I am pleased to announce that the Government has reached agreement with the Australian

Democrats on the passage of the legislation giving effect to the FBT capping measure. The

details are included in my correspondence with the Leader of the Australian Democrats

(attached).

In its tax reform package A New Tax System(ANTS), the Government announced a

measure designed to stop over use of the current open-ended concessional FBT treatment

available to public benevolent institutions and certain other not-for-profit

organisations. ANTS noted that, from 1 April 2000, a cap would be imposed on

the value of concessionally-treated fringe benefits which could be provided to employees

of these organisations.

Although the Australian Labor Party went to the last election with a policy supporting

a cap, the Opposition would not support the A New Tax System (Fringe Benefits) Bill

2000.

The Government’s agreement with the Australian Democrats involves increasing the

level of the cap applying to charities and certain other non profit organisations to

$30,000 of grossed up taxable value per employee, effective from 1 April 2001. The

Government has further agreed to review the level of the cap from time to time in the

light of general salary movements.

The Government believes that the $30,000 cap continues to provide a generous concession

to these employers.

The cap to apply to public and not-for-profit hospitals will be $17,000 of grossed up

taxable value per employee, effective from 1 April 2000. To assist with the transition to

the $17,000 cap, the Government will provide grants to public hospitals, through the

States, of $88 million in 2000-01, $80.5 million in 2001-02 and $72 million in 2002-03. By

reducing to zero in 2003-04, the grant will effectively phase out over the life of the

current Medicare agreement.

Applying a $17,000 cap to public and not-for-profit hospitals is justified on fairness

grounds, given that the public health sector represents a significant component of the

health industry overall and competes with the for-profit health sector for qualified

staff.

In addition, the Government will provide a concession to charities and non-profit

hospitals operating in regional areas, by exempting from FBT housing benefits provided by

employers located at least 100 kilometres from a population centre of 130,000 or more. The

definition of a regional area embodied in this measure is broader than the existing

definition of remote area for FBT purposes. This measure will significantly assist

charitable institutions and non-profit hospitals in regional areas in attracting and

retaining quality professional staff. The exemption will take effect from 1 April 2000.

The Government has also agreed to the establishment of an independent inquiry into

definitional issues relating to charities, churches and not-for-profit organisations. The

intention will be for the inquiry to be completed by the end of this year. The Government

will consult further with the Australian Democrats on the terms of reference for the

inquiry.

Contact: Geoff Miller (02) 6216 1483

0417 667 457

Letter from Peter Costello to Meg Lees 13/04/2000
  

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Letter from Meg Lees to Peter Costello 13/04/2000
  

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Letter from Peter Costello to Meg Lees 13/04/2000

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