Two year LAFHA reprieve for overseas agency staff already in place

(May 10 update: The question of whether overseas workers will be covered by the transition arrangements referred to below has been subject to fierce debate – see the comment thread. Mumbrella has been seeking clarification from the Treasury but at the time of writing this update, the issue is in question)

The media and marketing industry’s many overseas workers from the UK and elsewhere have been given a temporary reprieve over the loss of a tax perk worth thousands of dollars a year.

The government had flagged up the loss of the LAFHA – the Living Away From Home Allowance – as taking place from this July. The LAFHA allows workers on four year 457 visas to claim back their rent and living costs back against tax.

When the government flagged up its plans to axe the perk because it was being rorted, it generated a big debate on Mumbrella, with more than 250 comments.

The LAFHA suited employers because it helped in overseas recruitment by allowing them to offer a better deal, and it also reduces company’s mandatory super contributions because these are only paid on the basic salary, and not the rent allowance part of a remuneration package.

Yesterday’s budget saw the government confirm that it was indeed closing the LAFHA to most workers from this July. However, those who have already got LAFHA arrangements in place, will be allowed to continue with them until July 1, 2014 – an extension of two years.

The government guidance said:

“The Government will further reform the tax concession for living-away-from-home allowances and benefits, by better targeting it at people who are legitimately maintaining a home away from their actual home for an initial period.

“One of the issues raised at last October’s Tax Forum was the increasing exploitation and misuse of this tax concession by a narrow group of people, particularly highly-paid executives and foreign workers, at the expense of Australian taxpayers.

“Limiting access to the tax concession to employees who are maintaining a home for their own use in Australia, that they are living away from for work; and imposing a 12 month time limit on how long an employee can receive the tax concession at a particular work location.

“These further reforms will stop businesses from being able to give a very large taxpayer-funded tax break to employees who aren’t maintaining a second home, or are maintaining two homes indefinitely.

“It’s simply not fair or reasonable for ordinary taxpayers to be funding this kind of massive tax perk for a very small number of people.

“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.”

Brits make by far the biggest contribution to the overseas contingent in Australian media and marketing companies.

The end of the perk when it comes to recruiting new staff will probably have less impact at present because of the strong dollar and weak UK economy.

David Gaines, boss of media agency Maxus, who is British but gave up LAFHA when he obtained residency in 2006, told Mumbrella: “If you’re leaving the UK to work abroad, and you’re looking for tax breaks, you don’t go to Australia. You’d go to Asia. With the new LAFHA rules, we’re talking about a few people who won’t have a sea view until they get promoted a few rungs.

“People whining about few hundred bucks added to their rent won’t stem the flow people here.

“As an agency, we won’t be jacking up salaries for foreign talent to make up for them not having LAFHA. That would ruin the market and not be fair to Australians. Unless you are 100% dedicated to your career, and fame and fortune in medialand is your end game, then the LAFHA changes won’t mean much to you. Most people come to Australia for the lifestyle, and you can’t put a price on that.”


  1. Xx
    9 May 12
    1:13 pm

  2. There isn’t a repreive for overseas workers, actually. The November 2011 reforms still apply so LAFHA ends on 1 July 2012 for anyone who is not Australian (unless they maintain a home here and have to work away from it).

  3. Anonymous
    9 May 12
    1:38 pm

  4. Could you provide a link to the Treasury website that confirms that Xx?

  5. mumbrella
    9 May 12
    1:46 pm

  6. Hi anonymous, the link is included in the piece.


    Tim – Mumbrella

  7. Anonymous
    9 May 12
    1:56 pm

  8. Here we go……400 pages. Pomms v Aussies. GO.

  9. Anonymous
    9 May 12
    2:11 pm

  10. And within the link provided in the piece it clearly states that the reprieve isn’t for overseas workers?

  11. mumbrella
    9 May 12
    2:34 pm

  12. Hi anonymous, then it adds: ““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.”

    That’s where the two year reprieve comes from.


    Tim – Mumbrella

  13. ST
    9 May 12
    2:46 pm

  14. The LAHFA ends for those who enter in the contract later than 8 May 7:30 PM AEST. For those,prior to that it continues to be same till 1 July 2012. hence 2 year relief…

  15. Anonymous
    9 May 12
    2:54 pm

  16. It actually states that;

    This measure will build on the reforms to this tax concession announced in the 2011-12 Mid-Year Economic and Fiscal Outlook.

