Salary options too restrictive

With the demand growing on the ADF to increase salary (we have already seen a delay in the processing of the DFRT case on Service Allowance) and the separation of personnel based on fiscal constraints, I have to question the arrangements whereby personnel can FRP their salary.

Compared to other organisations (and it has to be said, with unions), our salary packaging arrangements seem extremely restrictive, to the point of being useless.

One example is the purchase of a computer. If I wished to purchase a desktop computer then I would have to enter into a leasing arrangement.

This would then be FRPable under the Office Expenses title, but I would end up paying on average 25 per cent more for the item. I am not able to simply purchase the item and then have the amount refunded from my pre-tax salary under the FRP.

I have several friends that work in civil jobs with FRP arrangements. The most basic form of arrangement they can make is in the form of a cash payout (based on a percentage) from their pre-tax salary to be used how they wish. In one friend’s case, this amounts to about $15,000 a year.

Imagine the relief families could obtain if they were able to consolidate any debts from their pre-tax salary or the mortgage reduction benefits of paying this as a lump sum and then re-drawing the mortgage.

Surely our FRP arrangements can be improved to the point where personnel are able to choose a more flexible arrangement in an effort to maximise their take-home salary. After all, my belief is that this has no fiscal disadvantages to Defence, so why the restrictive nature of our arrangement?
FLTLT William Hambly-Clark
ATCO
44WGDET-ESL

Official response

IN your letter you have raised two issues regarding Flexible Remuneration Packaging (FRP) arrangements in Defence, but before addressing those specific issues I would like to address what is a common misconception about FRP (or salary packaging).

Under salary packaging arrangements any Fringe Benefits Tax (FBT) payable on an item is paid by the employee as the FRP scheme is to remain cost neutral to the employer and ultimately it is an employee’s personal decision to participate.

As such, salary packaging only becomes viable where the item to be packaged is exempt from the payment of FBT, where it is “otherwise deductible”, or where it receives some concessional tax treatment under the Fringe Benefits Tax Assessment Act 1986 (FBTAA). In this regard, the range of items offered for packaging is set by legislation rather than a decision by an employer.

In the case of Defence, all items that offer a tax advantage to a member are included in our FRP menu of items. While Defence could permit any item to be packaged by a member, there is no purpose in doing so where FBT is payable and therefore there is no tax advantage to the member.

In the case of the purchase of a computer for your home office, the computer is otherwise deductible on your annual tax return and therefore may be salary packaged, but a benefit only arises where the computer is leased. You should also remember that only the percentage of use for business purposes can be claimed for salary sacrifice purposes.

As this is a complex tax issue and personal circumstances vary, it is recommended that you obtain advice from a qualified financial adviser on this or any other FRP decision.

In regard to mortgage repayments and debt consolidation, under the FBTAA certain organisations receive concessional treatment with a rebate available to the prescribed “rebateable employer”. Most common among these organisations are: religious institutions, scientific, charitable or public education institutions, certain schools and public benevolent institutions (mostly hospitals).

This is where the $15,600 limit applies that was mentioned by your friends. Unfortunately for us, Commonwealth agencies are specifically excluded from accessing these provisions.

The present FRP scheme for Defence has recently been reviewed with the objective of improving benefits where possible and making it as flexible as possible to our ADF members and APS employees within the provisions of the relevant tax legislation.

The results of that review are planned for release by mid-June, however, as explained, the issues you raise are controlled by legislation and not by Defence.

If you would like further advice on Defence’s FRP Scheme I suggest that in the first instance you contact the Scheme Administrator, SmartSalary, on 1800 632 496 or visit their web site at www.smartsalary.com.au
Peter G. White
Assistant Director
Directorate of Workplace Relations


Where’s the crest?

READING the Defence Attitude Survey I was heartened at the widespread points of view on many topics and the apparent strengthening of the esteem many members have for their respective branches of the Australian Defence Force.

I was, however, amazed by an attempt at change by stealth to yet another of our symbols that many have taken great pride in being associated with.

Where has the ADF crest gone? Has it joined the ranks of other symbols of Defence, swallowed up by the corporate image of the ADF that is being projected to the community?

It would seem that an influential minority has dictated to the masses that another symbol of the ADF should be deleted from view in the interests of displaying a more politically correct, airy-fairy, non-threatening image to the outside world.

Maintaining a sense of worth and pride in the ADF is a building block we should instil in all new and junior members.
Whittling away at the structure and image, that has taken many years and lives to build up, seems to be the aim of some, solely to justify their existence. The new logo is a symbol of the destabilising whim of a minority that I doubt have worn the uniform with pride.

We exist to protect those that can not protect themselves, we do so by our visual presence and the threat and or use of force. Sell the ADF as a professional military force performing a specialist function and treat them with the respect they deserve.
SGT Kyle McQueen
TDAF
RAAFSFS

Official response

Sergeant McQueen’s fears about the ADF crest are unfounded as it continues to be used, as it always has been, for all joint service activities.

However, as the Defence Attitude Survey involved all members of Defence, both those in uniform and civilians, it is appropriate that the Defence corporate identity be used.

That identity was introduced to provide a symbol which represents Defence as a whole and provides a way of visually linking the military and civilian elements of the organisation.

As the CDF and Secretary said in launching the Defence identity, Defence is a united organisation with a common purpose and we need to show that through, among other means, a clear and consistent corporate identity.
As with many of those responsible for introducing the new identity I have worn the uniform with pride.
James Cannon
Director
Defence Reputation

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