Budget to Target NFP Tax Concessions

Savings made from any changes to Not for Profit employment benefits should be returned to the sector, according to a peak body, as speculation mounts that the Federal Government will end uncapped meals and entertainment tax concessions in next week’s Budget.

CEO of the Community Council for Australia (CCA), David Crosbie, said many in the charities and Not for Profit sector recognise that the current concession system is unfair for most employees and some capping is inevitable, but any Government changes should see the savings kept within the sector.

“According to the ATO, the savings that can be achieved by capping the meals and entertainment card are well over $100 million per annum,” Crosbie said.

CCA says the concessions should be capped at $15,000 per annum, and the money saved should be used to enable all charities and Not for Profit organisations to offer tax deductibility for donations made by their communities.

“ATO figures suggest this measure would be more than affordable with the savings from capping the FBT concessions, provided all schools and churches did not automatically qualify,” Crosbie said.

“It is important to understand that more than one million Australians work for charity and Not for Profit organisations in Australia, most at well below commercial rates of pay.

“Over 90 per cent of these employees do not use a meal and entertainment card (originally intended to help the sector attract and retain staff) and of those that do, most claim back relatively small amounts.

“The reality is that there is a tiny minority within the sector that are very well-paid that can afford to spend and therefore claim tens of thousands in tax free income.  Capping the concession is fair, but the savings should be directed towards the original intent – supporting our charities and Not for Profits.

“To get tax deductibility in Australia is a ridiculously complex and time consuming process typically costing tens of thousands of dollars and often more than a year of effort, so only the bigger charities tend to go through the process.

“We can make deductibility more transparent and equitable by using the now well established Australian Charities and Not-for-profits Commission determination of whether a charity should gain or retain their charity status as the basis for eligibility.

“Why not allow all those with charitable status to receive tax-deductible donations?  This is much fairer for all charities, would encourage more donations and build stronger communities for all of us.”

The Federal Government’s recent discussion paper on tax reform specifically targets the Not for Profit sector asking if the current tax arrangements are appropriate – raising issues around the ongoing availability of Fringe Benefits Tax concessions and other foregone tax revenue.

The White Paper, entitled Re:think, Better tax, Better Australia, includes a separate section on the Not for Profit sector which points out that while existing tax concessions help increase the level of activity in the NFP sector, the value of revenue forgone from the concessions is significant and growing steadily.

On Monday Assistant Federal Treasurer, Josh Frydenberg confirmed the Government was looking at capping concessions in a bid to create a fairer system.

“Leaders in the Not for Profit sector…including Tim Costello from World Vision have all said that this one should stop,” Frydenberg said.

Chair of CCA and CEO of World Vision Australia,Tim Costello  said that “the current concessions favour the richest employees in our sector”.

“While we need to retain concessions to attract the best and brightest to our sector, I would prefer the concession was capped at a reasonable level, and that all the savings were used to strengthen the sector, not just be redirected into consolidated revenue,” Costello said.

Figures released previously suggest that a number of Not for Profit employees, including medical specialists employed at public hospitals, have claimed over $50,000 in tax free concessions in one year by using their meals and entertainment card to pay for personal expenses such as overseas travel and the cost of weddings.

“These practices have become more widespread in recent years, particularly amongst the small minority of more highly paid employees of charities,” Costello said.