Treasury has received over 100 submissions on draft legislation to change rules regarding the living away from home allowance (LAFHA).
Among those who have made submissions are Woolworths, the Australian Federal Police, the Minerals Council of Australia, Deloitte, KPMG, Ernst & Young, the Law Council of Australia, and the New South Wales Department of Health.
Some 108 submissions have poured in after the Assistant Treasurer, David Bradbury, released exposure draft legislation to implement reforms to the tax concession for LAFHA and benefits as announced in October’s 2011‑12 Mid-Year Economic and Fiscal Outlook (MYEFO) and the federal budget.
Treasury brought in the measures after a tax forum in October 2011 raised the issue of LAFHA’s exploitation and misuse by highly-paid executives and foreign workers.
Many of the companies who have made a submission to treasury argue that the changes will impinge on their ability to attract foreign workers.
In Woolworths’ submission, the retailer’s director of corporate and public affairs Andrew Hall urges the government to consider alternative reforms.
“Should the proposed reforms proceed in their current form, Woolworths recommends a transitional period be put in place after the July 1 2012 implementation date to ensure any changes would not unduly impact families before they have a reasonable opportunity to adjust their financial situation,” writes Mr Hall.
A submission from the Australian Mines and Metals Association (AMMA) claims the proposed reforms will have “significant impacts on both employers and employees”. AMMA do not support the reforms, as proposed.
The Association of Mining and Exploration Companies (AMEC) argued that the proposed changes will lead to a “material financial burden” for employers.
“On a broader scale, the proposed changes have a considerable potential to impact particular regions, for example Perth, which, as the home of Western Australia’s resources industry has many multi-national companies and local companies employing temporary foreign workers,” AMEC states.
The Mineral Councils of Australia (MCA) argues that the government can address “the perceived areas of abuse without removing the concessions altogether for temporary residents”. It members produce more than 85 per cent of Australia’s annual mineral output.
In a 41-page submission, Deloitte warned that employers may find it difficult to retain workers who lose LAFHA.
“The vast majority of skilled migrants are attracted to a position based upon a guaranteed net income position. If businesses are unable to afford the increased costs to maintain this net income, given the considerations previously discussed regarding attracting skilled migrants, businesses may fail to retain existing employees who will in turn depart Australia,” the professional services firm stated.
Many expats were left confused last month when it was announced in the budget that reforms to LAFHA would allow those who have entered into arrangements prior to May 8 this year to continue claiming the tax concession until July 2014.
However, treasury subsequently clarified that this transitional rule would only apply to those who legitimately maintain a second home in Australia, in addition to their actual home – meaning that all temporary residents will no longer have access to the tax concession from July 1, this year.
Irish and other temporary workers in Australia had been benefiting from the lucrative tax break, using it to boost their take-home pay.
Many recruitment agencies had offered the allowance as part of their salary packaging.
Some employers have paid their foreign workers a LAFHA, which comes off their gross wage, allowing them to pay income tax on the lesser amount.