Exempt income: church minister 'visiting' Australia

Is income derived by a taxpayer, a member of an overseas religious association, for services rendered as a church minister in Australia, exempt from income tax under paragraph 23(c)(iv) of the Income Tax Assessment Act 1936 (ITAA 1936)?

No. The income derived by the taxpayer for services rendered as a church minister in Australia is not exempt from income tax under paragraph 23(c)(iv) of the ITAA 1936 as the taxpayer is not 'visiting' Australia.

The taxpayer is a member of an overseas religious association which sends missionaries to Australia. The taxpayer arrived in Australia to minister to the congregation of an Australian church initially for a period of two years. The church later appointed the taxpayer as its minister on a permanent basis. In addition to the taxpayer's duties as a minister of the church, the taxpayer carries out research for planning purposes.

The income of the taxpayer consists of donations from overseas churches. These donations support the taxpayer and the taxpayer's ministry work in Australia.

The taxpayer entered Australia on a temporary residency visa, and was later granted permanent residency status. The taxpayer intends to stay indefinitely in Australia.

Paragraph 23(c)(iv) of the ITAA 1936 provides for the exemption from income tax, income which is derived in the capacity of representative of any society or association established for educational, scientific, religious or philanthropic purposes, by any person visiting Australia in that capacity for the purpose of attending international or Commonwealth conferences or for the purpose of carrying on investigation or research for such society or association.

For the exemption to apply, it is necessary, amongst other things, that the representative is 'visiting' Australia. The word 'visiting' is not defined in the income tax provisions. According to the rules governing statutory interpretation, it must take its ordinary meaning.

In the New Shorter Oxford English Dictionary 1993, 3rd edn, Oxford Clarendon Press, the word 'visiting' is defined to mean 'the action of visit'. According to that dictionary, the word 'visit' means 'an act of visiting a person; a call on or temporary stay with a person for social, friendly, business or other purposes'.

The Macquarie Dictionary 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines the word 'visit' to mean: 1. to go to see (a person, place etc.) in the way of friendship .....business, curiosity, or the like. 2. to call upon (a person, ...) for social or other purposes. ....4. (in general) to come or go to.

Based on the above, it is considered that the word 'visiting' in the context of paragraph 23(c)(iv) of the ITAA 1936 contemplates a person staying in Australia on a short-term or temporary basis, as opposed to staying permanently or an ongoing basis.

Having regard to the duration of the taxpayer's stay in Australia and the circumstances of the taxpayer's stay in Australia, including the granting of permanent residency status, the acceptance of the taxpayer as the minister of the church on a permanent basis and the taxpayer's intention to stay indefinitely, it is considered that the taxpayer could not be described as 'visiting' Australia within the ordinary meaning of that word.

Further, paragraph 23(c)(iv) of the ITAA 1936 provides the exemption from income tax should the taxpayer's purpose in visiting Australia be to attend prescribed conferences or carry on investigation or research on behalf of certain societies or associations.

Whilst representing this religious association in Australia, it is evident that the taxpayer's Australian sourced income is predominantly derived from carrying out ministry work for an Australian church and not from attending prescribed conferences or carrying on investigation or research on behalf of that religious association.

Whilst the taxpayer's duties may include carrying out some research activities, it is considered that this activity is incidental to the taxpayer's main purpose of ministry work.

As the requirements under paragraph 23(c)(iv) of the ITAA 1936 are not satisfied, the income derived by the taxpayer in Australia is not considered to be the subject of the specific exemption provided in this paragraph.

Note: irrespective of the outcome resulting from the application of the provision to this particular case, the word 'exempt' is used in paragraph 23(c)(iv) of the ITAA 1936 with the presumption that, apart from the provisions contained in it, the income in question would fall within other provisions of the Act under which it would be taxable (see Reid v. Federal Commissioner of Taxation (1947) 73 CLR 282; (1947) 8 ATD 255; (1947) 3 AITR 510).