Shocking Aussie politics and the LAFHA joke

Posted: May 11, 2012 in Personal, Politics

[tweetmeme source= “jsnrss” only_single=false]I’ve not commented much on my political viewpoints and I guess one of the many reasons I came out here in the first place is because of the political isolation Australia enjoys and which I looked forward to.

But, I feel compelled to comment on the recent Aussie budget and more specifically the impending changes to LAFHA.

Many are commenting on whether it’s fair or not (basically thousands of foreign worker, many in the agency sphere) will lose 20% of their salary -but this is the wrong area to focus on IMO.

How a progressive government of a modern country can manage the proposed changes to LAFHA in such a shambolic way (chaos ensues: is a poor sign of its ability to manage legislation and a bit shocking really.

Whilst the changes, fair or not are debatable, the fact that the government is leaving these thousands of people to wait in angst, to find out if the changes will impact them from July 2012 or if they will benefit from the reprieve until July 2014) is simply bewildering. With official announcements offering no clarity at all (yes, including the budget itself which I’ve read!) and even contradicting each other, it’s bad enough. But to then give them just one month (or two at best) to to deal with the impact of their reduced income should the changes indeed apply to them from this July, is comparable with the way policy is mandated in a third world economy.

I don’t feel like I have the right to comment on the merits or otherwise of the policy, but as far as I’m concerned, the policy handling and communication is a complete joke coming at the expense of many talented overseas people who have chosen to make (and contribute to) Australia as their home and may need to pack up as a result.

Latest update from officially unofficial sources here:

  1. Ctowna says:

    Amen !

  2. Helen says:

    Couldn’t agree more! We won’t be able to stay in Australia after this. We also can’t afford to return to the Uk. So…..we gave up two pretty good careers to come over to Australia for the experience of a new culture etc. Now, we’ll have to leave. The way the UK economy is we may not find employment comparable to that which we left (if any). We have all the associated costs to meet (credit card, here we come) and, if we fail to get work, will have no money to meet the mortgage and be repossessed. This has been the worst decision we have ever made, it will ruin us financially and I dread to think of the impact upon our children. Whatever the rights or wrongs of LAFHA a transitionary period should have been put in place for ALL recipients and proper guidance and facts made available. Yes, this is a farce but one which has very real consequences for people with families who have come here in good faith. I am so disgusted by the way this has been handled I cannot begin to put it into words.

  3. Jason Ross says:

    You’re so not alone Helen – for what its worth, despite the incredibly poor handling by the Government, I just cannot see the changes being implemented before July 2014. But, like all others … we’ll have to wait and see.

    • Helen says:

      I wish I could be as optimistic Jason! I think they will hurry through the changes and expect employers to meet the shortfall. Some employers might, others may not or not be in a position to (smaller firms, for example). Also, I can’t see Australian wokers being best pleased that their foreign colleagues are getting paid more for the same job. If we were entitled to the same benefits as residents then fine, but I fail to see why we should pay the same tax yet have no entitlements whatsoever. The child care is the deciding factor for us and I’m afraid we’ll have to leave. This is so short sighted of the government and really leaves a very sour taste in the mouth. I’ll keep my fingers crossed that you’re right though Jason!

  4. RaoulDuke66 says:

    The positive news for temporary residents is that the relevant transitional elements as they are set out in the exposure draft legislation (Tax Laws Amendments (2012 Measures No.3) Bill 2012: deducting expenses for living away from home) are unlawful, as they breach all of Australia’s double-taxation treaties. These treaties are incorporated into Australian domestic law through the International Tax Agreements Act 1953.

    This is because, in respect of existing LAFHA arrangements until July 2014, temporary residents and foreign residents will be subject to an additional restriction to which permanent residents will not be subject – namely the requirement to maintain a dwelling in Australia – in breach of the non-discrimination clauses in each treaty.

    Taking the UK as an example, this contravenes Article 25.1 of the UK/Australia Double Taxation Convention, because it is subjecting UK nationals to requirements connected with income tax/FBT which is “other” and “more burdensome” than requirements to which Australian nationals are subject in the same circumstances, “in particular with respect to residence”.

    Further excellent news for UK nationals is that the Convention with the UK is the first Australian tax treaty to contain a non-discrimination article (Article 26) which gives taxpayers private rights of appeal. UK nationals have a direct right to appeal to the Australian Competent Authority, whose role includes assisting people who believe that the actions of Australia result or may result in taxation that is not in accordance with a particular tax treaty.

