Fringe Benefits for Lay Workers

Notes to Employers

You may be aware that the LutheranChurch of Australia (LCA) is able to provide tax-free fringe benefits to ministers. This is in accordance with an exemption available to churches under the fringe benefits tax (FBT) legislation where fringe benefits are provided principally in respect of pastoral duties or directly-related religious activities.

This exemption is generous as it enables ministers to receive tax-effective remuneration. To ensure that this exemption is not abused, the LCA (like most other church denominations) has developed guidelines in relation to how remuneration arrangements should operate.

The LCAbelieves that generally lay workers are not eligiblefor exemption from fringe benefits tax. However, the actual FBT legislation does not state that ordination is a mandatory requirement. This is explained in a taxation ruling known as TR 92/17 which outlines the Taxation Office’s interpretation of the FBT legislation:

Lay persons acting in the capacity of a minister of religion or equivalent position may be treated as a minister while acting in that capacity. For example, a lay person may be directed to work in a parish where there is no ordained minister. Provided that the lay person comes within the meaning of ‘religious practitioner’ and is an employee for FBT purposes, fringe benefits provided to that person are exempt.

As a result of this, it may be possible for some lay workers of the LCA to receive tax-free fringe benefits provided they satisfy the following conditions:

  1. The lay worker is a religious practitioner:
  2. The fringe benefits are provided to the lay worker, their spouse or the child; and
  3. The fringe benefit is provided principally in respect of:
  4. Spiritual care and/or
  5. Religious activities.

Process for looking at applying FBT exemption to your lay worker

  1. Consult with the LCADirector for Lay Ministry.
  2. You need to substantiate the following in line with the current Board for Lay Ministry Guidelines:
  1. Is your lay worker an accredited lay worker of the LCA?
  2. Has your lay worker a current position description?
  3. Has your lay worker a current employment agreement?

If you answered yes to all of the above questions proceed with the checklist.

If you answered No to any of the above questions you should seek further advice from the LCA Director for Lay Ministry.

  1. Together with your lay worker complete the Fringe Benefits for Lay Workers Checklist to assess whetherthe conditions of section 57 of the Act have been satisfied.
  2. The Fringe Benefits Checklist must be completed and signed by the employer and lay worker.
  3. The original is to be retained by the employer.
  4. A copy is to be given to the lay worker and the Director for Lay Ministry of the LCA.
  5. Consult with the LCANational Office for guidelines on applying FBT if you believe based on the information provided that you are entitled to fringe benefits tax exemption.

REVIEWING THE FBT DOCUMENT

The process for looking at applying FBT exemption to a lay worker must be reviewed if any of the following occur:

  1. There are any alterations to the current position description.
  2. The lay worker vacates the role and it is taken up by another lay worker.

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