Cabinet Decision on Howard Government Measures Impacting Charitable Sector
E & O E – PROOF ONLY
TREASURER: Cabinet this afternoon has agreed to address a great social injustice that we discussed here the other day – a great social injustice which was inflicted on workers in the charitable and not-for-profit sector by measures which were legislated by the Howard government in 2006, and those measures are due to commence on the 1st July this year. Now, we said yesterday that those Howard government changes were unfair because they hit charitable and not-for-profit workers as if they were executives and these measures do have a profound effect in that sector, particularly on low paid workers. I think you would be aware that these Howard government changes could cut family benefit to some charity workers by up to $100 a fortnight.
Now, yesterday Jenny Macklin and I promised to right this wrong and tonight the Cabinet has righted this wrong.
As I said yesterday, the Government has only recently become aware of the issue, so the Cabinet did act decisively by restoring the old treatment that uses the cash value, or net value, of fringe benefits. Now, this is a very complex matter, as I think I was explaining yesterday, because it does have flow-on effects to others in the family assistance system who are not employed by charities and the not-for-profits.
The Government is concerned to ensure fringe benefits are treated equitably in the tax and benefits systems and accordingly the Cabinet has also decided that the Henry Review will examine the complexity of existing arrangements and make recommendations to improve equity and simplicity in the system for the long term. But I’ll throw to Jenny.
MACKLIN: Thanks very much, Treasurer. Just to let you know what will happen from here. We will seek to move amendments in the Senate next week to protect employees working in the not-for-profit and charitable sectors. As the Treasurer has indicated, some people could have been facing losing up to $100 a fortnight because of the Howard government changes that were made back in 2006. So, the Government’s amendments that we will put into the Senate next week will restore the use of net reportable fringe benefits in income definitions for family assistance. So, this will make sure that people who are working in the not-for-profit sector looking after and working with some of the most vulnerable in the community, this will make sure that they will not suffer a loss of family tax benefits or other family assistance payments after the 1st July this year.
We have been informed that up to 85,000 Centrelink customers could be expected to benefit from this decision that we’ve just made and I just want to take you through the process that Centrelink will engage in from Monday.
So, from Monday, Centrelink call staff will be advised and will of course then be able to let Centrelink customers know once the legislation goes through the Parliament. Centrelink will then begin the process of changing their IT systems to make sure that customers’ records are changed accordingly.
They will make considerable efforts to contact Centrelink customers, whether it’s through telephone, though SMS or the mail, but I do want to say here tonight that on the 1st July there are a number of other very significant and complex changes taking place in the child support area. So, if anybody is concerned about changes that are being made to their family assistance payments, if they have any concerns I’d encourage them to contact their Centrelink office in the normal way or their Family Assistance Office. Centrelink staff will be available to help people through what will be a time of considerable change.
As the Treasurer has said, these are very complex issues. We have acted quickly to give people in the not-for-profit and charity sectors the reassurance that they’ve been seeking that they will not be worse off as a result of the changes the Howard government made in 2006.
TREASURER: So, you’ve effectively repealed those changes…
MACKLIN: We’ll put legislation into the Senate next week. But we have made a decision, the Cabinet has made a decision tonight to restore the situation so that people will not be worse off.
JOURNALIST: Will the executives who the original measure was targeting benefit as well from this?
TREASURER: No, what that is a reference to is the original intent of the Fringe Benefit Tax system. But in this case, what has occurred is that it has been applied to very low paid workers, particularly in the not-for-profit sector and that is a feature of that sector because they do rely upon Fringe Benefit Tax-free packages. So, the change from net reportable fringe benefits to gross reportable fringe benefits is the one that has a particularly savage impact in the church and charitable sector. That’s what we are restoring – the old measure, but the longer term issues of the Fringe Benefits Tax system and how it interacts and how contemporary it is are very complex and that’s why they have been referred to the Henry Review, and we’ve reverted to the use of the net figure.
JOURNALIST: And you’re amending it for everyone, is that the case?
