Treasurer Chris Bowen's FBT announcement will impact on many public servants. Photo: Alex Ellinghausen
The federal public service and Canberra are set to be hit hard by the government's fringe benefits tax reforms.
One third of the nation's novated leases and salary packaging arrangement for cars are used by state and federal public servants with a large number of them concentrated in the capital.
The Commonwealth's largest department, Human Services, acted quickly in the wake of Treasurer Chris Bowen's announcement last week, telling its 35,000 workers that all salary packaging negotiations would cease, pending clarification of the new rules.
The Australian Automobile Association (AAA) also predicts that the capital's not-for-profit and NGO sector will suffer because of its preferred method of topping up salary packages with car arrangements.
The Rudd government is trying to save an annual $1.8 billion by making change to the fringe benefits tax (FBT) treatment for the private use of salary packaged or employer-provided cars.
Within a day of Mr Bowen's announcement, DHS national manager of recruitment and pay Jackie Hughes told the department's staff that all negotiations on salary packaging and the executive vehicle scheme (EVS) for senior managers would cease.
"We have not received formal government advice or guidance on the implications of the proposed change, so yesterday a suspension was placed on all salary packaging and EVS arrangements that were 'in progress'," Ms Hughes wrote.
"This action was taken to ensure that our employees do not enter into an agreement that may be impacted by the proposed FBT changes until such time as more definitive information is known.
"Until further information is known, employees will be unable to enter into new salary packaging or EVS arrangements."
AAA spokesman James Goodwin said he had heard of other large organisations putting a stop to salary sacrificing arrangements on cars until the details of the government's plan became clear.
"Everyone wants to be sure and Qantas have done the same thing, putting a halt on all negotiations for car packages," Mr Goodwin said.
"One of the problems we have at the moment is that there is not even
any draft legislation, nobody knows what the arrangements are.
"You would expect that we could at least have some legislation or a draft bill that we could have been consulted on.
"That's not even been made public and that's a concern."
Mr Goodwin said it remained unclear whether public servants with salary packaged cars who transferred between departments would be captured by the new FBT arrangements.
"If you change your arrangements … or if you moved to part-time employment and re-negotiate your plan, then that triggers the new arrangement," he said.
"We know that in the private sector, moving to a new employer, then it would trigger the new arrangements, so that might well be the case in the private sector with people moving departments. That's one of the things we don't know.
"With Canberra being a public service town, there would be a lot of people here taking advantage of these arrangements. This would be hitting the Canberra car market harder than perhaps elsewhere."
The AAA said it was also worried about Canberra's non-profit sector, which also makes heavy use of company vehicles and salary packaging arrangements.