Petrina Fraccaro, the CEO and managing director of Cystic Fibrosis Queensland, describes last week's 2025-26 Budget as a lost opportunity to correct a longstanding challenge for not-for-profit organisations that has been worsening over time.
Each Federal Budget presents an opportunity for meaningful reform, yet once again, the not-for-profit (NFP) sector has been overlooked.
With approximately 1.47 million Australians employed in the sector—representing around 10.5 per cent of the workforce—the lack of attention to outdated Fringe Benefits Tax (FBT) policies is a missed opportunity for the government and the communities we serve.
NFPs provide essential services that reduce pressure on government resources, from health care to disability support, social services, and community programs. By failing to index FBT exemptions, the government is making it harder for these organisations to attract and retain skilled professionals. This, in turn, pushes more people toward government-funded services—an outcome that could have been avoided with a simple policy update.
The FBT exemption and rebate thresholds for NFP employers have remained unchanged for over a decade. It is $30,000 for public benevolent institutions and health promotion charities, $17,000 for public hospitals, NFP hospitals, and public ambulance services, and $30,000 for specific registered charities and other NFPs not FBT-exempt.
Had these thresholds been indexed to an average inflation rate of 2.7 per cent over the last decade, the $30,000 cap would now be closer to $38,000.
Without indexation, NFPs are increasingly disadvantaged in recruiting skilled professionals, competing with the private sector, and delivering essential services. Adding to this inequity, the Coalition announced a capped tax deduction and FBT exemption for small business meal entertainment in its budget response but excluded NFPs from this measure. NFPs also incur meal entertainment costs, often classified under Tax Exempt Body Entertainment (TEBE), which is subject to restrictive valuation rules under FBT law. While fully FBT exempt organisations benefit from existing exemptions (excluding salary-packaged entertainment), income tax-exempt NFPs that are not FBT-exempt bear the burden.
To ensure the NFP sector's long-term sustainability, I will call upon the next Parliament to take immediate action by indexing FBT exemption and rebate thresholds annually, extending the proposed small business meal entertainment FBT exemption to eligible NFP organisations, and amending FBT laws on tax-exempt body entertainment (TEBE) and minor benefit exemptions to create fairness across sectors.
NFPs operate in a challenging environment, facing constant regulatory changes, reporting obligations, and external pressures. Addressing these outdated FBT policies will enable NFPs to remain competitive, attract skilled staff, and deliver essential community services.
Failing to act effectively amounts to a funding cut for the sector.
With inflation eroding the value of existing FBT thresholds, investing in fairer tax policies is not just about supporting NFPs—it is about strengthening the entire social fabric of Australia. In addition, extending the proposed FBT relief by the Coalition for meal entertainment to NFPs ensures a level playing field. If small businesses receive these benefits, why should organisations delivering critical social services, such as many social enterprises, be left behind?
The government can bolster the NFP workforce by addressing these issues, driving social impact, and reducing long-term reliance on direct government intervention.
Now is the time for meaningful reform. A thriving NFP sector benefits everyone—from those who rely on these services to the broader economy and government. The question is not whether we can afford to support NFPs but whether we can afford not to. On behalf of all who work in NFPs, I look forward to working with the 48th Parliament to create a sustainable and robust sector with the support we need to do what we do best: providing improved outcomes for all Australians.
