The Assistant Treasurer has released a consultation
paper on 29 November 2011 proposing a fundamental reform to how
Living Away From Home Allowance (LAFHA) and other associated
benefits will be taxed from 1 July 2012 for temporary residents.
These changes will significantly impact Australian
A copy of the Moore Stephens submission outlining a
number of significant issues that need to be addressed can be
Our key concerns are as follows:
The proposed reforms do not deliver a level playing field
between hiring an Australian worker and a temporary resident.
Will the existing guidelines contained in Miscellaneous Ruling
MT 2030 continue to be utilised in determining eligibility to
receive a LAFHA in respect of permanent residents and temporary
residents maintaining a home in Australia?
The term "the employee is required to live away from his
or her usual place of residence" is utilised in other
provisions of the Fringe Benefits Tax Assessment Act 1986
to exempt or provide concessional FBT treatment.
Will the existing FBT concessions relating to relocation costs
in respect of temporary residents not maintaining a home in
Australia (other than the Living Away From Home Allowance or
reimbursements) remain post 1 July 2012? The Consultation Paper is
silent in this regard.
The Consultation Paper does not provide any clarity in respect
of Australian national working overseas who remain residents and
therefore subject to tax on worldwide income and the interaction
with the proposed LAFHA changes.
The proposed changes do not segregate between the various
temporary visa categories and could be better targeted in this
The lack of transitional rules severely disadvantages
individuals who accepted roles in Australia on the basis that they
qualified as living away from home under the existing rules. The
transitional period should be restricted to the lesser of:
Two (2) years; or
The duration of the temporary entry permit issued pre 1 July
The Consultation Paper appears to be inconsistent in the income
tax deductibility of food, the meaning of "reasonable
food" and the substantiation requirements.
An objective review of the most recent substantive legislative
change in the area of expatriates would indicate that these changes
were rushed and implemented without due consideration of the
interaction with other pieces of tax legislation.
The proposed changes have the ability to significantly increase
Superannuation Guarantee, Payroll Tax and WorkCover costs.
The proposed changes will only make personal income tax return
compliance more complex and are clearly contrary to previously
stated Government policy.
We believe that the proposed changes will prove to be a strong
disincentive for employees to strengthen their skills through
working overseas and will hinder companies seeking to recruit
skilled workers to address Australia's ongoing skills
Please do not hesitate to contact Michael van Schaik or your
Moore Stephens relationship partner.
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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