Low-paid charity staff lose tax perk

Steve Lewis

Some of Australia’s lowest-paid workers could be stripped of salary perks worth up to $30,000 as part of a massive tax overhaul.

In a big challenge to the charity sector, the Henry tax review will recommend the clawback of fringe benefits tax concessions used by 60,000 organisations.

These allow church-based hospitals and nursing homes, the Salvation Army and other welfare agencies to provide top-up payments to their workers.

In its 1000-page blueprint, the Rudd Government’s independent tax review has slammed the FBT arrangements as being too complex and open to abuse.

It suggests that government agencies would be better suited to pay charities through a system of direct grants.

But the changes threaten to unleash an election-year backlash from the welfare sector, which is privately warning it may have to close or cut back essential services such as soup kitchens.

Catholic Health Australia has received advice from accountants KPMG that the tax clawback will cost its 75 hospitals an alarming $72 million.

The welfare sector – which was secretly briefed by Treasury last year on the reforms — is now talking of a tough campaign to defeat the Henry reforms.

Under the current tax concessions, not-for-profit organisations can deliver a range of tax concessions worth up to $30,000 a year.

The benefits are open to church-run hospitals and nursing homes, big and small charity outfits and some state hospitals.

Hundreds of thousands of workers, often on modest wages of $40,000 to $60,000, get top-up payments that allow them to pay for their mortgages, vehicles and other fringe benefits.

But the Productivity Commission estimates FBT concessions cost the tax base $1 billion a year.

Treasury argues the system is too complex and open to rorting.