Boosting Not-For-Profits: Indexing FBT thresholds for a stronger community

Every year, the Federal Budget brings hope that the government will address a critical issue for Not-For-Profit (NFP) organisations: outdated tax rules on employee benefits. These benefits can be a valuable tool to attract and retain skilled staff. However, outdated FBT exemption and rebate thresholds have been making it difficult for NFPs to compete with the private sector when attracting skilled talent for over a decade.

Employers rely on the FBT exemption or FBT rebate to attract suitably skilled employees to their organisation.

These NFP rebate thresholds are as follows:

• $30,000 threshold re FBT exemption: The FBT exemption for Public Benevolent Institutions and Health Promotions Charities is capped at a grossed-up threshold of $30,000 per employee per year.
• $17,000 threshold re FBT exemption: There is also an FBT exemption for Public Hospitals, NFP hospitals, and public ambulance services, which is capped at a grossed-up threshold of $17,000 per employee per year.
• $30,000 threshold re FBT rebate: There is an FBT rebate that can apply to employers who are not FBT exempt, including certain registered charities, non-government and NFPs. This rebate is capped at a grossed-up threshold of $30,000 per employee per year.

These thresholds have been in place for over ten years.

Therefore, the value of the FBT exemption and FBT rebate declines for each year, and the threshold remains unchanged. This also results in NFPs losing competitiveness compared to commercial organisations when attracting talent for employment. We note that if the $30,000 threshold was indexed at an average annual inflation rate of 2.7 per cent for the last ten years, it would be at least approximately $38,000 in early 2024.

BDO would like to see the thresholds indexed so that the value of the exemption / rebate is maintained each year.