NO.022

On 13 April last year, I announced the details of an agreement between

the Government and the Australian Democrats on the passage of the

legislation giving effect to the fringe benefits tax (FBT) reforms.

The reforms were designed to restrict the over-use of the open-ended

FBT concessions available to public benevolent institutions (PBIs)

and certain other not-for-profit organisations. In the case of PBIs,

the capping measure still allows an FBT exemption of up to $30,000

of grossed up taxable value per employee, effective from 1 April 2001.

A significant number of indigenous organisations are classified as

PBIs.

As part of this agreement, the Government undertook to examine the

impact of the FBT capping legislation on the recruitment and retention

of staff employed by Aboriginal and Torres Strait Islander organisations,

with a view to providing a mechanism to alleviate adverse impacts

that could occur as a result. A study for this purpose was subsequently

commissioned by the Department of Health and Aged Care, in conjunction

with the Aboriginal and Torres Strait Islander Commission.

Among the findings of the study was that fringe benefits have been

used extensively by Aboriginal and Torres Strait Islander organisations

in salary packages to enhance their ability to attract and retain

professional staff to service their communities, particularly in rural

and remote areas.

On the basis of the study, the Government has decided to allocate

$43.7 million in additional funding over the next four years to assist

not-for-profit indigenous organisations to adjust to the introduction

of the new FBT arrangements.

This additional funding will be available to Aboriginal and Torres

Strait Islander organisations which provide health, housing, employment,

education and legal services to indigenous communities, and are affected

by the FBT capping measure. It will enable these organisations to

continue to offer remuneration at competitive market rates in order

to attract and retain professional and other service staff.

Commonwealth agencies will contact Aboriginal and Torres Strait Islander

organisations shortly with further details concerning the arrangements

for the provision of additional funding.

Canberra

30 March 2001

Media Contact: 6277 7340

DHAC Contact: Michel Lok on 6289 5225

ATSIC Contact: Robert Lejsek 6121 4195