Public Consultation on Limiting FBT Concessions

The Federal Treasury has released a consultation paper on limiting fringe benefits tax concessions on salary packaged entertainment benefits which affect the Not for Profit sector.

The draft legislation and explanatory material put in place the 2015-16 Budget measures that will apply from 1 April 2016.

“The measure will introduce a separate single grossed-up cap of $5,000 for salary packaged meal entertainment and entertainment facility leasing expenses (entertainment benefits) for employees of public benevolent institutions, health promotion charities and employees of public and Not for Profit hospitals and public ambulance services,” Treasury said.

“Currently these employees can salary package entertainment benefits with no FBT payable by the employer and without the benefits being reported.

“All salary packaged entertainment benefits will also become reportable fringe benefits.

This measure will improve the integrity of the tax system by introducing a limit on the use of these benefits.”

In May the Community Council for Australia (CCA) said savings made from any changes to Not for Profit employment benefits should be returned to the sector,after the Federal Government announced it would end uncapped meals and entertainment tax concessions in the Budget.

CCA CEO David Crosbie said many charities and Not for Profits 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.

However, CCA said at the time that 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.”

The Federal Government’s recent discussion paper on tax reform specifically targeted 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.

The closing date for submissions on the draft legislation is Friday 21 August 2015.