Bye bye LAFHA, no more gravy train

Mellor

karl bracken wrote: »

Does this 32.5% apply to people being taxed as residents but on a 457?

Or does this mean the old tiered system will apply with the higher 18200 tax free treshold?

Or is every non resident just going yo hand over 32.5% of everything no matter what visa or how your being taxed?!

You are confusing resident and permanant resident I think.

People on 457 aren't "taxed as residents", they are residents. You are a resident if you are living here. No matter what visa. For tax purposes I think they have the bar set at 6 months. Flying out at Xmas, I was told to check the resident box on the immigration departure slip as my house was in oz etc.

PR is the right to permanently reside here.

mandrake04

This explains it

Generally, you are an Australian resident for tax purposes if any of the following applies:

you have always lived in Australia
you moved to Australia and live here permanently
you have been in Australia continuously for six months or more, and for most of the time you have been
in the same job, and
living in the same place

you have been in Australia for more than half of the financial year, unless
your usual home is overseas, and
you do not intend to live in Australia.

kdevitt

mandrake04 wrote: »

If you receive LAFHA…
You're not laughing anymore and will have to say cheerio to the lucrative Living-Away-From-Home-Allowance.

The new reforms mean it can only be used for the expenses of people who are legitimately maintaining a second home in addition to their actual home. So, Ireland or England doesn't count as a second home for most people who are here on a working holiday and 457 visas. It was good while it lasted - sorry guys

If you have a arrangement in place before May 8th at 7:30 PM and receive LAHFA - you continue to receive it until July 2014.

http://www.budget.gov.au/2012-13/content/overview/html/overview_35.htm

Feelgood

kdevitt wrote: »

If you have a arrangement in place before May 8th at 7:30 PM and receive LAHFA - you continue to receive it until July 2014.

http://www.budget.gov.au/2012-13/content/overview/html/overview_35.htm

I read this too, though am struggling to figure out if this applies to 457 visa holders?

kdevitt

Feelgood wrote: »

I read this too, though am struggling to figure out if this applies to 457 visa holders?

It doesn't refer to any specific visa category, but if you look at the savings in page 26 of the budget document (http://www.budget.gov.au/2012-13/content/bp2/download/bp2_consolidated.pdf) you can see the savings are progressively higher as people roll off of it, implying a staged withdrawal.

When the new rules come in it will only apply if you maintain a second home in Australia, and even then you can only get it for a max of 12 months.

digiman

So are we confident for those of us that have got LAFHA before last night that we will continue to receive it for the next 2 years?

Any other changes of note in the budget? Have the made any changes to the tax system? Different tax free thresholds or increase/decrease in the % at each level?

kdevitt

digiman wrote: »

So are we confident for those of us that have got LAFHA before last night that we will continue to receive it for the next 2 years?

Pretty confident alright - our HR team have already sent the details to our comp & bens team to ensure it continues to be paid to me.

digiman

kdevitt wrote: »

Pretty confident alright - our HR team have already sent the details to our comp & bens team to ensure it continues to be paid to me.

Would be amazing if it was, would be a huge weekly loss for me if I were to lose it. I had already prepared myself for losing it but won't do anything until I see no change in my payslip from July 1st!

Nick Diamond

I work in a salary packaging company, and here's what our CEO said

In short, the budget includes the following salary packaging related policy announcements:
• The living-away-from-home allowance benefit will be severely curtailed: it will no longer be available to employees coming into Australia from overseas and eligibility will be capped to a maximum of 12 months for domestic assignees.

The good news is that anyone currently salary packaging LAFHA will be able to maintain their packaging arrangements until the end of their LAFHA period OR until 1 July 2014 -whichever comes first. This means that LAFHA documentation will need to be reviewed to ensure end dates are clearly identified.


So essentially, if you already have LAFHA you will continue to receive it until a) the end of your current contract - your lafha period or b) 1 July 2014

Talk about a win for the lads!

kfc1210

So what if you work full time but are moving to part time for a few months (having a baby) and you are working on a 457, as far as the company is concerned they are changing your contract to part time.
Would this count as end of contract or would it be a case of say nothing and hopefully you'l be grand as the contract is being ammended for awhile!

Mellor

kfc1210 wrote: »

So what if you work full time but are moving to part time for a few months (having a baby) and you are working on a 457, as far as the company is concerned they are changing your contract to part time.
Would this count as end of contract or would it be a case of say nothing and hopefully you'l be grand as the contract is being ammended for awhile!

If they are giving you a new contract, then you should be getting LAFHA. I'm not sure if you'll get away with it or not in a hope for the best siuation.

