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 businesses.
A copy of the Moore Stephens submission outlining a number of significant issues that need to be addressed can be accessed here.
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 regard.
- 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 2012.
- 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 shortage.
Questions
Please do not hesitate to contact Michael van Schaik or your Moore Stephens relationship partner.
This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2011 Moore Stephens Australia Pty Limited. All rights reserved.
