Private ruling: Fringe benefits tax (FBT) – benefits provided to employee of a religious institution
Date of advice: 13 June 2018
Published: August 2018
Ruling period: 1 April 20XX – 31 March 20XX
Date scheme commenced: 1 April 20XX

Ruling: Q1: Are you able to provide exempt benefits under section 57 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) to the Relevant Employee? | A1: Yes

Relevant facts and circumstances: You are a registered religious organisation. You are registered with the Australian Charities and Not-for-Profits Commission (ACNC) as a charity (with a subtype pertaining to the advancement of religion) in accordance with subsection 25-5(5) of the Australian Charities and Not-for-Profits Commission Act 2012 (ACNC Act). The Relevant Employee is employed by you as the Business Manager. Despite the title of the role, the Relevant Employee’s role incorporates both pastoral and non-pastoral duties. Previously, the role was called ‘General Manager’ but was changed to better reflect the direction of the role to look after the people in the organisation. The Relevant Employee’s pastoral duties, which account for slightly over 50% of his time, include: 1. communication of religious beliefs; 2. counselling treasurers, and other board/committee members of affiliated congregations; 3. providing spiritual guidance and support to treasurers, and other board/committee members of affiliated congregations; 4. attending/presenting at your workshops; 5. meeting with and visiting members of affiliated congregations, or persons otherwise in need of emotional and spiritual support; 6. conducting religious worship and other religious ceremonies. Non-pastoral duties of the Business Manager, which account for slightly less than 50% of the Relevant Employee’s time, include business supervisory and mission support duties. The Relevant Employee is not an ‘Ordained Minister’, but is an Ordained Elder in the Church The role of an Ordained Elder: ● Are elected from the communicant membership of the congregation and remain Ordained Elders for life, unless removed by a process of discipline; ● Ordained Elders in a congregation are the spiritual overseers of a congregation; ● Ordained Elders are responsible for cultivating relationships with and exercising pastoral care for the communicants and adherents; ● Ordained Elders are expected to lead and conduct religious worship, bible studies, growth groups, and other religious training; ● Ordained Elders ordinarily operate in a volunteering capacity and are not remunerated; ● If Ordained Elders are required to do increasing amounts of pastoral work they are remunerated for that work. The benefits provided by you to the Relevant Employee include: ● work-related hospitality costs; ● costs of motor vehicle used for pastoral duties; ● travel costs related to pastoral duties and attending seminars; ● religious publications in the form of books, journals and newspapers; ● continuing education for ministry costs; ● educational expenses (children’s school fees, uniform costs); ● personal life insurance premiums; and ● residence expenses. You have stated that the benefits provided to the Relevant Employee are only in respect of pastoral duties, with no benefits provided in respect of non-pastoral duties. Ordained Elders who are remunerated for their pastoral work receive similar benefits to those received by the Relevant Employee. Ordained Ministers also receive remuneration where they are required to perform administrative duties in addition to their pastoral responsibilities. The relevant employee receives a taxable salary. Currently the employee is only paying their mortgage through a salary sacrificing arrangement with expenses (value of the benefits to be provided) met out of post-tax income. Upon issuance of the ruling and if the ruling is favourable the value of the benefits currently being incurred in post-tax income will be salary sacrificed as exempt benefits.

