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Find out what is happening in the salary packaging world

Media release
01 August 2013


Charities feel effect of Kevin Rudd's flawed economic decisions

The impact of the Rudd Government’s proposed change to the longstanding motor vehicle taxation arrangements grows daily as the community comes to terms with what this will mean to business, employment and the family budget.

Charity and community groups are the latest to feel the effect of the flawed motor vehicle FBT reforms that are likely to result in a loss of staff and reduced services for many of these important community organisations.

The Australian Salary Packaging Industry Association (ASPIA) hosted a meeting of Charity Group representatives in Melbourne today to provide an opportunity for the community groups to discuss the proposed taxation changes and, in particular, the impact these will have on the individual organisations.

In commenting on the meeting, ASPIA President, Leigh Penberthy said:

“Charities and Not-For-Profit Organisations are coming to terms with the impact this policy will have on their organisations. A potential loss of staff and in turn a reduction in the services they currently provide to the community.
“Not-For-Profit (NFP) groups from around Australia were involved in today’s meeting with everyone voicing their concerns for their organisation, for the sector, and for the community. The overwhelming response is that these proposed changes will lead to harder economic times for the community”.

Salary packaging, such as novated leasing, is a critical part of the remuneration mix for the charity and NFP sectors and is vital for attracting and retaining staff. Of the 100,000 leases reviewed by ASPIA, more than a quarter (28%) were held by charity and public health workers, making this sector one of the larger users of salary packaging.

John Kelly, head of Aged Care Australia, says recruiting and retaining staff is always difficult but will be even harder if they can't offer car incentives for staff through the FBT arrangements.

"Car vehicles are a significant part of that package that we offer," he said following the meeting.
"What we are going to see now is the potential diversion of money that actually goes to caring for people diverted to actually trying to continue to recruit and retain staff."

Tracy Adams, Chief Executive of BoysTown said they were taken by surprise when the proposed changes were announced.

“Contrary to the Government’s claim that the removal of novated lease options will mainly impact high salary earners purchasing luxury cars, the reality is that it will impact many thousands of ‘everyday’ people on average wages, including charity workers,” Tracy said.

The charities and NFP sector turns over around $100 billion and employs more people than the manufacturing sector. It contributes almost five per cent of GDP and involves around five million volunteers. About 80,000 of the one million people employed by charities and NFP have a car as part of their salary package.

“We are now seeing that more and more people and organisations are starting to understand the additional costs and administrative burden that will result from these proposed changes and that it is not just a matter of concern for the motor vehicle and salary packaging industries. This will impact on middle Australia with the average novated lease driver earning less than $70,000 and the average cost of all cars bought under the scheme being just $35,750,” said Mr Penberthy.

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