As you know stipend packages for ministers are certainly different to other salary packages!!
We are receiving many questions about how the new JobKeeper government stimulus applies to Minister’s pays.
This article provides information to help you determine if a minister’s pay should receive a JobKeeper top up. Here are our answers to the most common questions around this. Our information is based on our experience, research, input from our professional bodies and information from the head office of a Diocesan client.
Basics of ministry stipends
If you are already paying ministers you will know that allowances and benefits can be treated as Fringe Benefits and are Tax free arrangements for Religious Practitioners, subject to special conditions (to be sure click here for more details from the ATO website).
So, how do you calculate ministers salaries to determine if a JobKeeper top up payment is applicable?
Gross stipend amount: ie the 100% of stipend before deducting the stipend sacrifice, generally 30 or 40% (different churches and denominations use different %). Be sure to check the stipend package arrangement for any ministers before proceeding.
Exclude: Allowance pay items that churches commonly call allowances are in fact provided as benefits even when paid through an MEA/MBA/MEF/NCB, are not to be included – items such as car, housing, technology, utilities and such.
Can a portion of a JobKeeper top-up be sacrificed?
A top-up payment can also be split, following the same principle as the basic stipend split.
Explained: Whether the top-up is more or less than $1,500 per fortnight, it can be made up of 2 parts – the taxable stipend and the stipend sacrifice (the 30% or 40% paid into an MEA/MEF), any top-up payment could also be split the same way.
How will the ATO see that we are paying our ministers $1500 or more?
Our understanding (as at the time of writing this article) is that the ATO will learn about the payments we make to our employees including ministers, through our regular processing of payroll and filing of this information to the ATO via STP (the Single Touch Payroll system).
Also we understand, that churches/organisations will need to be submitting information about employees with JobKeeper eligibility to the ATO on a monthly basis using the ATO Business Portal or your BAS/Tax Agent.
We are not exactly sure yet what information will be.
Payroll, JobKeeper top-up and Ministers’ Payroll in Xero
Our recommendations for processing Ministers pays including MEA/MEF’s, allowances and benefits has always been to include all this information together in the payroll system.
Please click here for our recommendations on how to deal with minister’s pays in Xero.
Now that churches submit your payruns regularly to the ATO, through STP, we understand that the ATO will have all the information required and therefore the ATO can ask questions if necessary.
What will happen if the detail in the payroll system is incomplete?
If a church is only recording only the taxable stipend in the payroll system and not the complete payment details, such as allowances, the records per STP maybe incomplete. Therefore the date transfer to the ATO via STP maybe incomplete. We presume that the church will need to provide additional information to the ATO. Maybe this will be done via the monthly lodgements of information.
We strongly recommend that you process all the details of your minister’s payroll in Xero.
It is all clear and in one place.