Salary packaging has been quite popular due to the Fringe Benefits Tax (FBT) concessions it offers, especially in the non-profit sector. While the new rules that have been progressively introduced and the successive tax cuts over the past few years have eroded some of these concessions and the overall tax effectiveness of salary packaging arrangements, employees may still benefit from these arrangements if their salary packages are structured to take advantage of the remaining concessions.
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Tax exempt charity
Over the past few years John McCallum, Director, BDO, has reported in Club Insight the progress through the Courts of a case involving Word Investments Ltd (“Word”) - a company seeking endorsement from the Australian Taxation Office (“ATO”) as a tax exempt charity.
interest in this case was that it directly challenged the ATO’s view on the use of separate entity to own and operate a commercial undertaking to raise funds for another entity that was tax exempt. On 3 December 2008 the High Court upheld the decision of the Full Federal Court by a majority of 4-1 and found that Word should be characterised as a charitable institution and as a result is exempt from paying income tax on its income. With the Commissioner of Taxation (“Commissioner”) now having exhausted all avenues of appeal, Word has now obtained the endorsement it set out to receive 7 years ago and clearly established in law that it is the characterisation of the purpose or objectives of an organisation that should be considered in ascertaining whether it is charitable or not, not its activities or the generation of profits.
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