    Emphasis on the words ‘build on’. The 2011 reforms state that they would be;

    ‘limiting access to the tax concession for temporary residents to those who maintain a home for their own use in Australia that they are living away from for work. This change will ensure that a level playing field exists between temporary residents and permanent residents.’

    Who can clarify that the announcement yesterday overrides the November 2011 announcement?

  17. mumbrella
    9 May 12
    2:58 pm

  18. Hi Anonymous,

    This is the guidance KPMG has issued:

    “One relief is that these new Budget proposals will not apply to existing LAFH arrangements until 1 July 2014. This is in contrast to the announcements of November 2011, which intended to apply to all arrangements from 1 July 2012.”

    But we are trying for more clarity from the treasury.


    Tim – Mumbrella

  19. Anonymous
    9 May 12
    2:59 pm

  20. It doesn’t apply for overseas recipients. Our HR department confirmed it this morning

  21. The Duke of Norfolk
    9 May 12
    3:06 pm

  22. You should go back to your HR department. They’re just looking for an excuse to not have to do the work of processing it for you.

  23. Caveman
    9 May 12
    3:07 pm

  24. Garçon, more champagne!

  25. Anonymous
    9 May 12
    3:08 pm

  26. Tim I hope the advice you quote from KPMG is right. I guess time will tell.

  27. Fensaddler
    9 May 12
    3:28 pm

  28. Its staying at our place for those of us already on it. I think the guidance is pretty clear – if you’re on it you stay on it. There are plenty of HR depts out there who have long been unwilling to process it – I have a former colleague from the UK at a competitor firm in this city whose employer won’t process LAFHA for her, and I can’t tell where her position would differ from mine. Its always been something where you need an enlightened and helpful employer to claim.

  29. Devil's advocaat
    9 May 12
    3:32 pm

  30. LAFA doesn’t matter.

    Wayne Swan has boasted that “economic growth in Australia is expected to be stronger than every single major advanced economy over the coming two years” – he expects the economy to grow 3.25 per cent next financial year and 3 per cent in 2013-14.

    So everyone can have a payrise anyway.

    Unless he’s wrong?

  31. Devil's advocaat
    9 May 12
    3:32 pm

  32. LAFHA, typing so fast with one finger.

  33. The Duke of Norfolk
    9 May 12
    3:33 pm

  34. This is a bit academic now, but the way to persuade recalcitrant HR departments was to point out that they ended up paying less super. Once they realise they can save the company money they’re all over it…

  35. You having a LAFHA?
    9 May 12
    3:40 pm

  36. There is no way of knowing if this also applies to international workers (as it’s not clear at all) until 24th May when more details are released – Ernst & Young are speculating that it’s not going to be available for international employees and others, like KPMG, think it’s still going to be available until 2014 (for those already on LAFHA).

    Your guess is as good as mine!

  37. Blue
    9 May 12
    4:25 pm

  38. Assuming this budget gets through parliament, of course!

  39. Taxman
    9 May 12
    4:48 pm

  40. Issue:
    Will workers from outside of Australia who are currently living and working in Australia on 457 visas, who receive through their employers and the Australian Tax Office (“ATO”) the benefit of LAFHA under agreements entered into prior to 8 May 2012, and who do not maintain a residence available for their use in Australia at a site other than the location of their employment, continue to receive LAFHA benefits after 1 July 2012?
    Such workers will continue to receive the benefit of LAFHA under current arrangements until 1 July 2014. It is not clear whether such benefits are subject to early termination upon the occurrence of other events, such as expiration of 457 visas prior to 1 July 2014 if the worker’s current employment agreement has not terminated, the worker’s voluntary or involuntary change of employer and thus negotiation of new employment agreement, or other changes in the employee’s circumstances.

    International v. Domestic Workers
    The public discussion stemming from the release of the Budget includes a discussion about a dichotomy between international and domestic workers. Though the discussion seems to get overly broad at times, it apparently refers to the reformed rules now applying to permanent residents as well as temporary workers. Nevertheless, all of the reforms are equally applicable to workers whose original home base is overseas and workers whose original home is in Australia, and the timing of the application of the rules is not different for workers from different places.
    Further, some of the public discussion surrounding this dichotomy focuses on whether the proposed reforms apply to “international LAFHA”, presumably meaning overseas citizens who are living and working in Australia and receiving LAFHA benefits. One circulating comment is that the Budget has not addressed such “international LAFHA” and thus workers on 457 visas have received no guidance from the Budget. This comment makes no logical sense based on text of the actual documents and on the rhetoric surrounding their release.

