Salary sacrifice confidence returns to government employees

By Julian Bajkowski

Australia’s leading provider of public sector salary packaging services, Smartgroup Investments, believes that business and employee confidence has bounced back following the Federal Election, with government car lessees now shopping around again.

At a briefing in Sydney on Monday, Smartgroup chief executive, Deven Billimoria, said inquiry levels for novated vehicle leases from government employees had now recuperated to levels prior to the former Rudd government’s July announcement of unpopular changes to Fringe Benefits Tax concessions.

The company’s assessment is significant because a core part of its business, Smartsalary, covers more than 100,000 employees across 125 organisations – the bulk of which are in the public sector and would have been hit hard by the changes.

Initially sold as an FBT clawback, the changes to the so-called statutory calculation provoked an unprecedented backlash from the fleet and automotive industries that warned the move was a ham fisted miscalculation that hit the wrong people and would cruel the local auto industry.

Just a week before the September election, then Opposition Leader Tony Abbott and Shadow Treasurer Joe Hockey issued an open letter to the car industry, employers and employees that promised that if elected “Labor’s FBT changes will become null and void.”

The same letter implored employers and employees engaged in salary sacrifice programs “to urgently and immediately return to normal trading activity” especially in the leasing and salary packaging sectors.

It appears Mr Abbott’s missive may have had some effect, at least from industry perspective.

Mr Billimoria said that there were now some signs of growth, especially in the state education and health segments.

However he noted that there was still some caution and “trepidation” in the federal government segment where employees appeared less inclined to take on new financial liabilities.

That sentiment will be far from a surprise given that details of how an estimated 12,000 full time positions will shed as part of well publicised efforts to trim back public service numbers.

The slightly higher interest from state government employees balanced out the hesitation in Canberra on a net basis Mr Billimoria said.

Even so, Smartgroup’s chief executive was keen to emphasise that the reality of public servants salary packaging cars is far from the negative stereotype of executives upgrading their BMWs every couple of years.

Mr Billimoria said that the average value of a car that was put through salary sacrifice was under $35,000, and many of those were on salaries of under $80,000.

One of the potential biggest headaches for government services in the FBT changes was that they would have also hit the not-for-profit sector on which public agencies are increasingly relying on to deliver everything from home-help to job training.

The issue for many not for profits and charities is that they often try to load up on employee benefits to help offset lower salaries when attracting talent.

Mr Billimoria said that even the Salvation Army had been alarmed by the now axed FBT changes.

“They [the Rudd government] got it wrong, they missed the mark completely,” he said.

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