First, some background on the way the Salary Sacrifice system works:
A stipend sacrifice arrangement is one where a ministry worker foregoes the payment of a portion of their cash stipend. In return, the Parish Council / Diocese agrees to make certain payments to third parties on behalf of ministry workers. (Quoted from the FAQ Ministry Expenses document on the Diocesan website)
The reason salary sacrifice payments are free from tax is because rather than getting money, the parish / diocese is providing you with a non-cash fringe benefit (and the church is exempt from Fringe Benefit Tax for pastoral workers). So, for a payment out of your ME/SS account to qualify as a fringe benefit, it needs to be an “Expense payment fringe benefit”. The ATO defines them as follows:
An expense payment fringe benefit may arise in either of two ways:
- you (the employer) reimburse an employee for expenses they incur
- you pay a third party in satisfaction of expenses incurred by an employee.
So, if the parish/diocese were to pay your scheduled mortgage repayment for you, or were to reimburse you for it, then that would be an expense payment fringe benefit.
However, to pay in excess of the required repayment amount is doing more than paying (or reimbursing you for) a bill you owe, and indeed, with a redraw account, that extra money is available to you, in one of your bank accounts, as cash regardless of whether you choose to withdraw that money from the account or not. This would mean that the amount in addition to the required repayment is not an expense payment fringe benefit, and should be reported to the ATO by the parish/diocese as taxable income.
3 July 2019