    Existing Arrangements
    What remains unclear from the Budget is the complete definition of the term “arrangements” in the timing provision. The Budget states that “[t]he 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.” Budget at 25.
    We can safely assume that any employee continuing to work for the same company under the same employment agreement, living in the same rental property with the same lease, and continuing to be present in Australia under the same visa, is unaffected on 1 July 2012. However, if any of those conditions change – if the employee changes jobs, renews his visa, moves apartments, enters into a new lease, etc. – it is not clear if this will be considered a new “arrangement” under LAFHA and thus subject to the new rules immediately.
    As the Government has stated that it will “consult with tax experts and employers on the technical detail of the legislation,” we can expect further clarification of such details to come. See Budget at 25.
    * * *
    In conclusion, it is clear from the documentation released by the Australian Government that, as currently written and expected to pass, that workers from outside of Australia who are currently living and working in Australia on 457 visas, who currently receive LAFHA under agreements entered into prior to 8 May 2012, and who do not maintain a residence available for their use in Australia at a site other than the location of their employment, will continue to receive LAFHA benefits through 1 July 2014.

  41. Anonymous
    9 May 12
    4:53 pm

  42. If you read further on in the KPMG guidance it states that these reforms build on what was announced in November-namely that it won’t apply to overseas staff. Time will tell but I wouldn’t assume anything until actually law.

  43. Anonymous
    9 May 12
    4:55 pm

  44. Actually, I think you will find that KPMG’s Budget Brief states the following “The government has reaffirmed the changes to LAFHA taxation that were announced in November 2011 and we expect that those will apply from 01 July 2012”. BDO are also of the same opinion and EY state that it is too early to know the details.

    A very important line in the release is “This measure will build on the reforms to this tax concession announced in the 2011-12 Mid-Year Economic and Fiscal Outlook”. It is BUILDING ON, not amending.

    This article is a personal opinion of the author because there is no way to know what the legislation will say at this point. The media release that you have provided a link to clearly states that “The Government will consult with tax experts and employers on the technical detail of the legislation.” This legislation is not due before parliament until later this month and they will have until June 29 to enact it for 01 July.

    I really do believe that you need to retract or insert a caveat into your article as you are making a statement that is not yet certain.

  45. Danni
    9 May 12
    5:20 pm

  46. Very pleased to see David Gaines comment re increasing salaries to accommodate for ‘loss of income’ to those previously entitled to LAFHA – he is exactly right, this would ruin the market.

    It will already be difficult for small – medium agencies who will need to increase super payments for those staff. At least once this does come into play, those OS employees who decide to become residents will have a greater level of super to support them in later life!

  47. Janice
    9 May 12
    6:09 pm

  48. Why would anyone who receives lafha now need a pay rise if it was to cease?
    That doesnt make sense. Their cost of living is the same as anyone not on lafha –
    they just stop getting money for nothing.

    This 2 year repreive is ridiculous.

  49. Agency Australia
    9 May 12
    6:24 pm

  50. The facts are indeed that current people on LAFHA will continue to receive it until 2014 and then it will be taken away.

    The real issue is that LAFHA is a joke that greedy people make use of, at the expense of Australian residents, to feed coke habits and frivoulous lifestyles. If the money were being spent back into the tax paying economy it may not be such an issue.

    But that extra $300 a week is either going in bank accounts waiting to be deported back to the UK or going in the back pocket of a black mercedes driving guy from Bankstown.

  51. Ollie
    9 May 12
    11:52 pm

  52. Janice – Has it ever occur to you that those on LAFHA might get discounted salaries because the employer has accounted for the fact that take home salary was higher ? sad but it happens…! I understand how one could get upset and feel this is unfair but the savings that the government will get out of this measure won’t cover the déficit. Its 100 mln vs billions…

  53. John
    10 May 12
    5:34 am

  54. Janice, why is it ridiculous ?

    You sound bitter !

    Why would anyone who receives lafha now need a pay rise if it was to cease?

    To make up the difference of course. You clearly don’t know anything about LAFHA if you are asking the question. Employers have been using LAFHA as a “benefit” part of the package.

    Employees and employers with LAFHA can now prepare for its removal.

  55. Giacomotto
    10 May 12
    8:07 am

  56. To Janice,

    Do you even know that overseas dont have medicare, no Child care benefit and, actually, no benefit at all ? Please, before writing such thinks, try to understand why it is a big drama for many families.


