Additional Comments by the Australian Greens
Senator Rachel Siewert
These additional comments specifically address Fringe
Benefits Tax and Public Benevolent Institutions (PBIs), charities and other
relevant not-for-profit organisations.
The Australian Greens note that the main issue of concern to
us when this Bill was referred to Committee related to changes that altered the
income test for Family Tax Benefits so that fringe benefits were grossed up,
where they had previously been calculated on a net basis.
Subsequent to this referral the Minister for Family
Services, Jenny Macklin announced that the Government would reverse the changes
to the income definition for Family Tax Benefit A and B and the Child Care
Benefit. The Australian Greens welcome the announcement by the Government.
The unintended consequences of these changes would have been
to effectively reduce the disposable income of many families of community
sector employees, especially those in the $40,000 to $80,000 income range where
the primary income test for Family Tax Benefit is applied.
This change would have impacts on the ability of a wide
range of community service organisations to attract and retain suitably
qualified and motivated staff, their ability to deliver services efficiently to
their disadvantaged clients, and the ongoing viability of the wider community
sector.
The value of the community sector to the Australian economy
is conservatively estimated to be in the order of $50 billion per year –
consisting of $20 billion in expenditure[1]
(of which approximately 62 per cent is public funds and 38 per cent donations
and other income) and at least another estimated $30 billion in unpaid
voluntary work.
It is important to note that wages and conditions within the
community sector are substantially below those offered in both the public and
private sectors. This implies that, if there were a decision by government to
attempt to provide these services by other means, the cost of delivering the
same level of services (which are currently purchased by government for an
estimated $12 billion) would be substantially more than $50 billion.
The community sector cannot compete with public sector
employment or private enterprise on wages and conditions, and this gap
continues to widen alarmingly. The community sector has increasingly relied on
employees voluntarily forgoing the possibility of higher wages elsewhere for
the opportunity to 'do some good' and 'make a difference'. However, with rising
cost of living and other financial pressures there are limitations on the
degree of sacrifice employees are able to sustain and still meet their family
commitments.
The recent ACOSS Community Sector Survey (June 2008) found
that 68 per cent of respondent agencies had experienced difficulty in
attracting staff in the past year, and 43 per cent of respondents named
staffing as one of the three most important issues facing their services. A
significant proportion of respondents expressed concern about wage levels and
indicated that they had trouble attracting and retaining staff.
The committee inquiry received submissions and heard
evidence from a number of service provision organisations within the sector,
including Catholic Social Services, Salvation Army and Uniting Care, that
fringe benefits were crucial in their ability to attract and retain senior and
middle management staff.
Skilled occupations that require appropriately qualified
staff, such as psychologists, social workers and accountants are reportedly
becoming increasingly difficult to fill as skill shortages in these areas
continue to bite and the salary gap with the public and private sectors
continues to widen.
The Australian Greens agree with the wider principle put
forward in the submission from the Australian Council of Social Services that
our tax and social security systems need to be both fair and consistent in the
way in which they confer benefits and attribute costs. We also note that
relying on tax exemptions to remedy the poor remuneration offered by the
community sector is a poor substitute for a properly costed and resourced
welfare system.
On this basis we welcome the proposed Henry review of Australia's
tax system and hope that it will provide fair and consistent remedy to the
existing inequities of our tax system and of the wider issue of sustainable
funding for the community sector.
However, in the meantime we believe that it is imperative to
deal with the current sector viability crisis brought into focus by potential
changes to the assessment of fringe benefit tax. One of these is the ongoing
reduction in real terms of the cap on tax-free fringe benefits.
Indexation of Fringe Benefit Tax exemptions
During the course of the Committee hearings, representatives
of the community sector raised a number of other issues relating to the funding
and ongoing viability of the sector with the Committee, including the need to
raise the current tax-free ceiling on fringe benefits for public benevolent
institutions, charities, not-for-profit hospitals and other relevant
not-for-profit organisations.
The capped exemption on fringe benefits tax for public
benevolent institutions has played a pivotal role in the capacity of
organisations to offer more attractive pay and conditions to their staff. It
has allowed those organisation that qualify as PBIs or rebatable non-profit
employers[2]
(or those who qualify for a lesser capped exemption as public or not-for-profit
hospitals or ambulance services[3])
to effectively offer higher salaries than they otherwise would have been able
to, while at the same time reducing the cost to the purchasers of those
services (be they governments, philanthropic donations or fee-for-service
clients).
The Committee heard that the current tax-free ceiling of
$30,000 is not indexed and has not been increased since it was first introduced
in 2000.
Our calculations indicate if the current ceiling had been
indexed to the Consumer Price Index (CPI) it would now be $38,557.84, and if
indexed to Average Weekly Ordinary Time Earnings (AWOTE) it would now be $43,043.15.
Given the importance of this benefit to the ability of charitable organisations
to attract and retain staff and deliver services, we believe the ceiling should
be immediately lifted to $40,000 and indexation introduced into the
legislation.
A proposed new tax-free ceiling of $40,000 is in between the
two different measures for indexing. We believe that this is a fair figure
given the current cap public benevolent institutions, has not moved in 8 years.
As far as public or not-for-profit hospitals or ambulance
services are concerned, they currently have a different fringe benefits
tax-free ceiling of $17,000, which also isn't indexed and hasn't changed in
eight years.
Our calculations indicate if the current ceiling had been
indexed to CPI it would now be $21,849.05 and if indexed to AWOTE it would now
be $24,391.12. Given the importance of this benefit to the ability of
not-for-profit hospitals to attract and retain staff and deliver services, we
believe the ceiling should be immediately lifted to $23,000 and indexation
introduced into the legislation.
Once the issue of reducing the gap created by the lack of
indexing for the fringe benefits tax-free threshold has been addressed, this
still leaves open the issue of indexation going forward.
The Australian Greens support indexation to Average Weekly
Ordinary Time Earnings (AWOTE). This is because the issue at hand is a benefit
directly related to employment and wages, and hence AWOTE is the appropriate
indexation reference.
Given the value of the sector to the Government as discussed
above, particularly in the provision of much needed services at a cost far
cheaper than Government could either provide or source them, we do not believe
the extra cost of this measure is a great impost onto Government nor provides
any reason to reject it.
The capped exemption from Fringe Benefits Tax for public
benevolent institutions 'cost' the government $250 million in forgone taxes in
2005–06.[4]
Even with an increase in this figure with raising the cap to $40,000, this is
still a small amount compared to the value the community sector contribute as
discussed above.
While the Australian Greens are pleased that the Majority
Report raises the issue of the cap, we are disappointed that the Report
recommends that the issue be addressed at a later date and not as part of this Bill.
This issue is a matter of urgency for the sector, the Greens believe it should
be addressed now as a matter of urgency.
To this end the Australian Greens will be moving amendments
to increase the cap on exempted level of fringe benefits tax for these two
groups.
Recommendation 1
That the ceiling on tax-free fringe benefits is increased
from $30,000 to $40,000 for Public Benevolent Institutions, charities and other
relevant non-for-profit organisations and from $17,000 to $23,000 for
not-for-profit and public hospitals and public ambulance services.
Recommendation 2
That the ceiling on tax-free fringe benefits for Public
Benevolent Institutions, charities and other relevant non-for-profit
organisations and not-for-profit and public hospitals and public ambulance
services is indexed annually to Average Weekly Ordinary Time Earnings (AWOTE).
Senator Rachel Siewert
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