Sneaky Fringe Benefits changes a cruel blow to working families
With no fanfare whatsoever, the Federal Government has launched yet another cruel attack on working families, directly impacting on their finances in the immediate term. The sneaky move, introduced part way through the financial year, will come into effect on 1 January 2017 and has the direct result of increasing the ‘incomes’ of working families, while offering zero tangible benefits and a guaranteed loss in real disposable income.
In a letter distributed this week, Centrelink has advised working Australian families that the way it calculates assessable income will change.
In just a mere two months, Centrelink “will use 100 per cent of your reportable fringe benefits, instead of the current 51 per cent, to calculate your rate” for Family Tax Benefit Part A and Part B, Child Care Benefit, Stillborn Baby Payment, Parental Leave Pay, and Dad and Partner Pay.
What does this mean?
Quite simply, any person who has negotiated in their salary package fringe benefits which exceed a total taxable value of $2,000 in a given Fringe Benefit Tax Year, will now have that total value included as ‘assessable income’ (instead of half) for the purposes of any family payments.
The astonishing increase, from 51% to 100% is not insignificant.
The increase in ‘assessable income’ (with no corresponding increase in actual income) may well be worth thousands of dollars and has the potential to be devastating to the finances of families who have used a perfectly legal mechanism to maximise their salary package and planned responsibly for their family finances.
This is an obnoxious attack on working families and makes absolutely no sense at all.
It doesn’t affect other couples or singles. The change has only a financial detriment to those who already have dependent children (or who are close to giving birth), and the financial consequences are now practically impossible to avoid.
The Government repeatedly insists that it wants women to return to the workforce after having children, it laments the lack of women in senior roles and leadership positions, it bemoans the burden that ‘non-working parents’ allegedly place on the taxpayer.
Yet here is a striking, crystal clear example of the Government deliberately disincentivizing families from attempting to improve their personal financial situations by negotiating favourable deals with employers to better their career prospects while balancing child-rearing responsibilities.
Parents of young children who have no option but to place their children in care if they return to work, are already faced with a huge cost for the privilege (even after Government rebates and benefits), while every dollar they earn goes against them. For many low income families, there is simply no financial benefit at all for both parents to work until children are of school age.
Yet for those who do manage to juggle young children, child care and work, every pay rise or offered promotion or increase in hours comes with the potential of a disproportionate hit to disposable income and the likelihood of tighter margins in which to meet financial commitments.
Responsible families plan and manage the costs, risks and consequences of raising a family and pursuing a career. Responsible families make decisions based on their outgoings and income and expected tax.
And now, the Government has completely changed the boundaries.
Fringe benefits are not the domain of the uber-rich. Ordinary, working families have access to salary packaging and those who do forego cash in place of a car or other type of benefit. And now those same families are being punished for making sound, sensible financial decisions to improve their personal circumstances.
Introduced part way through the year, the change in how income is assessed will impact the entire 2016-17 financial year at tax time. Any family who has, in good faith, honestly declared their income and either received a benefit or rebate, now runs the very real risk of owing Centrelink thousands of dollars in completely unintentional and unavoidable overpayments. This will particularly hit hard those who are just below a payment threshold, meaning they may owe the Government the entirety of any family tax benefit received throughout the entire financial year.
Of course, the Government cares nothing for the impact on working families. This Government has openly, repeatedly and actively attacked new parents and single parents, and has consistently attempted to find ways to reduce payments to the vulnerable, disadvantaged and unemployed. Yet now, even those parents who obtain paid employment to support their children are being actively punished.
The sneaky changes to reportable fringe benefits represent a new low in this Government’s vendetta against ordinary parents who are simply trying to make ends meet and raise a family. The lack of transparency around the changes demonstrates the contempt this Government holds all working families under.
It seems quite clear that the Government places no value whatsoever on working families and is determined to punish them for having a go.
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Arthur Tarry
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Return to home pageNothing this Australian government does surprises me anymore as it is obviously is controlled by ideological ratbags.
I’m no accountant but does this mean that the company car and associated ‘novated lease’ – that Labor tried to reel in some years ago – will now be impacted ?
Obviously these changes will not hit the top end of town but I know several people who previously had a company car but switched to a ‘novated lease’ . I wonder what this mean to them in $ terms ?
There are, of course, many of us who have never been able to structure our incomes to benefit from these tax vagaries.
They do have to try and find some way of offsetting the $50 billion tax cuts to the 10%’ers, 1%’ers and the corporations don’t they?
