Believe it or not, I get asked this question all the time so to save you asking me…
Section 57 of the Fringe Benefits Assessment Act 1986 includes an exemption from Fringe Benefits Tax on benefits for certain employees of religious institutions.
Under this section, if a benefit is provided by a religious organisation to assist a religious practitioner with pastoral duties it is both not taxable to the employee (as it is a benefit and not salary) and exempt from FBT being paid by the employer… Nice outcome…
But what is a religious organisation covered by this section?
In practice, if the entity set up for the furtherance of a religion such that it could get income tax exempt charity status, it is a religious organisation. Simple. At law a religious organisation has a “belief in a supernatural Being, Thing or Principle” and the “acceptance of canons of conduct which give effect to that belief, but which do not offend against the ordinary laws.” So don’t tell me AFL is your religion…
But are all employees of religious organisations covered? No, just religious practitioners. A ‘religious practitioner’ is defined in subsection 136(1) to mean:
(a) a minister of religion;
(b) a student at an institution who is undertaking a course of instruction in the duties of a minister of religion;
(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.
So if you are the office manager or the bookkeeper… you will not be a religious practitioner.
If you pass these two tests, and have a religious organisation employing a religious practitioner, certain benefits will be non taxable for the employee and exempt from FBT for the employer.
Taxation Ruling TR 92/17 covers this exemption specifically and has examples of a religious practitioner being provided housing, use of a car and schooling and all of this being effectively tax free.
Having done the books or audited many of these organisations I can say I have never met any religious practitioner who is doing their job for the money – I could not live off what many are paid. But if you are going to employ religious practitioners, how about doing it in a way that saves everyone tax by providing more benefits and less cash salary.