  57. Lee
    10 May 12
    8:59 am

  58. Just in response to Janice the issue here is where people on a particular income have entrered into long term agreements based on how much money they earn/come away with each week/month/year.

    I know a lot of people including myself who have 12 month leases on a house, bought a car on finance, signed up for mobile phone contracts, signed up for foxtel or equivelent before any of these changes to LAFHA came to light.

    It is simply unfair and unrealistic to simply take away a huge portion of their income with very little notice period and certainly not enough notice period to effect the decisions they have already made. I stand to lose $1000 per month from an income of $5200 per month.

    I simply cannot afford to live here anymore if this happens. I will likely have to default on debts, hand my car in and hope the finance company look kindly on it or other extreme measures just to survive.

  59. You having a LAFHA?
    10 May 12
    9:32 am

  60. No, the actual cost of living doesn’t rise, but for some the LAFHA is part of their package and so it’s not a tax benefit for them, e.g. Their package is equivalent to $100k which includes LAFHA so they take home $5,600 (with the LAFHA)… Someone with a base salary would also take home $5,600. I know a few people in this situation and if their company refuse to negotiate they will be taking a pay cut! It doesn’t apply to everyone, but it does for a lot of people.

    Also, the LAFHA is used as a negotiation tool by companies to attract foreign skilled workers to Australia – so they factor that in. For some people they could have committed to a 1 year lease a week ago knowing they can afford it on LAFHA, and a week later they’ll struggle.

    And let’s not forget, non-residents don’t get the same benefits as residents so why should they pay the same to get less? For those with children, this is going to hit very hard as they have to pay to have their kids in school while they’re here…. Health care is really expensive for non-residents etc. etc.etc…

    This budget seems to be all about punishing success, taking heavily from those that can’t vote and trying to bribe the ones that can.

  61. @Janice
    10 May 12
    10:00 am

  62. If you move from Europe to Oz based on a 40k after tax salary and after a year it is cut down to 30k after tax…sure, your cost of living is still the same but you just lost one fourth of your income and your new job in oz suddenly doesn’t feel that great anymore…

  63. Fensaddler
    10 May 12
    10:01 am

  64. Janice, I take it you’d be fine if you had to take an instant cut of $1000+ to your monthly take home? Migrants arrive here and work with what they find, and that includes all the quirks of the tax and benefits system. People arriving here on 457s don’t have access to most of the benefits accorded to Aussie citizens (IMHO that’s fair enough in most cases), are *required* to take out medical insurance (so $3-400 a month for starters for families), and are often having to start again buying cars, furniture, equipping their kids for school and all that jazz. In some states, they will also have to be shelling out for other things that Aussie citizens get for free – in NSW for example it costs migrants about $5k a year per child to attend public schools. So it isn’t a level playing field. I’m not keen on special pleading, as frankly I’m glad to be here and aiming for citizenship myself. The outcome from the budget, inasmuch as we can interpret it, seems to be about the fairest outcome we’re likely to get, because it gives people time to adjust to a big change in their income. LAFHA is a curious scheme, and was always going to be an easy target for government spending cuts, because a. it benefits a lot of people who aren’t citizens, and therefore can’t vote, and b. is unlikely to get much support from Aussie citizens for much the same reason.

  65. Taxman
    10 May 12
    11:29 am

  66. Anyone who is on LAFHA on 457 visa, you need to call the Treasurer’s office @ Tel: (02) 6277 7340
    and requet to speak to Rebecca Fanning. Please call as you will be very surprised to hear that the information posted here may not be as accurate as it seems and you may need to think about going back home if you cannot afford to stay when LAFHA ends on July 1. Please don’t take my word for it, just call the office and they will tell you, from the horses mouth.

  67. LAFHA_Gone
    10 May 12
    12:10 pm

  68. I will take a hit of 1000 a month when this goes.

    I am paying 450 a week in childcare for prekinder.
    400 a month in health care charges. I would much rather be PR and not get LAFHA to get the family benefit, cheaper childcare and medicare.
    On top of all this I am still paying my mortgage back home.
    The rental house we are living in has no heating and a mouse problem. I am clearly NOT taking advantage of LAFHA its just helping us live.

    If or when this goes I will struggle. At the moment I couldn’t even afford the flights back :(

  69. JayZ
    10 May 12
    12:41 pm

  70. Cry me a frickin’ river. You have the choice to go back to London, don’t you?

  71. fleshpeddler
    10 May 12
    1:05 pm

  72. funny how everybody jumps down Janice’s throat for some mildly misinformed commentary when the Village Idiot…..Agency Australia…says this

    The real issue is that LAFHA is a joke that greedy people make use of, at the expense of Australian residents, to feed coke habits and frivoulous lifestyles. If the money were being spent back into the tax paying economy it may not be such an issue.

