# Potential LAFHA Changes for 2012 - Important



## ctowna (Jun 2, 2011)

Internal publication from my Company is below. For me personally, this change would decrease my monthly net income by approximately 17% (from estimates). It could mean more/less of an impact depending on your gross income though. I honestly hope the Government realizes that punishing the workers is not the way to sustain the economy. They're already taking 9% of my salary which will be taxed at 45+% tax... Now this. From what it seems, the Government is trying to fulfil the "Surplus" promises through slashing and burning incentives to individuals, and this one is aimed at ex-pats. Check out the article below. 

*Government unveils plans to abolish tax free allowances for foreign nationals working in Australia: Client email available *

On 29 November 2011 the Federal Government unveiled plans to effectively abolish tax free living-away-from-home-allowances (LAFHAs) for foreign nationals working in Australia. The reforms follow an extensive review by the Australian Taxation Office (ATO) in response to concerns over the growing use and perceived abuse of LAFHAs paid to foreign executives. 

A consultation paper was released at the time the proposed reforms were announced. The consultation paper states the perceived widespread exploitation of providing tax free LAFHAs to temporary residents has breached the original policy intent of the living-away-from-home (LAFH) provisions. It states this has provided an unfair advantage for temporary residents over local Australian workers.

Under the proposed reforms, LAFH benefits provided to temporary residents working in Australia will be fully taxable to the employee (if paid as an allowance) or fully taxable under fringe benefits tax (FBT) (if paid or provided by the company). The intention is for temporary residents to be subject to the same Australian tax burden on their employment income as are local employees. 

If implemented as drafted, the reforms will have a significant impact on the competitiveness of Australian businesses operating in Asia Pacific. In addition, Australia’s ability to attract foreign skilled labour in a time of increasing skill shortages will be severely impaired. Australia’s high tax rates, increasing rent costs and the overall cost of living do not compare favourably with regional competitors such as Hong Kong, Singapore and mainland China. Abolishing LAFHAs for foreign nationals will inevitably put upward pressure on wages in order to attract and/or retain foreign skilled workers in Australia. There may also be an on-cost impact in respect of items such as superannuation guarantee levy, payroll tax and workcover.

The proposal does contain limited measures to protect the tax concessions for LAFH benefits which support domestic mobility, providing the employee (including temporary residents) maintains an Australian home that is available for their use at all times. For example, accommodation provided to an overseas fly-in-fly-out worker would continue to be exempt from FBT; however accommodation in a city would be taxable. Whilst this is a welcome provision, it will not offset the significant impact for Australian businesses employing foreign workers.


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## Guest (Dec 1, 2011)

Old News, and in my opinion about time too. 

The tax payer should not be subsidising the wages of overseas workers. It only encourages employers to treat employees like slaves and offer less of a salary & benefits than any local would take because someone is excited and/or desperate to get a foot in the door at migration.

This should make employers buck their ideas up and pay a decent living wage that reflects the skills and experience of the workers they employ!


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## abetterlife (Apr 6, 2011)

I really don't understand what this government is playing at, only a few weeks ago it was announced that processing times for 457 visas would be shortened and the maximum length would be increased to 6 years. Now they are complaining that 457 visa holders stay for too long taking advantage of tax breaks before deciding if they want to stay permanently.

You also have to note that these tax breaks do go some way to compensating for 457 visa holders getting no assistance from the government for schooling, health, or anything else a permanent resident would receive.

Right rant over, I suppose we just have to accept this and move on.


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## ctowna (Jun 2, 2011)

_shel said:


> Old News, and in my opinion about time too.
> 
> The tax payer should not be subsidising the wages of overseas workers. It only encourages employers to treat employees like slaves and offer less of a salary & benefits than any local would take because someone is excited and/or desperate to get a foot in the door at migration.
> 
> This should make employers buck their ideas up and pay a decent living wage that reflects the skills and experience of the workers they employ!


First off, how is something that was announced a few days ago old news? I guess your gauge is relative. In my opinion, completely phasing out a program from 100% to 0% is not equitable for people on multiple-year contracts. 

Right or wrong, it still shafts people who came to Australia with the understanding of LAFHA for their stay here. All I can say is at least I'm here legally and paying SOME tax, whether you deem it to be my "fair" share or not is your opinion. 

The intention of the post was to inform potential 457's coming in to make sure their employers are not promising a program that is going away in 2012, and to voice my frustration of the *mechanics *around revoking this incentive.


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