MACKLIN: Sorry, if I could just remind you though, this relates to net reportable fringe benefits in income definitions in relation to family assistance, so that puts a fence around it. We are changing what was changed in 2006. So, for everyone who was affected in 2006, it has been changed and we’re restoring their previous position.
JOURNALIST: Why didn’t you just exempt the not-for-profit sector?
TREASURER: Because there are other people affected in other sectors and it is very complex. The only way to do this fairly, so you didn’t have more unintended consequences elsewhere in the system, was to simply go back to the old measure. So, we can take the time to make sure we absolutely get this right. It is complex but it is particularly savage in its impact in the not-for-profit sector and the charitable sector but it does move into other areas and the impact there is not clear. There are swings and roundabouts in other sectors and any movement one way or the other could present unintended consequences. That’s why all of those issues are going to the Henry Review.
MACKLIN: I might just add, just in answer to Mischa’s question, the other reason we’ve done this is to act quickly. We really did want to act quickly to make sure that those people who were facing considerable losses to their family incomes would not lose that money. We wanted to act quickly and this was the quickest way forward.
TREASURER: Can I just elaborate on that, why we have moved so quickly as soon as we became aware of the magnitude of the impact in this sector. If you’re losing $60 and you’re paying off your mortgage, that’s a lot of money. So, not only have we worked hard on the policy solution, but Minister Macklin particularly, working with Minister Ludwig and Centrelink, have spent a lot of time on a communication strategy and a notification strategy and an outreach strategy to ensure that there is very prompt and quick communication with every person that’s affected. This is terribly important in these circumstances.
JOURNALIST: How much will it cost the Budget?
TREASURER: $60 million, around $60 million a year. But we are still working on the overall cost, but roughly $60 million.
JOURNALIST: Now, there was some FBT changes that you had proposed in your Budget, coming into effect on, they’re only minor, but they’re coming into effect on July 1 2009…
TREASURER: They’ve not even been put into legislation, but there is a technical section of a bill in the Senate at the moment and I’ll hand over to Jenny Macklin to talk about that.
JOURNALIST: So, will that be looked at by the Henry Review?
MACKLIN: Not the small technical amendment that’s in our bill that’s in the Senate at the moment. There’ll be no need for that to proceed, but it’s only one very small change that had to do with indexing of family income estimates so it will no longer be required.
JOURNALIST: Given this was Coalition legislation, are you confident you’ll have the numbers in the Senate to get your amendments through?
MACKLIN: Well, I’d certainly say to all Coalition members in the Senate that we expect their support to make sure that people who are working in the not-for-profit and charitable sector don’t have their family incomes affected by up to $100 a fortnight. I certainly hope they will support this change.
TREASURER: I couldn’t possibly conceive how anyone in the Senate could possibly see anything untoward about this proposal. Look, it’s imperative that it goes through quickly for all the reasons that we’ve discussed.
JOURNALIST: These changes, the ones with the unintended consequences in the Howard government days, they were originally brought in to prevent high earning families from hiding their incomes for child support.
TREASURER: That’s right.
JOURNALIST: But by changing this fringe benefit allowance, doesn’t this now mean that all child support cases will need to be recalculated?
MACKLIN: No, it doesn’t. All it does is take us back to the situation we were in in 2006 where we have one system in the child support area and a different system elsewhere.
JOURNALIST: (inaudible)… for everyone or is there some prospect that some people, while Centrelink is readjusting its system, might actually have a lower rate paid to them and then…
MACKLIN: Well, Centrelink have advised us that they will be able to put these changes in place. But as I indicated in my earlier remarks, there are a lot of complex changes happening, particularly in the child support area, on the 1st of July. So, anybody who is concerned about what might be happening to their family assistance arrangements, if they are concerned about any changes that they don’t understand, they should contact Centrelink or the Family Assistance Office.
JOURNALIST: Will you be looking at your own changes just to make sure there aren’t any unintended consequences from July 1 (inaudible)?
TREASURER: Absolutely, but there is no commonality between this issue and the Budget measures from this year. Thanks very much.