The ATO have recently released a new ruling about the requirements for FBT exemption for benefits provided to religious practitioners. This ruling is an update of their last ruling issued in 1992 and, according to the ATO, there are no major changes to the overall ATO view.
The ruling provides clearer guidance on the Commissioner’s view on the meaning of:
- registered religious institution
- religious practitioner
- pastoral duties and directly related religious activities
The ruling also provides practical examples to explain how certain benefits will be exempt from FBT when provided to religious practitioners. The ATO has indicated that additional examples, to supplement those in the new ruling, will be provided on their website in the coming weeks.
While mainly of relevance to churches the ruling also provides examples dealing with situations where “religious practitioners” are engaged within a school context –
Example 2 – duties that are both pastoral and non-pastoral
29. Ismail is a full-time member of a religious order supervised by a religious institution registered with the ACNC. As part of his duties, and during most of his working hours, he teaches non-religious subjects at a private school, for which he is separately remunerated. This is not a pastoral or a directly related religious activity.
30. The institution also undertakes to meet Ismail’s living expenses, including accommodation and meals. The institution states that these benefits are being provided in respect of Ismail’s religious duties. Ismail’s benefits are of the same kind and amount as benefits provided to other members of the religious order who perform similar religious duties (of a comparable kind and amount to Ismail) who do not perform any non-religious duties (such as teaching).
31. The benefits provided to Ismail in the form of payments for living expenses are exempt from FBT. They are in respect of his religious duties or activities that are directly related to the practice, study, teaching or propagation of religious beliefs.
Example 4 – duties that are predominantly administrative
36. Kate is a minister of religion who is appointed principal of a private school that is a registered religious institution. Kate’s duties are related predominantly to the administration of the school.
37. As part of her remuneration package, Kate is provided with a residence and a motor vehicle.
38. Those benefits are not exempt from FBT, because the benefits are provided principally in respect of duties that are not pastoral duties or directly related religious activities.
Example 5 – duties that are solely or predominantly pastoral
40. Rod is a lay person commissioned to perform the ministerial duties of a church and meets all the criteria to be a minister of religion.
41. Rod is also employed by a private school to teach religious studies and to perform other duties as a spiritual guidance officer. The private school is a registered religious institution, which also maintains registration under another ACNC subtype.
42. The school provides Rod with the use of a car in relation to his employment.
43. The benefit is exempt from FBT, as the school is a registered religious institution and the benefit is provided principally in respect of pastoral and directly related religious activities that Rod solely or predominantly performs.
Example 6 – duties that are not solely or predominantly pastoral or directly related religious activities
44. Following from the facts of Example 5, in a subsequent year there is a restructure of the teaching duties at the school and Rod commences teaching the Mathematics and English curricula in addition to providing religious instruction.
45. Rod’s role as a spiritual guidance officer is now shared with several other teaching staff. His teaching duties in subjects other than religious instruction take up the majority of his working time.
46. The school continues to provide Rod with benefits on the same basis.
47. The benefits are not exempt from FBT, as the arrangement between the school and Rod does not show that the benefits are provided principally for the pastoral duties or the directly related religious activities that he performs.
Christian schools seeking to apply the FBT exemption to staff should download the new ruling from the ATO website, here, and seek appropriate professional advice if needed.