Archive for October 6th, 2011

The National Tax Forum and Salary Packaging

Hi Blog Readers – Simon Ellis here guest posting on the recent Tax Forum.

Well the National Tax Forum has wrapped up in Canberra, and Australia’s stockpile of tax policy ideas has now been officially replenished.  Influential thinkers from around Australia – from politicians to tax professionals to ordinary Australians – have had an opportunity to express their views on the direction in which Australia’s tax policy ought to head.

So “what about salary packaging?” I hear you ask.  Are there any serious Forum suggestions with the potential to impact it?  Well I’m glad you asked:

1.  Taxing benefits in employee hands

Parts of the business community have eagerly seized a Henry Review recommendation to move the burden of benefit taxation from employers to employees.   These advocates want to make benefits (especially cars) taxable ‘in your hands, rather than your employers’.

It’s not exactly a ‘winner’ from a political or social perspective and it’s doubtful we’ll hear much more about it in the near future.

 2.  Removing the tax-free ‘cap’ benefit

Once again, commercial hospitals have voiced their longstanding complaint that the tax-free ‘cap’ benefit is unfair to them.  The cap does make it much harder for them to use their extra cash to poach valuable staff from Public Hospitals and Charities, but then that’s exactly what the cap was meant to do so I’m not sure what their point is.

It’s fair to say that if their policy suggestion becomes seriously considered they can expect a hell of a fight from the Charity Sector (and Smartsalary for that matter), just like they got a year ago when the Henry Review considered the same complaint.  The Rudd government had no appetite for the fight back then and it is unlikely that the current government has much appetite for it now.

 3.  Shutting down “loopholes”

One of the more interesting things to come from the Forum has been a general commitment from our Treasurer to close “tax loopholes”, which he seems to believe includes the living-away-from-home allowance.

Aside from the fact that the LAFHA is not actually a loophole, his general sentiment is probably one with which most people would agree and some policy initiative is probably likely in this area.  I don’t think that they’ll find it easy to tamper with LAFHA, since it’s a benefit that many businesses legitimately rely on to move talented staff across their enterprise, but it looks like they’ll give it a go.

That’s about all from a salary packaging perspective.  It was a wide ranging review so we wouldn’t expect to see benefit taxation taking centre stage but, even so, it didn’t seem like there was a groundswell of support for significant benefit reform.  The recent changes to car packaging rules, which made vehicle packaging more attractive for low kilometre employees, seem very likely to remain intact.

The echoes from these sorts of events can continue to bounce around the public debate for a long time to come – in fact the government’s announcement that it will now create a business tax reform working group, a think tank on tax reform plus an independent tax advisory board for the ATO practically guarantees that they will.

We’ll be keeping a close eye on the tax reform agenda going forward and we will, of course, keep you posted.

Deven Billimoria
Chief Executive Officer

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