Religious Practitioners

Proverbs 3:3-4: “Let love and faithfulness never leave you; bind them around your neck, write them on the tablet of your heart. Then you will win favor and a good name in the sight of God and man."

The definition of “religious practitioner” was inserted into ITAA 1997 by Act No 168 of 2001 as part of the amendments to several tax laws to clarify the tax treatment of religious practitioners in the “new tax system”.

Under the amendments, religious practitioners are treated similarly to office holders (such as judges and parliamentarians) and common law employees. Religious practitioners who are not employees of religious institutions are treated for tax purposes in the same way as those who are. However, the treatment of religious practitioners under the tax laws does not affect their legal status for other purposes. If a religious practitioner is not an employee at common law, he/she continues not to be an employee.

A “religious practitioner” is defined to mean a minister of religion and a member of a religious order. It also includes a student at an institution who is undertaking a course of instruction in the duties of a minister of religion and a student at a college conducted solely for training purposes to become members of religious orders. The terms “religion”, “religious institution” and “religious order” are not defined in the Act. The Explanatory Memorandum states that these terms are used in their “ordinary sense”. For further comment, see ¶102-051.

Under the PAYG withholding arrangements, an entity is required to withhold from payments made to a religious practitioner for any activity or series of activities done as a religious practitioner of a religious institution (CCH Australian Federal Tax Reporter (FTR) ¶976-563). The withholding obligation applies to payments made on or after 1 July 2002. The obligation only applies if the paying entity makes the payment in the course or furtherance of an enterprise.

Under the Australian Business Number (ABN) and GST laws, activities performed by a religious practitioner, as a religious practitioner of a religious institution, are taken to be the activities of the religious institution (and not the activities of the individual). Consequently, a religious practitioner does not carry on an “enterprise” by performing the activities and he/she is not eligible for and does not need to obtain an ABN and does not need to register for GST (FTR ¶958-005).

Benefits provided to a religious practitioner by a religious institution for the performance of pastoral or related duties are exempt benefits for fringe benefits tax purposes, regardless of whether the religious practitioner is an employee of the institution (FTR ¶819-690).

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