Recently announced changes, if implemented as planned from 1
July 2012, could have a far reaching impact on existing living away
from home (LAFH) arrangements and those written in the next five
Whilst the government is still consulting on its proposals, of
particular concern is the current lack of any specific transitional
rules. This means that, in only five months' time, it is
possible that large tax obligations for employers or their
employees will arise in relation to existing employment contracts
with LAFH benefits.
The main area of concern is for expatriate employees working in
Australia. If they don't have permanent residency in Australia
(including many New Zealanders and 457 visa holders) they will not
qualify for LAFH concessions under the proposed changes (except for
those who have a usual home in Australia that they are "living
away from"). This could add a large tax burden to the cost of
employing such individuals (either FBT or PAYG gross up for tax
equalised arrangements). Alternatively, affected employees may
suddenly find they have far less net income from which to meet
their accommodation and living expenses.
Grant Thornton recommends reviewing all existing LAFH
arrangements to determine the potential cost impact of the changes.
In addition, the proposed changes should be taken into account when
drafting new employment contacts, letters of offer and other
documentation for all new LAFH arrangements.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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