    But that extra $300 a week is either going in bank accounts waiting to be deported back to the UK or going in the back pocket of a black mercedes driving guy from Bankstown.

    so much prejudice and misconception in that post it’s hard to know where to start

    yes you’re right, every LAFHA recipient spends their savings on coke and ‘frivolous lifestyles’
    yes every drug dealer drives a Merc and lives in Bankstown (you stopped short of calling them ‘Lebbos’ but we all know what you meant
    yes, every international LAFHA recipient is here to bleed Australia dry and take all their money home.

    I can only imagine you’re down at Cronulla most weekends waving your flag and wearing your ‘love it or leave it’ t shirt, you prejudiced idiot. With apologies to the Aboriginal community, the vast majority of Australians are recent immigrants, mostly come here to make a better life for themselves.

    yes LAFHA gets abused and is given out for too long (my view is that as soon as you’re eligible for PR you should lose LAFHA), but it’s been a highly successful strategy to counter the brain drain Australia suffers losing white collar talent overseas and now, with this being one of the most expensive countries in the world, it continues to perform an important role in attracting highly skilled migrants…all people who should make the country a better place to live for prejudiced idiots like you

  73. Anonymous
    10 May 12
    1:08 pm

  74. LAFHA definitely ceases in July 2012 for all temporary residents that do not maintain a second home in Australia.

  75. Ryski
    10 May 12
    1:29 pm

  76. The transitional arrangements for LAFHA (i.e. keeping existing LAFHA until 2014) will not apply to temporary residents.

    Holders of 457 visas (or other temporary residents) will come under the new legislation from 1st July 2012.

    The Treasury acknowledge there has been confusion over this, but maintain they have been “abundantly clear”.

    Seems lots of newspapers/websites and accounting firms will need to change their budget breakdowns.

  77. You having a LAFHA?
    10 May 12
    1:30 pm

  78. Well said fleshpeddler…
    Amazing that a lot of people think it’s only people from the UK getting LAFHA. Australia wants and NEEDS skilled workers here to fill the skills shortage and with roughly 25% of the population made up from people born overseas, it’s essential for the economy to attract and keep skilled foreign workers. LAFHA attracts them and keeps them here long enough for them to consider getting residency. As fleshpeddler said, this offsets the skilled workers leaving Australia.

    You lose LAFHA allowance as soon as you apply to stay in Australia permanently (not actually get residency, just apply) which takes 2 years for people to meet the requirement for employer sponsored residency, but you can’t limit it to 2 years as many people are on longer term contacts… the Business Visa last for 4 years and therefore the LAFHA should apply while the visa is active, as it’s only a temporary visa.

    This reform just keeps skilled workers away, drives out the ones that are here and ultimately hurts the economy.

  79. Xx
    10 May 12
    1:36 pm

  80. Thank you Anonymous. You are quite right that this article needs to have a caveat inserted because it is misleading. The situation is not clear at present.

  81. Doug K
    10 May 12
    1:37 pm

  82. This article is wrong! Unfortunately. Rebecca Fanning (Advisor from the Treasury dealing with the reform – (02) 6277 7340) has today confirmed that all 457 Visa Holders, Temp residents, will lose LAFHA from the 1st of July 2012. It appears that the Government have not disclosed the smallprint around the reform and that only PR and Citizens will get the transitional payments until July 2014 or until their Visa expires.

    See for more info

    What a blow! I just can’t believe the chaos and stress the Treasury/Government have caused. I am furious! I can’t believe that they are only giving a phased out approach for PR and Residents, why not temp residents!?!?!? They have solely targeted 457 holders throughout this entire reform! One rule for Aussie’s, completely different rule for overseas individuals. So the worst case scenario has been implemented, tax 457 holders like PR and then give us none of the benefits, and treat us like scum by delaying finalising this and then pulling the carpet out from underneath us at the 11th hour. This stinks to high heaven……. particularly given the glimmer of hope released yesterday in the budget.

    BAD DAY for Australia! Watch the mass exodus commence……

  83. Fensaddler
    10 May 12
    2:13 pm

  84. We don’t have a vote Doug. Why would they worry about us? After all, Australia can get along fine without its migrants, just like it always has done.

