Urgent information on salary packaging and SACS workers05 June 2008
By ASU - the social and community services (SACS) industry union
As a result of recommendations by a Howard Government Ministerial Taskforce on Child Support back in May 2005, a number of changes are being made to the way that income is calculated by Centrelink for the purpose of determining Family Assistance payments.
These changes will have an effect on SACS workers who utilise salary packaging because of the Public Benevolent Institution (PBI) status of their employer.
As we know salary packaging is very prevalent in the SACS sector so the changes proposed are likely to adversely affect many workers in our sector.
What is changing?
Centrelink says the following in relation to the changes:
Currently the net value of reportable fringe benefits is used to work out your family assistance payment. From 1 July 2008 this will change and the gross value will be used.
The gross value of reportable fringe benefits is the amount reported on a person's Payment Summary from their employer.
You will need to take this amount into account when estimating your income for 2008-09 for Family Tax Benefit or Child Care Benefit.
Here is a practical example
The following example of the effect has been supplied by Advantage Salary Packaging:
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The maximum you can salary package towards household expenses is $16,050. When this value is reported on your Payment Summary (was Group Certificate), a 'grossed-up' value is shown. For example, If you salary package $16,050, the reported figure is $30,000 ($16,050 x 1.8692).
In the past, Centrelink has added your taxable salary and your salary packaging to calculate your so-called 'adjusted income'. The reported figure for salary packaging ($30,000 as above) was always discounted back to the cash figure ($16,050 above).
For example, a person earning $36,050 and salary packaging $16,050 will have a Payment Summary (group certificate) as follows:
| Taxable Income |
$20,000 |
($36,050 - $16,050) |
| Reportable Fringe Benefits |
$30,000 |
($16,050 x 1.8692) |
Currently, your 'adjusted income' for Family Assistance purposes is calculated as $20,000 (salary) + $16,050 ($30,000 x 0.535). Therefore, your income for Family Assistance purposes is the same, regardless of whether you salary packaged or not (that is, $36,050).
This is the current position.
From 1 July, the Family Assistance Office will no longer reduce the "reportable fringe benefit" amount. Rather, the figure will simply be added to your salary.
In the above example, the employee's 'adjusted income' will be $20,000 (salary) + $30,000 (reportable fringe benefits), that is $50,000. |
What this means
The change in the means of calculating income means that many people may be entitled to less family assistance because their "income" for the purpose of the calculation has gone up.
We all know that salary packaging is widespread in our industry. One of the only things that has compensated for the poor pay rates is salary packaging.
Now, with this change, staff who have children and who receive Family Tax Benefit may lose some of the benefits of salary packaging because of this change. Meanwhile, staff without children will suffer no change.
The fringe benefit tax concessions given to organisations with PBI status was supposed to be in recognition of the poor wages in our sector. With the difficulty in retaining staff even with this benefit there is no doubt things will get worse if staff with children suffer this consequence.
A call to action
We don't think the Rudd Labor Government realises the extent of salary packaging in the SACS sector and the effect this "small" change made by the Howard Government will have.
There is still time to reverse this decision.
We need to act now and email the Federal Treasurer Wayne Swan, Minister for Families, Housing, Community Services and Indigenous Affairs Jenny Macklin and Minister for Human Services Senator Joe Ludwig to tell them this must be changed. You can do this here.
Send an email to the Ministers
This can be effective - look at what happened in our recent Working Women's Centre email campaign. They got back funding.
Pass this email around and get everyone you work with to email NOW!
Watch out for more details on the campaign. The ASU will also write directly to the Ministers and let you know their response.
UPDATE: Correspondence from the ASU to the Ministers
Following are copies of letters (PDFs) to the three Ministers, the first series dated June 6 and the second set of letters sent June 10:
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