Rudd Government to address concerns raised by charities and not-for-profits

The Rudd Government is urgently examining the impact of changes in family assistance law made by the former Howard Government which may impact adversely on workers employed by charitable and not-for-profit organisations from 1 July this year.

The Rudd Government is committed to addressing the concerns of not-for-profit organisations about the impact of the Howard Government’s changes.

The work undertaken by workers in the charitable and not-for-profit sectors is valued highly by both the community and the Rudd Government.

The Rudd Government and the charitable and not-for-profit sector have only recently become aware of the potential impact of changes to family assistance law which were legislated in 2006 but are not due to take effect until July 1 this year. The changes are unrelated to this year’s Budget.

The previously legislated changes sought to align the treatment of fringe benefits for child support and family assistance purposes, but may, depending on the circumstances of individual employees, result in unfair reductions in family assistance if they work for not-for-profit or charitable organisations.

The change relates to the way reportable fringe benefits are to be treated from 1 July this year.

The change is to use the gross value, rather than the net value, of reportable fringe benefits in determining a person’s income to determine the level of family assistance they are eligible to receive.

The gross value of fringe benefits is already used to work out a person’s income for child support purposes, particularly how much child support they are required to pay. This rule prevents a parent who pays child support reducing their taxable income through salary sacrifice and thus paying less child support.

The Government is currently receiving advice on the likely impact of the changes to the law and what practical action can be taken to remedy the problems.

The Government will consult with the sector to find the best possible solution to what is a very complex problem.