Relevant legislative provisions: Australian Charities and Not-for-Profits Commission Act 2012 Subsection 25-5(5) | Fringe Benefits Tax Assessment Act 1986 Section 57 | Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision: Summary: You are able to provide exempt benefits to the Relevant Employee under section 57 of the FBTAA. | Detailed Reasoning - Detailed reasoning: Section 57 of the FBTAA states that: Where: (a) the employer of an employee is a registered religious institution; and (b) the employee is a religious practitioner; and (c) a benefit is provided to, or to a spouse or a child of, the employee; and (d) the benefit is not provided principally in respect of duties of the employee other than: (i) any pastoral duties; or (ii) any other duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs; the benefit is an exempt benefit. Each of the conditions in section 57 of the FBTAA are considered in light of your circumstances below. | Detailed Reasoning - Are you a ‘Registered Religious Institution’?: A ‘registered religious institution’ is defined in subsection 136(1) of the FBTAA to mean an institution that is a ‘registered charity’, and is registered under the Australian Charities and Not-for-Profits Commission Act 2012 (ACNC Act) as the subtype of entity with a purpose that is the advancement of religion pursuant to 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 ACNC Act as a ‘charity’ pursuant to subsection 25-5(5) of that Act. As per the Facts; you are registered with the ACNC as a charity (with a subtype pertaining to the advancement of religion) in accordance with subsection 25-5(5) of the ACNC Act. You are therefore a ‘registered religious institution’ pursuant to subsection 136(1) of the FBTAA. As such, the first criterion under paragraph 57(a) of the FBTAA is satisfied. | Detailed Reasoning - Is the Relevant Employee a ‘Religious Practitioner’?: A ‘Religious Practitioner’ is defined in subsection 136(1) of the FBTAA and broadly means a minister of religion, a full-time member of a religious order, or a student undertaking studies to become either of the previous designations. Paragraph 13 of Taxation Ruling 92/17 Income tax and fringe benefits tax: exemptions for ‘religious institutions’ (TR 92/17) provides guidance on the tests to apply in determining if an employee is a ‘minister of religion’. That paragraph states that 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. It is noted that, effective from 3 December 2012, section 57 of the FBTAA was updated to substitute the term ‘registered religious institution’ for ‘religious institution’, and a statutory definition for ‘registered religious institution’ was inserted at subsection 136(1) the FBTAA. The Australian Taxation Office (ATO) is in the process of updating TR 92/17 accordingly. Based on the Facts; the Relevant Employee is a member of a religious institution (being you). While the Relevant Employee is not officially ordained, he is considered to be recognised officially by another ‘admission or commissioning’ through his position as an Ordained Elder in the Church. It is accepted that the Relevant Employee is recognised officially as having authority in matters of doctrine or religious practice within the Church, and has a position distinct from the ordinary adherents of Christianity. Furthermore, the Relevant Employee’s duties include the conduct of religious worship and other religious ceremonies. Therefore, it is considered that, as the Relevant Employee satisfies the requirements to be classified as a ‘minister of religion’ as per paragraph 13 of TR 92/17, the Relevant Employee is a ‘religious practitioner’ as per the definition of that term in subsection 136(1) of the FBTAA. As such, the second criterion in paragraph 57(b) of the FBTAA is satisfied. | Detailed Reasoning - Are the benefits provided to the Relevant Employee or to a spouse or child of the Relevant Employee?: Based on the Facts, the benefits provided to the Relevant Employee do not include benefits to anyone other than the Relevant Employee or to a spouse or child of the Relevant Employee. Therefore, the third criterion in paragraph 57(c) of the FBTAA is satisfied. Are the benefits provided principally in respect of the Relevant Employee’s pastoral duties or any other duties directly related to the practice, study, teaching or propagation of religious beliefs? Paragraph 21 of TR 92/17 provides that ‘pastoral duties’ are generally duties associated with the spiritual care of the members of the congregation of a religious body. These duties can include the communication of religious beliefs, as well as the teaching, counselling and/or support of adherents and members of the surrounding community, and attendance at in-service training seminars of a religious nature. Paragraph 25 of TR 92/17 states that administrative work, including the administration of a church or school, does not qualify as pastoral duties or work that is directly related to the propagation of religion. Paragraphs 27 and 28 of TR 92/17 provide guidance with respect to the term ‘principally’. These paragraphs highlight that the ‘principally test’ would generally be satisfied in instances where a benefit is provided to a minister of religion whose duties are exclusively or predominately pastoral, and that the test would not be satisfied where such duties are exclusively or predominately non-pastoral. However, paragraph 29 of TR 92/17 states that where an employee who is a religious practitioner undertakes both pastoral and non-pastoral duties (even where non-pastoral duties predominate), it is possible for a benefit to be provided solely or principally in respect of the employee’s pastoral duties, and thus be exempt under section 57 of the FBTAA. In establishing whether the benefits are provided to the relevant employee principally for the pastoral duties function of their role it is important to determine if there is a history of other employees in a similar situation. As per the facts; Elders who are required to perform a number of pastoral duties are remunerated in that capacity. While there isn’t anyone else in the exact same situation as the relevant employee there are other elders and ministers who are remunerated for their pastoral roles. Additionally, there are ministers who are paid a taxable salary for the administrative functions they perform in addition to their pastoral duties. The elders who receive remuneration receive similar benefits as those provided to the relevant employee. Historically the relevant employee’s role had been filled by an ordained minister due to its heavy focus on pastoral duties. The relevant employee was appointed to the role based on previous business experience. The role primarily focuses on the pastoral care of its business members with a secondary function to assist and provide supervision and direction to the business function of the organisation. As per the Facts; while the Relevant Employee (who, as established above, is considered to be a ‘religious practitioner’) performs both pastoral and non-pastoral duties, the benefits provided to the Relevant Employee are provided solely in relation to pastoral duties, with no benefits provided in respect of non-pastoral responsibilities. The current circumstances are comparable to the example in paragraph 29 of TR 92/17. Furthermore, there is a history of elders being provided remuneration for their pastoral duties in similar circumstances to that of the relevant employee Therefore, it is considered that the fourth criterion in paragraph 57(d) of the FBTAA is satisfied. | Detailed Reasoning - Conclusion: The criteria under section 57 of the FBTAA have been fulfilled and the benefits provided to the Relevant Employee are exempt.

Question: Are you able to provide exempt benefits under section 57 of the FBTAA to the Relevant Employee?