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Lafha to be abolished 2012

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Hi all my OH brought this info home about LAFHA so anyone on a 457 read on.

 

Changes for Living Away from Home Allowance (LAFHA)

 

01-Dec-2011

 

The Living Away from Home Allowance (LAFHA), once a lucrative incentive for highly paid migrants to linger in the twilight zone of temporary rather than permanent residency, has been reformed in a controversial government move to prevent tax fraud. The Australian Treasurer, Wayne Swan, confirmed the changes to LAFHA on 29 November 2011.

 

The allowance, claimed by many 457 holders, provides for cash payments to cover the costs of living away from home, interstate and overseas travel. After reports that some foreign workers were receiving up to 90 per cent of their salary tax-free, and as part of the budget-cut program, the government decided to reform LAFHA to specifically prevent overseas workers from claiming back tax.

 

In order to continue claiming the LAFHA one must maintain a home for their own use in Australia (rather than their home come country) from which they are living away from for work. For example if a 457 holder owned a home in Sydney and their company sent them to Melbourne for work. In addition individuals claiming the allowance need to demonstrate their actual expenditure on accommodation and food beyond a statutory amount rather then simply claiming “reasonable costs” as is currently the case.

 

Some possible effects include:

- highly paid skilled overseas workers/senior executives may be deterred from working in Australia if there are better tax incentives from other countries;

- more 457 workers will now be attracted to become a permanent resident as there is no more tax incentives for them to remain a temporary resident.

 

If you are currently holding a 457 visa and claiming the LAFHA for tax reasons and wish to now apply for permanent residency contact your migration agent in order to set the ball rolling.

 

My apologizes if I've posted under the wrong thread.

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Hi

 

Read this: http://www.treasury.gov.au/documents/2235/PDF/CP_FBT_LAFH_Benefits.pdf

 

There is an email we can all write to at the end. If enough of us cause a stir perhaps they will reconsider it. Personally I would be happy if they just let us have free schooling. I have 3 kids. If we lose our LAFHA then I will have to homeschool my twins. This is not on! When Aussies come to Britain we dont charge them school fees. I think its a right for every child to have access to free education.


Melanie Charlton

Based in Berowra, Sydney:cool:

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Guest deadishduck

not good, Im am due start work on the 9th of Jan 2012 and I just got this from my new employeer...

 

A couple of weeks ago, proposed changes were unveiled by the Australian Federal Government in respect of changes to the treatment of living-away-from-home benefits.

The reforms follow an extensive review by the Australian Taxation Office (ATO) in response to concerns over the increased provision of LAFH benefits and perceived abuse of LAFHAs paid to foreign executives. The proposed changes are intended to apply from 1 July 2012 for all new and existing arrangements.

We have identified you a future employee of xxxxxxx who is likely to receive a LAFHA as part of your Total Package Value (TPV) and therefore you might be impacted by these changes. As there is currently a very limited amount of information that has been released, we remain uncertain how you will be specifically affected.

 

We are conscious that you may be in the process of moving to or within Australia and maybe making plans for the future and so we are keen to ensure you are informed of these proposed changes.

 

Here is an overview of measures and key impacts for employees with LAFHA:

 

 

A consultation paper has been released that states that 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 is deemed that this has provided an unfair advantage for temporary residents over local Australian workers. Under the proposed reforms, LAFHA 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 local employees.

 

Both the Treasurer’s press release and the subsequently issued Consultation Paper make it clear that the great majority of temporary residents on subclass 457 visas and their employers will lose their ability to claim LAFH benefits from 1 July 2012.

 

Next steps:

 

  • xxxxxxxxx is actively involved in the consultation process with the Australian Federal Government over the coming months
  • Submissions are due by 3 February 2012; therefore further clarity on how this impacts our employees is unlikely before early March next year.

Immediate considerations:

 

  • We are unable to provide further advice on how you may be personally impacted by these proposed changes until the final legislation is passed and released
  • You should consider how you may be personally affected by this proposal and what impact this may have on your current or future financial commitments.