  85. Chivvy
    10 May 12
    4:23 pm

  86. Having read the budget statement a few times, it is the most poorly written policy I have ever read (I used to work with the UK Treasury so can get how bean-counters express themselves). Its completely open to claims that the statement leads everyone to believe that there is a transition period for non-residents, as there is no explicit reference to preclude non-residents when the change of policy dates are outlined.
    Btw, I don’t think a single individual person could clarify over the phone with a ‘forgot to mention that it means you….’ The budget statement is in effect, a legal statement so lawyers have to be involved.
    Its now near impossible for companies to revise the policies and payroll in time for 1 July, particularly MNCs and Universities (i.e. academics) so its frought with difficulties.
    If there is no transition, Doug K is right that it appears to be warped towards foregners. I take issue with the statement that everyone moves here for the lifestyle. Some us/our spouses are here because they are in a highly specialised sought-after discipline and it was a good career move.
    The best talent will not settle as secondary because you get to off clock at 4pm on Friday to go to the beach….there are beaches in California and the booming Asian economies.
    Being a non-UK born Brit (whose parents gave NHS public service), I do take a real issue to the thought of paying taxes as locals yet not being entitled to any benefits. Why does the system discriminate against foreign workers’ children? No-one owes anyone LAFHA but at the same time, highly skilled foreigners should not be indebted to Australia – it sends out the wrong message. It is a big old world out there and even if EU/US economies are plunging, highly skilled professionals will always be sought after.
    In my case, I am on a 457 and I am keeping up repayments on a London mortgage as well as forking out on extortionate rent in Sydney – because my position is temporary. I’d happily go back to my home in the UK if/when the career move is right – as that is the whole purpose of highly skilled migration, right?

  87. Taxman
    10 May 12
    4:56 pm

  88. Has anyone contacted the Treasury and asked to speak to Rebecca Fanning to clarify the LAFHA position, especially for internationals?
    Treasurer’s office @ Tel: (02) 6277 7340

    If so, what has been to communication?

  89. Fensaddler
    10 May 12
    5:01 pm

  90. We will pay exactly the same taxes as Australian citizens. We will have exactly the same obligations under the law as Australian citizens. So it only seems reasonable we get the same benefits as Australian citizens. At the moment it seems, we pay everything, and more, get less, and are expected to suck it up and be grateful. I love Australia, and I love the people I’ve got to know here, but there is the deeply held principle of the ‘fair go’ here. This doesn’t seem to be the country any more where migrants are given that ‘fair go’. Tax breaks come and go for all of us, and we work with what we have, but the sense of being shafted because we are an easy target and can’t vote is hard to take. And the manner in which this has been communicated is woeful.

  91. Cathie McGinn - Mumbrella
    10 May 12
    5:31 pm

  92. Hi Taxman – we have been seeking clarification from the Treasury for much of the afternoon and we’ll be updating shortly.

  93. Giacomotto
    10 May 12
    7:44 pm

  94. Hi there,

    So Full tax for all overseas, ok we are here. Many of us can continue to live here well with that -Ok that’s unfaire to say it 6 weeks before the cut-.
    But for family with children -especially under 5- it will be a nightmare.
    Do you know a good way to let know the government that child care has to be take into account then ?


  95. Ryski
    10 May 12
    9:28 pm

  96. I have personally spoken to the Treasury (yes, Rebecca Fanning) and she confirmed to me that the transition rules ONLY apply to the additions in the budget (i.e limiting LAFHA for permanent residents to 12mths in any one location).

    457 visa holders WILL lose their LAFHA on 1st July 2012. They will therefore be paying THE SAME tax as residents, with access to fewer services.

    Please check the activity over on Linkedin:


    New headline:

    “Mad scramble for UK Jobs”

    Bedlam ensued today at many UK airports, as plane loads of tanned Brits hit the tarmac in the hope of getting their old jobs back.

    Many had a funny walk which they attributed to “getting shafted by the Aussie government”.

    Some with young children spoke at the worsening situation in Australia, stating that the junk food culture and terrible education system had left their kids “chubby, sun baked and thick”.

