The Institute of Public Accountants (IPA) has voiced its support for the Government’s proposed changes to the Fringe Benefits Tax (FBT) treatment of salary packaged meal entertainment in its recent submission to Treasury as part of the 2015-16 Budget changes.

“The IPA has long advocated for this FBT policy change; in particular the introduction of a cap on the total amount of salary packaged entertainment that employees can include as part of their remuneration package,” said IPA general manager technical policy, Tony Greco.

“There has been ample evidence over many years that this concessional treatment has been exploited beyond its original intended purpose. The concessional treatment has been further exploited by extending its reach to include both domestic and overseas holiday accommodation.

“Independent reviews have determined that the benefit of this concession is not evenly spread among not-for-profit (NFP) employees, but rather more highly utilised by eligible employees on higher salaries.  This is contrary to the original policy intent of helping registered charities and public hospitals attract and retain employees.

“The exploitation of these uncapped concessions has offended the principle of fairness for too long. For example, allowing someone to salary sacrifice a $40,000 wedding from pre-tax income is difficult to justify. 

“The benefits are not capped and not reportable for FBT or other government tax and transfer payment income tests.  The proposal to cap these benefits subject to a new reportable grossed-up exemption cap will improve the fairness of this concession. 

“However, if the cap is struck at a level which is too low, it can place undue pressure on small NFP employers trying to compete with commercial remuneration packages.  Some research should be conducted on the impacts of the proposed threshold, particularly for NFP organisations.

“We also believe there is room to do even more on the FBT front to further remove red tape and reduce the burden on small business in particular.  FBT has the unenviable title of having the highest compliance cost of any tax. It places a significant compliance burden on small business operators” said Mr Greco.