We will continue to keep you updated as we progress.

 

 

what to do now...

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Guest DutchRooster

First post - sorry for the abrupt intro.

 

I have only just signed a contract to relocate from UK to AUS, upon request of my current employer. They dangled the LAFHA tax breaks in front of me like a carrot, and didn't communicate the upcoming changes to me. I emailed HR today and they explained that until a decision was final there was not much point in alerting all those affected. I beg to disagree. I'm supposed to start the new role in March. I would be signing a long term lease on a house that will suddenly become a LOT more expensive to rent. I am currently having building work done to my home in the UK to prepare it for letting - without LAFHA benefits I may be better off selling it and trying to buy a house in AUS.

 

Lastly; what good is a 457 visa if we are to be burdened by all the tax without any of the benefits? I have 2 young children that need schooling. What about medical care etc? Seems very unfair...

 

:arghh:

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I contacted the NSW school board to ask if we could get discount for sending all 3 kids to school. They informed me that our earnings are not enough to pay for school fees - all 3 children are now exempt from school fees! So, do check and see if you qualify. It seems one only pays school fees if you earn a certain amount.


Melanie Charlton

Based in Berowra, Sydney:cool:

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First post - sorry for the abrupt intro.

 

I have only just signed a contract to relocate from UK to AUS, upon request of my current employer. They dangled the LAFHA tax breaks in front of me like a carrot, and didn't communicate the upcoming changes to me. I emailed HR today and they explained that until a decision was final there was not much point in alerting all those affected. I beg to disagree. I'm supposed to start the new role in March. I would be signing a long term lease on a house that will suddenly become a LOT more expensive to rent. I am currently having building work done to my home in the UK to prepare it for letting - without LAFHA benefits I may be better off selling it and trying to buy a house in AUS.

 

Lastly; what good is a 457 visa if we are to be burdened by all the tax without any of the benefits? I have 2 young children that need schooling. What about medical care etc? Seems very unfair...

 

:arghh:

 

Seems a bit deceitful to not mention it considering it has already been announced by the govt on November 29th and your ongoing budget would be based around it. Employers should be offering more money to compensate.

 

It doesn't change your access to medicare btw and schooling is still free in the majority of states on a 457 so depends where you are going.

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Guest DutchRooster

I emailed the head of HR about it and his response was that for now it is speculative, subject to debate etc and once clarity has been provided about what the exact change will be and how it will be implemented, he will issue an update to all employees affected. I pointed out that in my case I'm looking to commit to a long term property lease and have based my decision to take the contract in part because life for me and my family would be affordable provided LAFHA benefits apply. Without them, it suddenly becomes a different story...

 

I'm looking into a 850 visa or skilled worker visa.

 

Thanks for the additional info re medicare. WRT schooling; I'll be moving to Sydney and from what I've read schooling will not be free on a 457. We'll also need child care a couple of days a week - about $100 a day in Sydney, no subsidy.

 

I've negotiated my contract to a 2x conversion - LAFHA excluded (and we'll lose my wife's income). So a lot will depend on the actual cost of living in AUS. We're going for it. Fingers crossed.

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My guess is that any changes will come through on 1st July with the new tax year. So you've got six months to make any other arrangements.

 

The Australian government is trying to get its budget under control, and foreign workers don't vote so the repercussions are likely to be fairly minor. Removing something like negative gearing from rental properties would have a much bigger effect, but also upset a lot more citizens, so it appears to be off the radar right now...

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I emailed the head of HR about it and his response was that for now it is speculative, subject to debate etc and once clarity has been provided about what the exact change will be and how it will be implemented, he will issue an update to all employees affected. I pointed out that in my case I'm looking to commit to a long term property lease and have based my decision to take the contract in part because life for me and my family would be affordable provided LAFHA benefits apply. Without them, it suddenly becomes a different story...

 

I'm looking into a 850 visa or skilled worker visa.

 

Thanks for the additional info re medicare. WRT schooling; I'll be moving to Sydney and from what I've read schooling will not be free on a 457. We'll also need child care a couple of days a week - about $100 a day in Sydney, no subsidy.

