution would like to offer the employee some non-cash benefits. If the religious institution does provide benefits, they would most likely be expense payments such as rates, interest and electricity. The religious institution would only provide benefits to the employee in relation to the portion of their time spent on activities directly related to religious activities and they would be provided to them in their capacity as an employee of the religious institution. The employee is an elder in their local church. They are not ordained in any formal way although they have theological training and experience. The following describes how the employee is an active member of their local church: 1. leads 5-10 church services per year 2. leads a Bible study group, teaching the bible to members of the church 3. attends church weekly 4. is an elder (board member) of the church, meeting every six weeks to discuss governance issues relating to the church. The religious institution’s vision is to promote faithful, persevering, Christ-honouring, Bible-driven, Spirit-empowered, ministry across Australia. The religious institution’s strategic goals are, in brief, to build gospel partnerships and promote the importance of the gospel, across Australia. Their 5 year plan provides a more specific breakdown of their strategic goals, outlining the key infrastructure and initiatives the religious institution will implement to form and foster vibrant partnerships and enact its vision. The plan details how the religious institution will structure its efforts around the following focus areas: 1. Theological Training 2. Specialised Ministries 3. Church Health & Planting 4. Leadership Multiplication 5. Resources & Funding 6. Communications & Connections 7. Projects The objectives of the religious institution in the relevant clause of the Constitution are: 1. Encourage Australian Christian believers in proclaiming, believing, and obeying the gospel of the Lord Jesus, in conformity with the Foundation Documents. 2. Encourage mutual and informed support and prayer among gospel ministries in Australia, including churches, mission agencies, and other Christian ministries. 3. Engage in activities which support and encourage gospel ministry in Australia, and in gospel ministry from Australia to elsewhere in the world. 4. Produce resources and provide training to support and enable gospel ministry in Australia. 5. Collect funds and solicit and accept financial and other aid, grants, subscriptions, donations, and bequests and otherwise borrow or raise funds to be invested, managed and used for the pursuit of the above objects. The following are some activities that the employee performs towards achieving the objectives of the religious institution provided in the relevant clause of the Constitution: 1. encouraging other organisations to partner with the religious institution in running ministry related events, so that they reach a larger Australia-wide audience 2. sending out a quarterly prayer letter to their email subscribers encouraging them to pray for the religious institution and the wider work of the gospel across Australia 3. launched the religious institution webinars which involve inviting guests onto the online webinar. The employee interviews the guests and takes questions from webinar attendees. These webinars encourage gospel ministry in Australia, and because of their online nature, have a wider impact. 4. writing articles themselves and editing articles from other authors for use on the religious institution’s website 5. personally meeting with potential financial donors. The Position Description (Summary of the purpose of the position) states that the CEO of the religious institution is accountable for: a) Implementing the strategic goals of the religious institution and achieving the outcomes agreed by their Council. b) Encouraging the growth of ministries and regional networks across Australia c) Overseeing events and conference ministries that may become part of the religious institution and developing new models of conferencing to resource gospel ministry on the ground. d) Spearheading the fundraising program. e) Overseeing the development and distribution of resources through the religious institution’s website. The following are duties or activities that the employee performs toward each purpose listed from a) to e) above: 1. The employee is responsible for keeping a record of the resolutions of the religious institution Council from Council meetings and ensuring they are delegated and/or implanted. On a monthly basis, the employee reports to the religious institution’s Executive, who also tasks the employee with various goals. 2. As CEO, the employee can provide advice to people wishing to form chapter, but is also involved in discussions with various stakeholders (e.g. ministry leaders of various kinds) exploring and encouraging greater networking among ministries. 3. The employee is involved in discussions with a particular ministry whom the religious institution is looking at running a National conference with. 4. The employee has acquired System software and a professional fundraiser to help with fundraising and will personally meet with potential donors. 5. The employee works closely with the Senior Website Editor in developing goals and strategies for their website, including increasing the number of regular writers; increasing the number of paid editors, and increasing the number of articles their website puts out. The relevant clause of the Position Description provides that the role of CEO is to work closely with the religious institution’s Council to achieve the ministry objectives of the religious institution (outlined in the Constitution) and the fulfilment of its vision. The following are examples of how the employee has lead and participated in the development of the of the religious institution’s strategies and initiatives: 1. meets annually with the Chair of the religious institution’s Council to formulate an annual plan. 2. meets biannually with the religious institution’s Strategy Group (made of Council members) to discuss strategic issues affecting the religious institution. The following are examples of how the employee has led the implementation of the religious institution’s strategies and initiatives: 1. Flowing out from the development of their strategy, the employee is responsible for implementing (or ensuring the implementation) of the above as CEO. For example, they are responsible for spearheading fundraising (one of their major goals) and this has involved contracting a professional fundraising service and with their guidance, organising and meeting donors. 