    One passenger was quoted as saying “we knew there were cut-backs here in the UK, bad weather, and a surplus of chavs, but we still felt it better to come back. At least here if someone tries to screw you, they buy you dinner first…”

    Another added “everyone thinks Australia is some sort of paradise, but the novelty of taking the kids to school in a 3.5 litre V8 doesn’t really offset the fact that they call flip-flops ‘thongs’, and my kids are going to be saying ‘noy’ instead of ‘no’ for the next 5 years…”

    Meanwhile, back in Australia it has been reported that most major infrastructure projects have ground to a halt, and that bankruptcy claims among Australian landlords have risen by 40%. The Australian Government is also predicting a severe skills shortage, but is at present unaware of anything that may have caused this.


  97. RaoulDuke66
    10 May 12
    9:55 pm

  98. All, I’m posting this message on a number of forums as it will provide 100% clarity on what is happening with regard to LAFHA for overseas workers.

    I spoke with Rebecca Fanning, Wayne Swann’s research advisor on the LAFHA reforms. I can only recount the conversation I had with her. You may want to do your own due diligence on the matter. And, up front, I want to praise her for her honesty and taking the time to come back to me after office hours, regardless of the dirty work she’s being made to do.

    Anyway, she conceded that Budget paper 2 does in fact say that all LAFHA reforms will be subject to a transitional period. However, she apologised for that, and said that it meant to say that only Australians will be allowed 2 years to re-arrange their financial affairs to an affordable position. Foreigners are left up a creek from 1 July 2012.

    However, the reason there has been confusion on this is because Wayne Swann and his Treasury haven’t been 100% honest about the nature of the reforms in respect of overseas workers. What we’ve all missed (i.e. what they’ve tried to hide) is that they basically view the overseas worker LAFHA budgetary savings as a direct pass-through cost to business. Of course, I can understand why Swann wouldn’t say that, given how much he pretended to be helping Australian business in the budget. He’ll no doubt view it as a tax on nasty foreign companies – but I, like thousands of others who now can’t afford to live here/leave, work for an Australian company.

    The reason I say this regarding the nature of the reforms is because the Treasury told me that they expected all employees’ losses to be met by employers through renegotiated employment contracts. I asked what happens if the employer refuses to renegotiate to a liveable wage for that individual/family, leaving the employee unable to afford to stay in Australia but unable to afford to go. She said that shouldn’t happen – it is up to the employer to meet all losses incurred due to the reforms.

    I also pointed out that whilst the changes were intended to level the playing field between Australian employees and overseas employees, it costs an overseas employee thousands more per year to live and work here (health care, schooling etc), and therefore overseas workers (especially families) will be significantly worse off than Australians in the same job with the same company. She said that the Treasury expected companies to pay additional amounts to overseas workers to meet those additional costs.

    Further, I asked when had notice been given that the proposed changes outlined in November were confirmed. She said that items set out in the mid-year outlook and consultation paper in November had the same effect as if set out in the budget. In other words, employers should have known exactly what was happening back in November, and should have been renegotiating overseas employees’ contracts back then to ensure that they didn’t lose anything. I took from her the Treasury view that, if an employer hasn’t renegotiated their contracts for overseas workers, they’ve been deliberately pulling the wool over the eyes of those employees, and they need to re-package salaries now.

    All of this will be confirmed when the draft legislation and a press release is issued on Monday, although of course they’ll omit the bit about this being intended as a pass-through cost to nasty horrible foreign companies (although I understand that HM’s foreign office sees it as exactly that).

    In summary, the Treasury view:
    – a 2 year transitional period for Australian workers;
    – nothing for overseas workers;
    – businesses to provide repackaged contracts to all affected overseas workers to meet all additional costs.

    My view would be that everyone affected should, as a first step, gather all information available to them before deciding how to proceed in their own particular circumstances:
    – approach their employer and at least give them the benefit of this information, that the Treasury intends the company to pick up the employee’s losses;
    – confirm the position regarding flights home (which the employer is supposed to pay for), so that the position on that is clear with them;
    – confirm the position regarding employment contract termination costs (you may have to pay penalties within a certain period of having entered into the contract); and
    – find out whether your employer has transfer opportunities to countries looking to have skilled/professional overseas labour (of course, you’ll want to stay clear of countries which have a history of these types of tax grabs from foreigners).

    On a positive note, this is a great opportunity for businesses outside of Australia to recruit skilled and professional employees, and I have no doubt that anyone on a 457 will walk into a job abroad on a liveable wage for them and their family.

  99. mumbrella
    10 May 12
    10:26 pm

  100. Thanks for that comprehensive update Raoul.

    We’re still working on getting a definitive, on the record statement out of the Treasury. We’re making some progress, but aren’t there yet.


