Anger over FBT changes

Aged care providers have written to the federal government to oppose recent changes to the fringe benefits tax arrangements for car leasing, claiming the new rules are ill considered and will reduce the attractiveness of the sector to skilled staff.

John Begg, CEO LASA Victoria.

By Linda Belardi.

LASA Victoria has joined the state’s ambulance service and peak bodies representing public and not-for-profit healthcare providers and dentists to urge the Rudd government to dump changes to the car fringe benefits tax.

In letters sent to both Prime Minister Kevin Rudd and Opposition Leader Tony Abbot on Wednesday, the heads of the four organisations said the new rules would impact on the ability of health and aged care employers to remain competitive when recruiting and retaining staff.

The CEO of LASA, John Begg, said the significant tax concession was necessary to offer attractive salary packages, which commonly included a leased car, to managers and team leaders in the lower paid aged care and not-for-profit sectors.

Treasurer Chris Bowen said the reform, which removes the statutory formula method of calculating the FBT, was designed to create a fairer and more effective tax system by clamping down on tax breaks for private car use.

Using the statutory formula method, employees can currently subject just 20 per cent of a vehicle’s cost to FBT each year, without having to justify the actual percentage of work-related use.

Under the changes, employees will be required to keep a logbook for three months every five years to record how much the car is used for business purposes.

The government says the changes will affect some 325 000 people and will reap $1.8 billion in taxes to fund the government’s shift to a floating carbon price. 

Mr Begg said middle to low-income earners delivering vital health and aged care services would be hit hardest.

According to the letter also signed by the Victorian Healthcare Association, the Australian Dental Association and Ambulance Victoria, 28 per cent of the 100 000 surveyed employees with a car lease arrangement worked in the charity and public health sectors. Figures specifically on aged care workers were not reported.

Mr Begg also criticised the government for the announcement, which he said was made without notice or consultation, and without consideration of the impact of the reform on the not-for-profit sector.

“There is no doubt that the small usage of a company-leased car for private travel is a necessary benefit to attract a staff member to a sector that in most cases receives less pay then in the private sector or other industries,” he said.

“The change hasn’t been thought through. While it’s supposed to hit the top end, it’s really going to hit the middle to lower end earners.” 

Mr Begg said combined with the now deferred $2000 cap on education expenses, these policies unfairly target sectors that are trying to entice a significant number of additional workers to the industry.

In a separate letter to Treasury from ACSA, Adjunct Professor John Kelly called on the government to assess the impact of the decision on the delivery of essential services, including the recruitment and retention of aged care staff in rural and remote areas and the cost of delivering home care services.

Adj Prof Kelly cited the example of a not-for-profit aged care provider that predicted an increase in costs totalling between $600 000 – $700 000 for 220 leased cars across the organisation.

Richard Hearn, CEO of South Australian aged care provider Resthaven said the statutory claims method should be retained. ‘The government is fully aware that the FBT exemptions provided to the NFP sector is not rorting,” he said. 

“It has been long-standing federal government policy to allow the statutory claims method. Indeed, the government itself reviewed the policy in 2011 and adopted a revised approach, with a four-year transition period.

Treasury analysis reported that the changes would affect around one in 25 employees earning between $60,000 and $100,000 a year, compared to one in six employees earning over $150,000 a year.

Mr Abbot said he would scrap the changes if elected to government.

Tags: fbt, john-begg, lasa-vic, richard-hearn, tax,

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