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Industry warns of major backlash over proposed FBT change

Publication date: 22 Nov 98 | Source: THE TAX INSTITUTE

In a joint letter to the Prime Minister five professional associations, representing over 120,000 tax and accounting professionals, have criticised the proposed tax change to require the value of fringe benefits to be reported on group certificates, claiming that the plan will render FBT and related rules the most complex in existence. The letter from the Taxation Institute of Australia, Australian Society of CPA’s, Australian Taxpayers’ Association, Institute of Chartered Accountants in Australia and the Law Council of Australia urged the Prime Minister to delay the proposed FBT changes until April 2000 to allow sufficient time for business to accommodate such complex and time consuming change.

"The proposed changes are complex - very complex - both from a technical and administrative point of view," said Mr Ken Spence, President of the Taxation Institute of Australia.

"As such, it is likely to impact substantially on both large and small to medium businesses and negate any simplification of the tax rules achieved over recent years," he said.

"Although we support much of the Government’s Tax Reform agenda, the implementation process for the changes under discussion have the potential to create a major backlash among small and medium employers and employees. This is especially so since it represents the first changes under the government’s tax reform package to be implemented."

In addition to the concern over timing of changes, there is also serious concern within the industry regarding moves to include benefits which are not part of salary packaging such as Christmas parties, entertainment and car parking on group certificates.

"While it is currently the law that these expenditures are subject to FBT, there can be no rational policy reason to include them in calculating employees’ personal tax and social security obligations," said Mr Spence.

"To include these benefits in any calculation which denies to employees government benefits, or renders them subject to additional tax liabilities, has no logical policy basis."

"While the industry recognises that the Government is trying to make the tax rules fairer for all taxpayers, we believe it may be rushing these proposals without a proper commercially based understanding of the ramifications," he said.

The Taxation Institute and the other professional bodies are seeking a meeting with the Prime Minister on this issue.