Salary Sacrifice in the gun

Health Professionals working in the non-for-profit sector—including public hospitals and community healthcare centres—are likely to be worse off under changes to taxation legislation moved by the Abbott federal government in their second federal budget.

The move, effective from 1 April 2016, sees a grossed-up collective cap of $5000 placed on two areas of salary packaging: Meal Entertainment (ME) and Entertainment Facility Leasing (EFL). In real terms, this limits spending of pre-tax dollars in these areas to something around $2330—the exact figure is not yet known and will be dependent on the as yet undrafted legislation.

It is important for employees to understand that this move also sees ME and EFL become reportable items. That is, there will be a Reportable Fringe Benefits Amount (RFBA) on these benefits. Reportable amounts are included in income tests for some benefits and obligations such as super co-contributions, the Medicare levy surcharge threshold calculation and a range of Centrelink and child support benefits. This could see some workers worse off.

This change was recommended by a 2013 Productivity Commission inquiry that took aim at ‘Jane’, a non-for-profit worker who salary packaged her wedding. Assistant Treasurer Josh Frydenberg stands firmly behind the recommendation noting that in many instances this benefit offends ‘the principle of fairness.’

The fact that a strict low-ball cap would disadvantage an employee on $70k to a far greater extent than it would an employee on $250k does not seem to come into this arbitrary ‘fairness’ calculation.

Further, there appears to be no genuine acknowledgement of the fact that this concession allows Not-For-Profit and Charitable Institutions to attract quality staff so that they can continue to work for social betterment.

“This measure is not about closing down a so-called exploitable tax loophole”, notes VHPA Secretary Craig McGregor. “It is rather part of a sustained attack on the provision of essential services via centralised and non-private institutions.”

The Union has extended an invitation to Josh Frydenberg to meet with a delegation of VHPA members to discuss the Paid Parental Leave issue. We hope to use the opportunity to discuss the Abbott Government’s proposed changes to Fringe Benefit Tax legislation.

We await a response to our invitation.