And the economy gets even worse – the rich don’t grow the economy and the more you take from the average Australian the less the economy will grow. Cannot believe we have another three years of these destructive idiots in charge
Penny wise, pound foolish as my grandmother used to say. They simply don’t seem to have the ability to think it through. All they see is the instant savings, and no understanding of the ongoing social and economic costs.
Small minded, short-term thinking personified ……
In one word TYPICAL. These shysters are the dizzy limit. Yet we have to endure them for another 3 years. Remember Malcolm thundering a warning to voters in the election campaign about the “”chaos and instsbility” they would get with a Labor government ?
Let me start by saying that I am a taxation advisor and have advised many employees and businesses on fringe benefits tax over the years.
One group of employees that stands out, for me anyway, are those men (I never had a woman ask me this question) who came to me asking if I could package non-cash benefits into their salaries to enable them to reduce their incomes for the purposes of working out their child support payments. As an advisor, it is not really for me to moralise, but it highlights that if it were not for the add back of reportable fringe benefits, tens of thousands of Australians would be flooding into the offices of people like me to help them get access to benefit payments and to cheat their ex and worse, their children, out of child support (the argument is ALWAYS that the wife spends the money on herself not the kids).
And, it would not be those on the bread-line – it would be those who can afford to pay their way and just don’t think they should have to do that. You should have seen the shenanigans when Rudd offered the $900 payment – I was inundated by people wanting to reduce their taxable incomes to get access to the payment. Some spent more on accounting fees than the benefit gained, but such is the psychology of “something for nothing”
Now, changing the rules mid-stream is never really a good look, but it is an understandable change and probably was one that should have been made a long time ago. As long as families are not caught out for over-claiming benefits as a result of the changes, I don’t see an issue.
Where the thresholds are set MIGHT well be an issue. People on what really are modest incomes are not really getting rich and I have only ever thought that in this era of profligate, selfish consumerism, $5 cappuccini and massively expensive housing, $80,000 is often barely enough to live a reasonable, but basic lifestyle if you have a couple of kids.
The reality is that salary packaging has always been used more as a “tax dodge”. I note this morning, for example, that the sales of SUV-style utes (mostly dual cabs I suspect), are now greater than cars. This is because certain dual-cab utes (preferably black, always with the wanker A-team rollover bar added – the cost of which is probably often not excluded from the FBT cost-base when the employer does its FBT) are exempt from fringe benefits tax, so are very, very popular with men-in-suits and non-tradies because they can be packaged under a novated lease and that reduces the cost very substantially – thousands of dollars per year even on modest salaries.
Of course, these folks would scream that they are “entitled” to exploit this, despite the fact that such vehicles are SUPPOSED to be used for home to work travel (and very minor other travel), but that requirement is hardly ever policed by the ATO – although it does occasionally go to school sport or the supermarket on Saturday morning and take rego numbers. But why should they be able to claim that benefit and how do they conclude they are “entitled”. Moreover, why and how is the taxpayer funding this very expensive and utter rort when families with kids are being penalised?
Sounds fair to me. What about all those other folk who cannot avail themsleves of salary packaging? Why should non cash benefits be taxed differentially, particularly when not universally accessible?
Another rort by the government to reduce ‘welfare’. Similar to the change in the asset test for pensioner by increasing the amount to reduce pensions by $3 for every $1000 of assets instead of the current $1.50, an increase of 100%. Changes in midstream, makes it hard to plan for the future. That, on top of continual changes to superannuation makes planning for the future pure guesswork.
The Liberal Nasty Party will look after their own, don’t worry, no CEO’s or big hatted pastoralists harmed in the making of this Law. Nothing to see here, only low income consequences, move right along now!
Sounds like a great idea, why should people be given cars and houses as part of their salary and not have it taxed?
I am affected by these changes, basically for me it means from the new FB finacial year I will no longer salary sacrifice. It also means that we now have a debt through the changes, I dont understand why they have made the changes midway through the finacial year. The only reason I think is so they can recoup the money paid out. The changes take into account money we dont actually receive, as FB is shown on your payment summary as a grossed-up amount. Centrelink used to calculate it on the actual amount received not the grossed-up amount. So in my case, any saving that I made on paying tax is now eaten with the removal of our FTB. I am also quering if it will impact my two Uni student daughters that have to live away from home for school, they each receive youth allowance based on our income, at a heavily reduced rate so it means we are paying for their accomodations as the amount they receive doesn’t even cover a week rent/board. We still support 3 school aged children at home and have another at home that is a second year apprentice.