Also, woudl reducign hours liek that not be in breech of your 457 visa?

dave3004

Treasury have confirmed transitional measures will not apply to Temporary Residents which is, of course, terrible news

Feelgood

dave3004 wrote: »

Treasury have confirmed transitional measures will not apply to Temporary Residents which is, of course, terrible news

Where did you hear this?. Link?

kdevitt

There is confusion over whether or not yesterdays announcement is the reform in full, or in addition to what was announced in November. If its the latter, then it could indeed be bad news after all - confusion reigns!

kfc1210

Mellor wrote: »

If they are giving you a new contract, then you should be getting LAFHA. I'm not sure if you'll get away with it or not in a hope for the best siuation.

Also, woudl reducign hours liek that not be in breech of your 457 visa?

Im defacto so there will be no breach, maybe should have mentioned that part.
By hope for the best i mean that they will just reduce my hours and not want a whole new contract when i switch from full to part time but i suppose thats in the hands of HR!

Butterbear

I work in the tax dept of a large professional services firm in Aus... and I'm also on LAFHA. The employment taxes Partner emailed today to notify us that the budget announcement was unclear, that she is meeting treasury tomorrow and will let us know Monday what the proposed changes will mean. There is currently uncertainty at to what "entered into arrangements" means- is it your lease contract, your employment contract? The draft bill has not yet been released and the devil will be in the detail. Anyway, I'll post once I hear more.

tezzy_v2

The announcements were definitely unclear - however one of the Partners in the Big Four firm I work in contacted the ATO & Treasury this morning and they have said that:

- the intention of the Budget release was not to change what was previously communicated in November.

Basically -

- 457 visa holder: Yes
- Currently claiming LAFHA: yES
- Will the concessional tax treatment be gone from 1 July 2012: Yes

Basically - now your LAFHA will be taxed at your marginal tax rate.

The Exposure Draft will be released Monday but tighten your belts - LAFHA is with us 457 visa holders for a few more weeks only.

The "transitional arrangements" referred to apply only to Australian permanent residents & citizens who are currently living away from an "Australian, non-rented out" home - they get LAFHA til 2014. Temp residents will not.

Contracts entered into from 7.30pm EST on 8th May for which the employee qualifies for a LAFHA will now only be available for 12 months

- so Aus Perm res, living away from an Australian home, gets job today - can claim LAFHA for 12 months only

Exception to this will be to Fly in Fly Out workers - no 12 month restriction.

Hope this makes sense.....more deets on Monday but no change to the above, just actual legislation.

kdevitt

If you read the Nov announcement it says -
"The reforms will apply from 1 July 2012 for both new and existing arrangements."

That quite plainly isn't the case now, as there are staggered dates. So if yesterdays announcement is building on November's one, its pretty contradictory. Even the big accountancy firms have different views on the intention, its absolutely ridiculous.

hussey

LAFHA Reforms Announced in 2012-13 Budget Release
May 09, 2012
Employees receiving LAFHA prior to yesterday's 2012-13 Commonwealth budget announcement by the Australian Government have been given a two year reprieve before the announced budget reforms will affect their eligibility for the tax concession.
Following the release of the 2012-13 Commonwealth budget by the Australian Government yesterday, further clarification has been provided on the proposed reforms to the Living Away From Home Allowance (LAFHA).
Whilst there is no detail in relation to the proposals previously discussed, the budget does build on the reforms announced in the 2011-12 MYEFO measure by:
- Limiting access to the tax concession to employees who maintain a home for their own use in Australia, that they are living away from for work; and
- Providing the tax concession for a maximum period of 12 months in respect of an individual employee for any particular work location.
The reforms will apply from 1 July 2012 for arrangements entered into after 7.30pm (AEST) on 8 May 2012, and from 1 July 2014 for arrangements entered into prior to that time. For those people currently receiving LAFHA, arrangements will continue as they are now until 1 July 2014 provided current eligibility criteria are met.
KEY FACTS
- For everyone currently receiving LAFHA, arrangements will not change until 1 July 2014, when reforms are due to be implemented.
- The reforms will apply from 1 July 2012 for arrangements entered into after 7.30pm (AEST) on 8 May 2012.
- For anyone applying for LAFHA from 8 May 2012, the tax concession will be limited to temporary residents if they are living away from a home located within Australia which they are maintaining. Permanent residents may be required to demonstrate that the home that they are living away from is maintained for their own personal use. Renting out the home could fail this criteria.
- For anyone applying for LAFHA from 8 May 2012, the concession can only be accessed for a maximum period of 12 months for any particular work location. This is an additional proposal to the initial reforms announced late last year.
The Government are to consult with tax experts and employers on the technical detail of the legislation for the purposes of ensuring it is fully enacted on 1st July 2012.
As per the budget announcement, additional information is expected shortly from the Government regarding the detail on these reforms.

bakedalaska

This is getting very confusing/
Irish Echo has a story on it
http://www.irishecho.com.au/2012/05/09/budget-offers-expat-reprieve-on-lafha/18223

Claims that we are keeping it. They would hardly publish a story without confirming it first???

kdevitt

I'm really hoping that is the case - am waiting on a call back from treasury to find out first hand.

kdevitt

@Hussey - if that came from lafha.com.au, its just some guys interpretation.

kdevitt

Just heard its definitely gone for 457 holders as of 1st July 2012.