    In addition to posting this information on other forums to help people elsewhere, UK nationals who wish to oppose the discriminatory transitional arrangements, may wish to include the following material in their consultation responses (to, in their communications to the Australian Competent Authority (, and in their communications to the further relevant contacts I’ve listed (see below)…

    “In respect of the Tax Laws Amendments (2012 Measures No.3) Bill 2012: deducting expenses for living away from home exposure draft (the “Exposure Draft”), proposed provisions in relation to Transitional – existing employment arrangements are in breach of the UK/Australia Double Taxation Convention (the “Convention”) applicable to both income tax and fringe benefits tax, incorporated into Australian domestic law through the International Tax Agreements Act 1953.

    Article 25.1 of the Convention, states:

    Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected.

    According to the ATO:

    Article 25 (Non-discrimination) is included to protect nationals of one country from tax discrimination in the other country.

    According to the HMRC explanatory memorandum:

    …this Article provides that neither country shall impose discriminatory taxes (or requirements) on the nationals, permanent establishments and enterprises of the other.

    In respect of existing LAFHA arrangements until July 2014, as set out in the Exposure Draft, “temporary residents” and “foreign residents” (which includes UK 457 visa holders) will be subject to an additional restriction to which Australian permanent residents will not be subject – namely the requirement to maintain a dwelling in Australia – in breach of the non-discrimination clause.

    The result is that on 1 July 2012, UK nationals already working in Australia on 457 visas under LAFHA arrangements, will overnight see a decrease in their take home pay of up to 40% and possible immediate financial ruin, whereas the Australian Government has seen fit to put full transitional arrangements in place for Australians with existing LAFHA arrangements.

    In his justifications, it is entirely disingenuous for the Treasurer (and those under his authority) to continually suggest that all 457 visa recipients of LAFHA are highly-paid executives. The Temporary Skilled Migration Income Threshold is $49,330, compared to the average Australian full-time salary of $68,791(Q3 2011).

    It is unacceptable for the Treasurer to continually suggest that foreign workers (including UK nationals) who receive LAFHA are “rorting” (Australian slang, meaning “cheating” or “defrauding”) the system. The ATO website currently advises UK expatriate employees on 457 visas that they are entirely entitled to claim LAFHA if eligible under existing arrangements:

    Examples of employees on appointments of finite duration who will generally be living away from their usual places of residence are foreign nationals employed in Australia (expatriate employees)… In the case of expatriate employees having to reside in Australia for the term of their employment, each year we publish a tax determination outlining what we consider a reasonable food component.

    The proposed discriminatory transitional arrangements, based on the Treasurer’s disingenuous and offensive characterisation of UK nationals claiming LAFHA in line with ATO guidance, breach Australia’s obligations under the Convention and conflict with its International Tax Agreements Act 1953. Existing Australian domestic law and treaty obligations require that the transitional LAFHA arrangements applicable to July 2014, must be applied to UK nationals working in Australia on 457 visas in the same way as they will apply to Australians.

    In view of the Australian Government’s failure (in breach of its own guidelines on public consultation) to demonstrate how previous consultation responses to the Assistant Treasurer’s November 2011 consultation paper on LAFHA reform have been taken account of in the Exposure Draft (which responses explained inter alia that the Australian Government should not leave UK nationals who are tied into existing employment contracts and financial arrangements in Australia, to overnight financial ruin), it has been necessary to copy this consultation response to the following relevant parties:

    • the Australian Competent Authority at;
    • Prime Minister, David Cameron, at;
    • First Secretary of State, Secretary of State for Foreign and Commonwealth Affairs, William Hague, at;
    • Deputy Prime Minister, Nick Clegg, at;
    • Leader of the Opposition, Ed Miliband, at;
    • Shadow Foreign Secretary, Douglas Alexander, at;
    • the Foreign and Commonwealth Office, at;
    • Leader of the Australian Opposition, Tony Abbott, at; and
    • Australian Shadow Treasurer, Joe Hockey, at”

  5. Bob Ward says:

    Keep in mind that the temporary residents are required to pay for their own health insurance and schooling for their children while paying the same taxes as citizens

  6. Mark says:

    I am fed up with the government giving tax breaks full-stop. The decision to come to Australia to work should be purely economic (capitalism at its best) and not be due to government tax manipulation. I am looking forward to seeing the LAFHA gone and hopefully the government too.

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