The meal entertainment party comes to an end
Longstanding FBT and reportable fringe benefits tax concessions allowing employees of certain employers to salary package ‘meal entertainment’ (without $ limits) will come to an end on 31 March 2016. The meal entertainment concession allowed employees of certain types of employers (i.e. PBIs etc.) to effectively receive money tax free with the amount also not included for reportable fringe benefits purposes.
The Budget announcement places a cap on the amount of meal entertainment able to be salary sacrificed from an employer at $5,000 (grossed up value) per employee, per year. Any excess must be counted when determining whether an employee has exceeded the FBT exemption thresholds ($30,000 or $17,000) with any excess being subject to FBT under normal rules.
Meal entertainment will also become a reportable fringe benefit and included when determining whether an employee has exceeded the reporting threshold (>$2k taxable value per employee, per year).
Still a fairly generous concession though one would imagine. Not unsurprisingly key NFP industry spokespeople acknowledge the uncapped nature of the concession had meant certain employees were exploiting the concession. This is one aspect of the Budget that is unlikely to cause the Government much headache getting passed.
ACNC – here to stay?
The on again, off again Australian Charities and Not-for-profits Commission may be here to stay?
Despite announcements that the ACNC would be wound back and functions devolved back to the ATO the Government appears to have softened its stance with Scott Morrison announcing the matter is not high priority and 2015/16 Budget Papers showing funding for the organisation out to 2018/19.
Pay-roll Tax – 4th limb charities – NT follows WA to tighten up PRT exemptions for certain charities – who is next?
The WA State Revenue Department gave us a glimpse into the future as to how State Government’s might manage who can access tax concessions.
In a decision by the WA State Administrative Tribunal, the WA State Revenue Department lost an argument that the Chamber of Commerce and Industry of Western Australia was not a charity. It was therefore eligible for State tax concessions, most notably pay-roll tax exemption.
Whilst unhappy with the decision, the State Revenue Department was seemingly left with nowhere to turn given centuries of case law protecting within the concept of a ‘’charity’, a not-for-profit organisations that exist for “…other purposes beneficial to the community”. This group of NFPs are referred to as 4th limb charities.
This rather loose concept of a 4th limb charity is not one that sat well with the WA State Revenue Department. The WA Government reacted with the introduction of legislation that gives it the opportunity to restrict eligibility to State tax concessions to organisations that may qualify as a 4th limb charity.
We were curious to see whether other State Revenue Offices (and in fact the Federal Government?) may move in the same direction.
We did not have to wait long for another jurisdiction to follow suit.
The Northern Territory Budget includes reforms similar to WA intended to become effective in NT on 1 July 2015.
Like WA, the NT are moving to target specific types of 4th limb charities when it comes to determining whether they can access NT PRT exemption.
The NT Government has used the new approach to target 4th limb charities established and carried on as “professional associations” or “for the promotion of trade, industry or commerce”.
More significantly the proposed legislative change also seeks to deny PRT exemption for wages paid by employees of non-profit charitable organisations where the employees are engaged in an activity defined as a “commercial or competitive activity”. This concept extends to “an activity carried on in competition with a business carried on by another person”.
This latter aspect of the proposed law should be the subject of some serious discussion both as to intent and likely application.
It will be very interesting to see what the NT Revenue do with this new provision.
We are sure other State Revenue Offices will be watching on with interest.
This article was written by Michael Doran, Director TaxEd. TaxEd provide dedicated taxation support and education services for the Government and Not for Profit sectors. TaxEd memberships offer access to monthly tax updates, a Q&A service answered by a tax technical panel, a specialised and searchable database and discounted training. Memberships begin on 1 July 2015.
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