The Henry tax review recommendation to end Fringe Benefits Tax concessions, which allows charity-run hospitals and nursing homes to top up payment to staff, could strip salary perks of some of the lowest-paid workers.
The Henry review said current arrangements are too complex and open to abuse, and suggests a better system would be for government agencies to pay charities through direct grants, the Herald Sun reports.
The welfare sector said that as a result, it may have to close or cut back essential services such as soup kitchens, the report said.
Catholic Health Australia has been advised by KPMG that the change would cost its 75 hospitals $72 million, making it harder to recruit nurses and other qualified staff, said the report.
"Some Catholic not-for-profit private hospitals would be forced to cut or close services," CHA chief executive Martin Laverty said.
"This may in time increase public hospital workloads. It may increase the cost of private health insurance. It would cause some not-for-profit hospitals to shut their doors."
Under the current system, not-for-profit organisations are eligible for tax concessions worth up to $30,000 a year. The benefits are available to church-run hospitals and nursing homes, charities and even some state-run hospitals.
Hundreds of thousands of workers, often earning modest wages of $40,000-$60,000, can receive top-up payments, but the Productivity Commission estimates the FBT concessions cost the tax base $1 billion every year.
Some of Australia's lowest-paid workers could be stripped of salary perks under suggested tax overhaul (Herald Sun)