Café

The Hardest Sermons You’ll Ever Have To Preach
Reviewed by Hans Kristensen
Little Black Books: Science and God
Reviewed by Andrew Laird
Making the Most of the Cross
Reviewed by Lesley Hicks
Higher Ground
Reviewed by Andrew Laird

Tax threat to ministers

1:00am Saturday, 6th March 2010

Ministers and church staff could pay an extra $25,000 in tax each year each after a review of taxation commissioned by the Federal Government recommended pastors and charity workers lose a tax exemption.
At present non-profit charities can “pay” non-cash benefits to their employees without paying fringe benefits tax.
This means cars, books, computers and phones, even rent, can be provided out of a non-taxed allowance.
But the Henry Report into the tax system has suggested that the exemption should not be continued and that the government could support charities directly if they need help.
The Federal Government has not announced whether it will accept the report’s recommendations. The election due later this year may mean controversial proposals such as this one are shelved.
For some years one major employer of church workers, the Sydney Anglican Diocese, has warned local churches not to abuse the fringe benefits exemption by setting non cash benefits as too high a proportion of workers pay. They suggested no more than thirty per cent of a package should use the exemption.
Churches and charities will have to pay for the extra tax on their employees’ income, or the employees will get an effective pay cut.
The extra tax will be reduced to some extent because some of the non-cash benefits may be tax deductable.
Employees with supplied housing may be badly hit. Where a house is supplied fringe benefit tax is 86.92% of what the rent would be. In the capital cities this will cost an estimated $13,000 to $65,000 per year, but averaging perhaps $21,000.
It would be cheaper for the church to have income tax paid on this by the staff member, rather than FBT.
Peter Martin, the Fairfax Economics Correspondent, quoted Dr Ken Henry, head of the review and Secretary to the Treasury saying, “Who on earth would think it sensible to levy tax on a worker whose bank balance is enhanced by the receipt from her employer of a payment called a wage, but to not levy tax on a worker whose bank balance benefits from the receipt of something called an expense?”
Henry’s suggestion that the government support charities directly would benefit many non-profits. But it is unlikely that the government would directly subsidize churches.