The Henry review is believed to favour removal of the present ability of some not-for-profit employers to provide tax-free benefits of up to $30,000, which potentially amounts to a maximum personal tax saving of $7463 to the employee. This will leave an estimated 60,000 Australian hospitals, schools and charities with a pay-roll shortfall.
Russell Garvey, BDO Director, Corporate & International Tax, says most non-profit bodies have been working with the current concessions in order to stay competitive in the labour market, and that the FBT rules are well accepted and administered across the charitable sector.
“The proposed recommendations are a body blow to a not-for-profit industry that will be left with trying to attract competent staff to carry out their charitable and public benevolent works,” says Mr Garvey.
The FBT concessions were originally enacted to address the fact that charitable and public benevolent organisations don’t necessarily have the available funds to pay competitive salaries to staff, and the ability to offer tax-free benefits help alleviate some of the discrepancies. Hundreds of thousands of low-paid workers of church-run hospitals and nursing homes, welfare agencies and other charities receive top-up payments that allow them to pay for their mortgages, motor vehicles and other fringe benefits.
Mr Garvey questions how the charitable sector would attract a high-quality workforce without FBT. “The Henry review reportedly says that government should support charities through a system of direct grants if it feels they need help,” he says, “but it is not known what assistance the not-for-profit sector will be offered going forward.
“A grant or some other cash rebate system will require a level of ongoing administration and presumably an approval process. The cure could be a more complex and less cost efficient way to administer assistance to this much needed sector of our community.”