Tax concession cuts for foreign workers in Australia

Australia, 8th May: Foreign workers in Australia are going to feel the pinch of planned tax concession cuts by the federal government.

The government intends to reduce tax breaks available to foreign workers in Australia.

Tough rules for LAFHA—LAFHA (Living Away from Home Allowance) will see significant reductions in the coming times for foreign workers in Australia. This has been revealed by Treasurer Wayne Swan as part of fifth budgetary plans. LAFHA is available to foreign workers for deducting their food and rent expenditure from their taxable income.

But, this provision will, no longer, be available to the overseas staff.

The changes, the federal government alleges, are aimed to weed out foreign senior executives taking home a hefty pay packet.

Nearly $109 million tax deduction claims were received by Australian Taxation Office from around 1415 employers in Australia in the financial year 2009-10.

And this meant a big financial hole in the Australian government’s budget.

New pre-requisites for receiving LAFHA allowance—As per the tougher eligibility norms for receiving LAFHA benefits, following rules will be applicable to foreign workers--—

• Provide a proof of owning or renting a second home interstate;

• Workers will have to substantiate expenditure incurred while working away from their home;

• Limiting the LAFHA allowance to one year rather than indefinitely.

457 visa workers to be worst hit—Australian government’s move to reduce tax breaks will have a worst impact on 457 visa workers coming to work in Australia. That’s because such foreign workers take up employment in Australia primarily due to the facility of huge tax benefits on their income.

New rules will make overseas workers coming to Australia on temporary visas ineligible for tax breaks. Meanwhile, fly-in, fly-out workers employed primarily in the Australian mining works will continue to receive tax breaks, new rules suggest.

Changes to reduce Australia’s attraction for overseas workers--These changes are going to make Australia a comparatively lesser favorable choice for immigrants wanting to work here, cautions Innes Willox, chief executive of Australian Industry Group.

However, Willox has a remedy for offsetting reduced tax concessions for overseas temporary workers in Australia.

Australia can increase pay package of temporary foreign workers to help them compensate on the issue of lower tax breaks, suggests Willox.

He also has urged the federal government not to introduce new LAFHA norms until July next year to reduce the impact of such changes on foreign workers and Australian businesses.