RaoulDuke66

The accountancy firms have been giving some weird and wonderful interpretations of the wording in the budget. One even says that if you benefit from the 2 year transitional period for existing arrangements, the maximum period LAFHA can be claimed for is still 12 months - utter rubbish. But remember, they're accountants, not lawyers. And as for believing what a public sector employee at the end of telephone says, or anyone from a personnel department (sorry, "human resources"), take it with a pinch of salt.
What budget paper 2 says is:
- further reform by means of a measure targeting LAFHA at people legitimately maintaining a second home will build on the previously announced reforms from the mid-year outlook;
- the further measure will not affect FIFO or travel and meal allowances;
- the reforms will apply from 1 July 2014 for arrangements entered into prior to the budget.

So regardless of what any accountant or person answering the phone at the treasury says, they've announed that the reforms will apply from 1 July 2014 for arrangements entered into prior to the budget.

Frankly, common sense tells anyone that 457 visa holders under existing arrangements must be afforded the same time as Australians to rearrange their affairs, living arrangements and employment. If that wasn't the case, many 457 holders would be in a position where they couldn't afford to stay in Australia but couldn't afford to leave due to contractual employment penalties (repayment of relocation costs etc). The queue at HM's foreign and commonwealth office would be down the street.

kdevitt

RaoulDuke66 wrote: »

What budget paper 2 says is:[/SIZE][/FONT]
- further reform by means of a measure targeting LAFHA at people legitimately maintaining a second home will build on the previously announced reforms from the mid-year outlook

You've included the bit which hangs us 457 holders - its a further reform. The initial reform is included in the November announcement.

Treasury feel that plenty of notice has been given to 457 holders, which I disagree with - especially since I'm one of the people you refer to who will probably have to leave.

Until someone slightly more official than internet budget experts come forward with a clarification, I'm going on the word of the girl I spoke to at treasury - which I obviously hope is incorrect.

hussey

kdevitt wrote: »

@Hussey - if that came from lafha.com.au, its just some guys interpretation.

I was sent it from a guy at Macquarie - I have asked him where he got it from.

RaoulDuke66

The budget wording itself doesn't hang us. The budget took existing reforms, added a new measure, and then at the bottom of all that information says that the reforms will apply from 1 July 2014 for arrangements entered into prior to the budget. Have a re-read of it in context and see whether you agree that's what it says. Of course, the treasury may now do something else, but it definitely says that the reforms don't apply to existing arrangements until 2014.
Re. the girl at the treasury, I take it she had to "phone you back" after asking her supervisor. Yeah, don't believe internet budget "experts" but take the call centre supervisor's "expertise" similarly. The only certainty which will come is from the enacted legislation.
In terms of notice, yes, it was given in November, but I signed my employment contract in October. I can't terminate it without paying tens of thousands of dollars and I can't stay in Australia with a 20% cut in take-home, plus all the additional 457 costs such as private health insurance at $350p/m. What exactly would Mr Swann suggest I do?
Really hope the government doesn't do a u-turn from the position announced in the budget.

kdevitt

hussey wrote: »

I was sent it from a guy at Macquarie - I have asked him where he got it from.

Yeah its copied from lafha.com.au - the guys who run the site have just posted on linkedin that they need to update it now after a discussion with treasury, and that its not good news for 457 holders.

kdevitt

RaoulDuke66 wrote: »

The budget wording itself doesn't hang us. The budget took existing reforms, added a new measure, and then at the bottom of all that information says that the reforms will apply from 1 July 2014 for arrangements entered into prior to the budget. Have a re-read of it in context and see whether you agree that's what it says. Of course, the treasury may now do something else, but it definitely says that the reforms don't apply to existing arrangements until 2014.
Re. the girl at the treasury, I take it she had to "phone you back" after asking her supervisor. Yeah, don't believe internet budget "experts" but take the call centre supervisor's "expertise" similarly. The only certainty which will come is from the enacted legislation.
In terms of notice, yes, it was given in November, but I signed my employment contract in October. I can't terminate it without paying tens of thousands of dollars and I can't stay in Australia with a 20% cut in take-home, plus all the additional 457 costs such as private health insurance at $350p/m. What exactly would Mr Swann suggest I do?
Really hope the government doesn't do a u-turn from the position announced in the budget.

The dates in the recent annoucement refer only to the 'further' reforms. The July 2012 termination date announced in November for 457 holders is still effective.

Its going to cost me $2k per month in net pay, believe me - I don't want it to be the case.

RaoulDuke66

:eek: Even if you could afford to stay, it'd be crazy to. The next budget could put 457 holders on a 50% flat tax rate overnight, you'd just never be able to sure about your Australian salary as a 457 holder/'highly paid foreign executive and Australian tax expert deliberately rorting the system'.