The end of salary packaging???

The Government has just released draft legislation in relation to the capping rules for exempt fringe benefits that can be provided by public hospitals, ambulance services, registered public benevolent institutions and registered health promotion charities.

I should quickly say it is exactly as was announced on Budget night – from 1 April 2016 the total amount of salary packaged meal entertainment and entertainment leasing facilities that employees of these entities will be able to salary package is $5,000. (By the way, as my wife is a doctor at the public hospital, I have to get my 8 and 4 year old sons married by 1 April 2016 so my wife can salary package the costs of their wedding…)

But what is more interesting is that these changes only apply to benefits where there is a “salary packaging” arrangement.

For the first 20 years of the FBT Assessment Act 1986 there was no difference between whether a fringe benefit was “salary packaged” or not. But recently, changes have been made to limit the FBT concessions and exemptions to situations where the benefit is not provided under a salary package arrangements.

In 2008 the FBT Assessment Act 1986 was changed so that the exemption provided by section 41 would no longer apply to food or drink provided to an employee as part of a salary sacrifice arrangement.

In 2012 the FBT Assessment Act 1986 was changed so that:

  • Concessions that apply to the valuation rules in respect to in-house expense payment benefits, in-house property benefits and in-house residual benefits do not apply to benefits under a salary packaging arrangement.
  • The specific exemption that applies to residual benefits in respect to private home to work travel through public transport, where the employer and associate are in the business of providing transport to the public, does not apply where the benefit is provided in-house and where the employee accesses the benefit under a salary packaging arrangement.
  • The annual reduction of aggregate taxable value of $1,000 does not apply to in-house benefits where the employee accesses the benefit under a salary packaging arrangement.

This draft legislation is the third time the Government has limited FBT exemptions and concession so they do not apply to “salary packaging” arrangements.

Given that there is now a definition of “salary packaging” in section 136 of the FBT Assessment Act 1986, it is very easy to amend this Act so that any exemption or concession in the FBT law does not apply where there is salary packaging (interestingly my auto correct keeps changing this to slurry packaging…).

As there will be no car manufacturing in Australia in 2017 why would not the Government consider saving $800 million a year and make it so that the statutory method for calculating the FBT on cars only available if the car is not salary packaged.

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About Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.
This entry was posted in FBT, Planning Stuff, Tax Policy. Bookmark the permalink.

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