 

I've negotiated my contract to a 2x conversion - LAFHA excluded (and we'll lose my wife's income). So a lot will depend on the actual cost of living in AUS. We're going for it. Fingers crossed.

 

I think it is a bit more than speculation, sounds to me like the future employer is either in denial or not being completely honest.

 

What visa are you thinking of anyway, you mention 457, skilled worker and an 850 (never heard of that one).

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Guest ezp

Out of interest is there anything stopping a 457 getting a bedsit/shared room in a house out of the state you are working in, seems like a bit of a loophole if not.

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The internet ate my post...

 

Reading through various previous posts it seems there's generally an expectation that 457 workers will get LAFHA until PR comes through - if you've never had the intention of returning home, technically you're not entitled to it in the first place. How many people who claim it *genuinely* have the intention of returning back to their country of origin?

 

To the poster who mentioned abolishion of negative gearing, the Keating government tried this, all that happened was that rental costs soared as there was no longer any incentive for landlords to keep returns lower than the mortgage so it benefits the renters as well as the landlords.

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Don't think it was landlords purposely keeping rent down...negative gearing helps but isn't better than higher rent.

 

Found this interesting tidbit on wikipedia:

 

The popular view that the temporary removal of negative gearing caused rents to rise has been challenged by two separate studies. The first study, which examined Real Estate Institute data, found that rents rose in Sydney and Perth, but did not find any discernable increase in rents in other State capital cities.[2] The second study, which examined Australian Bureau of Statistics rental data, found that rents rose in Sydney and Perth, remained flat in Melbourne and Adelaide, but fell in Brisbane.[3] Both studies suggest that the property industry's claims about the impact of negative gearing on rents are false. Since if it was true that the abolition of negative gearing caused rents to rise, rents should have risen Australia-wide since negative gearing affects all rental markets equally.

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Overly simplistic statement, granted, but as a landlord it *does* give the incentive to invest - returnes are horrendously low right now and capital growth isn't what it used to be, if I wasn't getting tax back, which makes my places postive cash flow I wouldn't have bothered and that's three families who have to find alternative accommodation in a 0.1% vacancy rate area

 

Hijacking the thread now - back to LAFHA

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I kind of get what the Aus Government are getting at with the LAFHA, but, currently it's our intention to return to the UK, we have not taken the visa as a foothold into Aus and apply for PR now we are here. We are also renting out our home back in the UK so it's still there when we do go home.

 

To be honest, with the cost of rent, without the LAFHA we would not have come over. Back home I have a nice 3 bed detached house in a nice area, I don't see why I should have to live in a tiny 2 bed unit to be able to afford to live out here.

 

Hubby's employers wanted him out here, (an internal move with his company) we hadn't thought of living in Sydney until he was approached, and I expect there are many people like us out here who aren't here to rip off the system, but are here because of a good job offer and a life experience, but it isn't our long term aim to stay for ever down under or use it as a foothold for PR.

 

I would also say the Gov' are being shortsighted, as they do need experienced labour in various areas, and if this allowance is lost then a lot of migrant workers might well move to other countries where the cost of living is less, or just think stuff it, got a good job back home and lifestyle, will stay home.

 

I would also suggest a lot of employers use the allowance as a way of reducing their employer liabilities with pension payments etc, by paying this sum but reducing your taxable salary accordingly. You still earn the same as you co-workers in total, but maybe are a little better off by not paying tax on some of your income.

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To be honest, with the cost of rent, without the LAFHA we would not have come over. Back home I have a nice 3 bed detached house in a nice area, I don't see why I should have to live in a tiny 2 bed unit to be able to afford to live out here.

 

It should be up to the employer to bear the cost of paying your husband more, not the Australian tax payers.

