Health Professionals benefiting from employer-provided salary packaging arrangements can breathe a sigh of relief.
While the Federal Government has made a surprise move to clamp down on how Fringe Benefits Tax (FBT) is calculated when using a work car for private use, it has left the tax benefits associated with salary packaging for non-profits unchanged — for now.
The changes to the FBT treatment of work cars that were announced recently are a key part of the Government’s budget savings designed to offset the cost of scrapping the Carbon Tax and moving to an Emissions Trading Scheme.
The Rudd Government is trumpeting the changes as making the tax system fairer by ensuring the FBT exemption for cars is targeted to actual business use rather than personal use. The change involves removing the ‘statutory formula method’ for both salary-sacrificed and employer-provided cars. This means any new or varied contracts entered into will have to use the ‘operating cost method’ whereby tax concessions are limited to the cost of running the car for business use, as worked out by a log book.
Experts have warned that the changes remove a key selling point for salary-packaging. They are part of a trend in recent years to pare back tax concessions on employment that have generally benefitted higher income earners. These include the abolition of in-house meals and other benefits, and more recently the capping of self-education expenses.
Tax alert for hospitals and non-profits
Some tax experts have warned this leaves the major remaining area of salary-packaging benefits in the not-for-profit sector which should be on “high alert” as to possible future changes.
Perhaps the main reason this sector has not been targeted so far is the fact that salary-packaging is used to ‘top-up’ salaries that are generally lower than other sectors, in turn saving State and Federal Governments from having to provide more in direct funding.
However, owing to the prospect the Government may introduce curbs on salary-packaging for hospitals and non-profits at virtually any time they are short on revenue or decide to change tax policy, the VHPA has avoided factoring these arrangements into Enterprise Agreements.
“These latest surprise FBT changes underline the wisdom of our approach to Enterprise Agreement negotiations and the importance of focusing on salary levels and actual income rather than ancillary benefits,” said Andrew Hewat, Assistant Secretary.
“But we are still checking whether these latest FBT changes will have a significant effect on members who have a work-provided car. Please let us know if you think you will be adversely affected,” said Andrew Hewat.