2. Growing the website, through employing part time editors to help grow the website, as well as recruiting authors to write for them. This particular goal is promoting the practice, study, teaching, and propagation of beliefs through articles aimed at informing Christian readers. The following are examples of a how the employee is acknowledged as a leader and an authority in spiritual affairs by the religious institution and its members: 1. The religious institution has appointed the employee to oversee the running of the religious institution, an organisation dedicated to building networks of encouragement between Christians. 2. They have also been appointed to write and edit articles of a religious nature for their website (a national platform), not to mention grow the website. 3. The employee is the point of contact for the religious institution when it comes to other ministry organisations. The employee does not spend any time on formal pastoral duties. The employee oversees and directs approximately X administrative staff members including the company secretary and various editors but does not provide them with any formal pastoral care as that is not the role Other information provided in support of the religious institution’s ruling application: ● the religious institution is not affiliated with one particular church ● the employee will not provide any significant amount of pastoral care nor will anyone at the institution ● they contend that the purpose of the institution is the propagation of religious beliefs (in this instance, the Christian faith) as well as other components directly relating to the practice, study, teaching of religious beliefs ● reiterated that the employee’s duties or activities as CEO include the authoring and posting of religious articles (approximately 20%), conduct interviews and webinars and is a guest speaker at churches. The employee also encourages other organisations/churches to partner in running ministry related events and seeking donations.

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: Summary: Section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides an exemption for benefits provided to employees of religious institutions where the following four conditions are met: (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 on the above requirement is discussed in Draft Taxation Ruling TR 2018/D2 Fringe benefits tax: benefits provided to religious practitioners (TR 2018/D2). In respect to (a): A ‘registered religious institution’ is defined in subsection 136(1) of the FBTAA as an institution that is a ‘registered charity’, and registered under the Australian Charities and Not-for-Profits Commission Act (ACNC Act) as a charity ‘with a purpose that is the advancement of religion’ as per subsection 25-5(5) of the ACNC Act. The religious institution is registered with the Australian Charities and Not-for-Profits Commission (ACNC) as a charity, with entity subtype ‘with a purpose that is the advancement of religion’. The religious institution therefore meets the definition of a registered religious institution in subsection 136(1) of the FBTAA. Paragraph 57(a) of the FBTAA is therefore satisfied. In respect to (c): the employee is an employee of religious institution intends to provide the proposed benefits to them. Paragraph 57(c) of the FBTAA is therefore satisfied. In respect to (b): Subsection 136(1) of the FBTAA 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 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 The employee is not a student described in (b) or (d) and is not considered to be a full-time member of a religious order in relation to his membership of their local Church or the religious institution. Paragraph 14 of TR 2018/D2 states that except in rare cases, a religious order would have all of these characteristics: (a) members are part of a religious community and are pursuing a religious life on a full-time basis (b) the members regularly participate in activities such as private and public prayer, religious study, teaching, care of the aged, missionary work or church reform (c) controlled by, or supervised by, or affiliated with, or partially or wholly funded by a religious institution (d) in principle, members renounce the possession of private property, and (e) members make a long-term commitment to the order. We do not consider that the local church or the religious institution have all of these characteristics. Consequently, the employee is not a full-time member of a religious order. Whether or not the employee is a religious practitioner therefore depends on whether or not they are a minister of religion. 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 TR 2018/D2 states 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 recognized 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 (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. We have considered each of these characteristics in relation to the employee’s situation: ● In respect to (a): They are a member of the religious institution, a para church organisation, and they are a member of their local church in a personal capacity (not as an employee). ● In respect to (b): There is no evidence that the employee is officially recognised as authorised to carry out the duties of a minister of religion by either religious institution. They are not an ordained clergyman in any Christian denomination. The religious institution does not have a congregation and the employee is not authorised to carry out the duties of a minister of religion in that organisation. There is no evidence that they are officially recognised as a minister of religion of the local church they goes to, although they are obviously a leader in the church. Further there is no evidence that a leader of church services equates to carrying out the duties of a minister of religion. ● In respect to (c): There is no evidence that the employee is officially recognised as having authority in matters of doctrine or religious practice. They have undertaken theological training but there has been no official recognition by a religious institution that they have the requisite authority. ● In respect to (d): the employee’s position in the parachurch organisation