This rewrites the previous ATO view expressed in Taxation Ruling TR 92/17, which the ATO withdrew on and with effect from the same date. There is no actual change to the ATO position. Rather, the draft ruling updates the ATO view to reflect the current requirement for religious institutions to be registered charities with the Australian Charities and Not-for-profits Commission (ACNC) to meet the criteria of providing exempt fringe benefits, and it also seeks to recognise changes in the nature of religious practice that have taken place since TR 92/17 was first released.
The draft ruling states the three (3) requirements for the provision of FBT-exempt benefits are:
- The provision of benefits by a ‘registered religious institution’;
- The provision of benefits to an employee ‘religious practitioner’, or the employee’s spouse or child; and
- The provision of benefits principally in respect of pastoral duties or ‘directly related religious activities’. (emphasis added)
Given the significant changes in the operations of religious institutions in the 25+ years since the previous ruling was released, this new development provides both opportunities and risks for discussion and consideration by management, advisors and directors. Indeed, the release of this draft ruling provides an opportune time for religious institutions to review the contents of the ACNC register, particularly confirming whether (or not) the ‘advancement of religion’ charity sub-type is included as one of its purposes.
Our experience, aligned with similar discussions at the recent ACNC Regulatory Conference in Melbourne on 3 August, suggests that there is still significant integrity issues with the information contained in the ACNC’s register including with charitable purposes. The direct link between this draft ruling and the ACNC places these FBT exemptions at risk if the register is not accurate.
The release of this ruling also provides a timely reminder to conduct a review of the current remuneration arrangements with all religious practitioners and employees to ensure compliance with the relevant tax legislation. We would be happy to assist in this regard.
Comments on the draft ruling are due by 24 August 2018. We welcome any comments you have on the draft ruling or alternatively you may wish to send your comments directly to the ATO. The final ruling, when issued, will apply both before and after its date of issue.