Why Novated Leasing? – Not For Profit Organisations

Leigh Skelton is the Finance Manager of Ballarat and District Aboriginal Co-operative (BADAC),a Not For Profit Organisation delivering much needed health, social, welfare and community development programs to local Aboriginal people.

In their latest company newsletter, Leigh describes all the reasons why he loves his Novated Lease with Car Leasing Options.

Click here to read the excerpt.

If you are a Not For Profit Company and would like to know more about offering this service to your employees, contact us on 1300 69 30 77.

2014 Federal Budget

FRINGE BENEFITS TAX AND SALARY PACKAGING

FBT rate
The FBT rate is being increased from 47% to 49% to align with the highest marginal tax rate inclusive of the Temporary Budget Repair Levy of 2%. Whilst the increased income tax rate will apply from 1 July 2014, the increased FBT rate will not apply until 1 April 2015. Further, whilst the Temporary Budget Repair Levy applies until 30 June 2017, the FBT rate is to drop again as of 1 April 2017.

Changing the FBT rate also changes the FBT gross-up rates, as follows:

2014-15 FBT year 2015-16 FBT year 2016-17 FBT year 2017-18 FBT year
FBT rate 47% 49% 49% 47%
Type 1 gross-up 2.0802 2.1463 2.1463 2.0802
Type 2 gross-up 1.8868 1.9608 1.9608 1.8868

Salary packaging
The reason for increasing the FBT rate is stated to be “To prevent high income earners from utilising fringe benefits to avoid the levy”. But you would need to salary package a lot of income to take advantage of this 2% differential. For instance, packaging $20,000 would only produce a saving of around $400.

So whilst there appears to be an opportunity in both the year ending 30 June 2015 and the year ending 30 June 2017, for high income earners to take fringe benefits in the period where the lower FBT rate applies, it would only be useful to the extent the employee earns above $180,000 and the minimal savings probably mean they are unlikely to bother.

Not-for-profit caps
In order to protect the value of fringe benefits provided in the not-for-profit sector, that otherwise diminishes with an FBT rate increase, the annual caps for concessional treatment are to be increased. Confirmation of the new amounts has not yet been provided.

FBT rebate
The FBT rebate (currently 48%) is to be aligned with the FBT rate as of 1 April 2015.

Leight Penberthy
Chief Executive Office

*Source Elizabeth Lucas – Grant Thornton Australia

Announced changes from Federal Budget 2013

Impact from the Federal Budget to affect the NFP and Public Health sectors.

The Medicare levy will increase to 2% from 1 July 2014 to fund the Government’s Disability Care Australia reforms. Revenue raised from this measure will be paid into a dedicated fund administered solely for the purpose of meeting Disability Care funding needs.

In addition to the Medicare Levy, higher income earners without sufficient private health cover will continue to be assessed to a further 1% surcharge.

The increase in the Medicare Levy brings the effective top marginal tax rate to 47%. A number of tax laws apply the top effective rate as a penalty rate of tax. As a consequence, a Bill released today indicating that the new FBT rate of 47% is proposed to come in as of 1 April 2014 – so no transition despite higher Medicare Levy only being effective from 1 July 2014.

  • For Type 1 the new gross up factor will be 2.0802 meaning that allowable packaging cap will become $14,421 for NFP and $8,172 for Public Hospitals
  • For Type 2 the new gross up factor will be 1.8868 meaning that the allowable packaging cap will become $15,900 for NFP and $9,010 for Public Hospitals
  • For the majority of staff utilising salary packaging benefits this will mean a reduction of $150 for NFP organisations and $85 across the Public Hospital sector each FBT year, April to March

Not for Profit tax reform

The Federal Government has again deferred the long awaited legislation as it relates to the Not for Profit sector where it was seeking to remove the FBT and other concessions where the NFP performed unrelated commercial activities.

The original plan was for the law to become active from July 1 2014 for all activities after 10 May 2011 with any activity already commenced prior to May 2011 will need to comply by July 2015