does not necessarily make their distinct from other adherents of the religion. There is nothing preventing other adherents of the religion having similar roles in a parachurch organisation. Similarly there would be many adherents of the church that undertake the same weekly leadership activities. However the fact that they do lead a number of church services per year and is an elder (board member) may enable them to satisfy this element. ● In respect to (e): the employee has a leadership role in both religious institutions. It is not clear whether they have acknowledged leadership in the spiritual affairs of either institution. There is no clear evidence that they lead the other members of the religious institution in spiritual affairs. However they have been appointed to write religious articles for the organisation’s website and their role in the church, where they lead church services and bible study, is probably sufficient to satisfy this element. ● In respect to (f): there is no evidence that the employee is authorised to discharge the duties of a minister or a spiritual leader. Their role in the religious institution does not involve these activities. Their role in the local church includes leading 5-10 church services however there is no evidence to suggest that this extends to having authority to conduct religious worship and other religious ceremonies. Even though the employee may satisfy (a), (d) and (e), we have determined that the employee’s duties as CEO are duties expected of an administrator or executive and not those of a minister or spiritual leader and therefore conclude that in respect of the employee, the requirements of benefits being provided to a religious practitioner are not satisfied. Because the employee is not a religious practitioner the religious institution cannot meet the four required conditions in section 57 of the FBTAA. Accordingly, the religious institution does not qualify for the exemption section 57 provides. Benefit provided principally in respect of a religious practitioners pastoral duties or directly related religious activities Because one of the mandatory conditions in section 57 of the FBTAA has not been met it is not necessary to go any further and consider whether the benefits will be provided to the employee principally in respect of duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs (directly related religious activities). However we include our consideration of this condition for your information to highlight that the proposed benefits may not be exempt even if the employee did meet the definition of a religious practitioner. An explanation of what is meant by the term directly related is provided in paragraph 20 of TR 2018/D2: 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. The following activities that the employee performs (or intends to perform) towards achieving the objectives of the religious institution in its Constitution may be directly related religious activities: ● sending out a quarterly prayer letter to their email subscribers, encouraging them to pray for the religious institution and the wider work of the gospel across Australia ● launched the religious institution’s webinars which involve the employee inviting guests such as Christian authors and speakers onto the online webinar, interviewing them, and allowing webinar attendees to ask questions. These webinars encourage gospel ministry in Australia, and because of their online nature, have a wider impact ● writing articles and editing articles from other authors for use on the religious institution website. We took into consideration the following examples of the duties or activities that the employee performs toward each purpose of the position listed in the Position Description: ● responsible for keeping a record of the resolutions of the religious institution’s Council meetings held twice per year and ensuring the resolutions are delegated and/or implanted. ● on a monthly basis the employee reports to the religious institution’s Executive who also tasks the employee with various goals ● can provide advice to people wishing to form chapter and is involved in discussions with various stakeholders (e.g. ministry leaders of various kinds) exploring and encouraging greater networking among ministries ● involved in discussions with a particular ministry regarding running a National conference with them ● done the legwork in acquiring software and a professional fundraiser to help with fundraising and personally meeting with donors; and ● working closely with the Senior Website Editor in developing goals and strategies for their website, including increasing the number of regular writers; increasing the number of paid editors, and increasing the number of articles their website puts out. The Position Description provides the key outcomes and activities and directs that the role of CEO is to work closely with the religious institution’s Council to achieve the ministry objectives of the religious institution and the fulfilment of the religious institution’s vision. We took into consideration the following examples of how the employee has lead and participated in the development and implementation of the religious institution’s strategies and initiatives: 1. meets annually with the Chair of the religious institution’s Council to formulate an annual plan 2. meets biannually with the religious institution’s Strategy Group to discuss strategic issues affecting the religious institution 3. responsible for spearheading fundraising (one of the religious institution‘s major goals) and this has involved contracting a professional fundraising service and meeting with donors; and 4. growing the website, through employing part time editors to help grow the website as well as recruiting authors to write for them. Despite the above examples provided, in our view, the activities involved in the role of CEO are generally ‘secular or commercial activities that have a mere causative relationship to the practice, study, teaching and propagation of religious beliefs’ and are not directly related religious activities. On the balance we consider that the employee’s duties as CEO are duties expected of an administrator or executive officer and not those of a minister or spiritual leader. We consider that the employees activities are not principally directly related religious activities. The ‘principally’ test in paragraphs 17 and 18 of TR 2018/D2 is not satisfied.