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.