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Overly simplistic statement, granted, but as a landlord it *does* give the incentive to invest - returnes are horrendously low right now and capital growth isn't what it used to be, if I wasn't getting tax back, which makes my places postive cash flow I wouldn't have bothered and that's three families who have to find alternative accommodation in a 0.1% vacancy rate area

 

Hijacking the thread now - back to LAFHA

 

Maybe if the tax payer stopped subsidising figures that don't otherwise stack up, more landlords would be forced to sell - prices would fall - and the three families would stand a better chance of buying their own properties.

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To be honest, with the cost of rent, without the LAFHA we would not have come over. Back home I have a nice 3 bed detached house in a nice area, I don't see why I should have to live in a tiny 2 bed unit to be able to afford to live out here.

 

 

 

You don't have to do anything though do you? The Australian taxpayer should not have to fund the house that is to your liking, it is the employer that should be paying the salary that you think you deserve and which will pay for the hous eyou want. And if they will not then you don't take the job.

 

Instead of lobbying government, why don't people lobby their employers to get the salary they think they deserve.

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Guest DutchRooster

Future employer is my current employer, they want to relocate me to help them develop their market in Aus.

Currently a 457. Considering an 856.

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Guest DutchRooster
You don't have to do anything though do you? The Australian taxpayer should not have to fund the house that is to your liking, it is the employer that should be paying the salary that you think you deserve and which will pay for the hous eyou want. And if they will not then you don't take the job.

 

Instead of lobbying government, why don't people lobby their employers to get the salary they think they deserve.

 

My company will be paying me twice the salary I was earning in the UK to do the same job somewhere else - is that not an investment by the company? If Australia has a scarcity of certain skills that the country needs, why shouldn't the tax payers contribute?

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If Australia has a scarcity of certain skills that the country needs, why shouldn't the tax payers contribute?

 

I think this post has made me angrier than anything I have previously read on a forum. Good night before I say something I enjoy.

 

In case it is not clear, your intended arrival in Australia is for the benefit of your employer - not the taxpayer:

Future employer is my current employer, they want to relocate me to help them develop their market in Aus.

Currently a 457. Considering an 856.

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My company will be paying me twice the salary I was earning in the UK to do the same job somewhere else - is that not an investment by the company? If Australia has a scarcity of certain skills that the country needs, why shouldn't the tax payers contribute?

 

When you say "twice the salary" and "I've negotiated my contract to a 2x conversion"...do you mean in raw numbers...ie £100,000 -> $200,000 or in real terms twice the salary £100,000 -> $440,000 ?

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Guest DutchRooster
I think this post has made me angrier than anything I have previously read on a forum. Good night before I say something I enjoy.

 

In case it is not clear, your intended arrival in Australia is for the benefit of your employer - not the taxpayer:

 

Apologies if my opinion has angered you, that was not my intention. I stand by my POV though. Governments use tax payers money to stimulate some incentives and discourage others. If a less competitive country wants to be more competitive in the global economy, it will have to attract high-skilled workers from some of the more competitive countries.

 

Perhaps Australia has reaped enough benefits from such high-skilled foreign workers, for now? I mean, Australia is relatively stronger due to the recessions in Europe and the US.

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Guest DutchRooster
When you say "twice the salary" and "I've negotiated my contract to a 2x conversion"...do you mean in raw numbers...ie £100,000 -> $200,000 or in real terms twice the salary £100,000 -> $440,000 ?

 

I doubled my salary. On the flip side, we lose my wife's income and will have a higher cost of living. Especially without LAFHA tax breaks.

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Guest marchatfield
I think this post has made me angrier than anything I have previously read on a forum. Good night before I say something I enjoy.

 

In case it is not clear, your intended arrival in Australia is for the benefit of your employer - not the taxpayer:

 

i must say i agree with peech, i currently run a hgv workshop and over the last 4-5 years i have seen the average wage being driven down by a large influx of mainly eastern european workers, this has ment that a once in demand well pay'd skilled trade is now on the decline wage wise. This would be the same in oz, how will it be of benifit to the local ozzie who has to start taking less money to compete with migrant workers- the company will start to throw out the line they use over here - "lazy locals dont want the work so we have to employ migrents" In my opinion you are choosing to move to another country if you do not like or agree with the rules its simple, dont go.

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