    Tim – Mumbrella

  101. jean cave
    11 May 12
    12:13 am

  102. The same obfuscation exits at Immigration Services. I quote
    “Some of our more inexperienced staff don’t want to give the client bad news directly. Often they will give you a form, knowing you will be unsuccessful. You have no rights in this country.”
    Suppose she meant no rights to expect truthful honest answers.

  103. Ryski
    11 May 12
    8:13 am

  104. Everyone should head over to this linkedin topic which explores whether the new rules for 457 holders are legal

  105. RaoulDuke66
    11 May 12
    8:50 am

  106. Agreed: giving the transitional period to Australians but not to British workers contravenes Article 25 of the UK/Australia Double Taxation Convention 2003 –
    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.

    UK nationals need to contact the foreign office asap

  107. I AM Chuckling
    11 May 12
    9:27 am

  108. Ha ha LMAO. So many Pom’s, Sep’s, Canadians etc hurried their permanent residencies through because they are staying here, however have been playing the Lafha game for the last 4, 6, 8 years etc. Now their PR is granted they are not going to be able to claim – good!

    What I find very perplexing is why LAFHA is allowed to be given to people for so long, who evidently are in Oz, because it rocks and not because we need their skill.

    In the old days when the Aussie dollar was so low, it made sense to offer LAFHA. Sydney / Melbourne hold their own these days, I truly do not think you need it. If we do offer it, ensure it is strictly for a maximum of two years.

    People rant on about attracting talent from oversea’s etc. I have worked in London and NYC. I feel the talent is now in Sydney. I see Pom’s coming here and getting taught a thing or too… I see so many Sep’s and Pom’s coming here and staying here, because they love Sydney.

    Do we honestly need LAFHA?

  109. Rob
    11 May 12
    9:34 am

  110. Can someone tell me if Im missing the point here, Im on a 457 visa, and get LAFHA. There is a difference between the definition of ‘permanent resident’ for tax and immigration. Obviously being on a 457 visa im not a permanent resident from an immigration stand point, but from a tax view, as I live, work etc here I am a permananent resident and pay full Aussie tax. Surely if its is tax legislation then my tax position is the one that counts? Or am I just being far too optomistic?

  111. DD
    11 May 12
    10:57 am

  112. @Iamchuckling – I think the Poms need to teach you to spell. I am guessing you mean a thing or two as opposed to a thing or too.

    Not sure your argument holds up when you can’t differentiate between to, too or two. #sadstateofaffairs

  113. Fensaddler
    11 May 12
    12:30 pm

  114. @ I AM CHUCKLING You can’t get (couldn’t get…) LAFHA once you are/were a permanent resident – LAFHA eligibility ceased as soon as a PR application was lodged. Your post suggests otherwise which is wrong. Most (I think about 70%) of migrants on 457 (temporary working) visas move to PR. For most 457 status is a 2 year stepping stone onto PR, and then further towards citizenship. Its entirely misguided to think that most are playing the system to hold onto LAFHA and temporary status for many years. Its usually quite the opposite, most are pleased to get PR, and hence put up with the loss of LAFHA, since it gives them permanence in the country they have chosen to settle in. I want to be here, and 457 is for me that stepping stone. The problem with the new legislation is that LAFHA is being withdrawn for that first, initial period under 457, when we don’t have the rights and benefits of citizens, and depending on nationality and location, are having to pay additionally for health and education services where citizens do not, and at the same time are now being required to pay exactly the same contributions without access to the services that others get as a result.

  115. Gav
    11 May 12
    12:41 pm

  116. Funnily enough I was speaking to a German based client on Wednesday. He mentioned they’re setting up an APAC head office in the next 12 months, they were considering Sydney or Singapore, however were waiting for the news on LAFHA. It looks like they are going for Singapore in large part due to this. He was gutted as he loves Sydney, but “the tax difference for workers and also the company [i think govt incentives for business relocation/opening?] are just too much to turn down. And obviously Singapore airport is good”.
    Yes, only 12 or so jobs probably, but then there’s the knock-on effect etc. Funny to see it expressed so obviously and so directly related, but that’s the problem.

    It’s supply and demand, on the one hand, do the Australian govt. need to impress us foreigners? No – we don’t vote. On the other hand, do they need to incentivise non-geographically mobile Australians already living here to stay living here? Probably not so much as they need to incentivise skilled migrants to come here. LAFHA was a good way of doing this. As a previous recipient (No more! I’m one of those proper taxpayers that wouldn’t be here now if it hadn’t have been for LAFHA when I first arrived), I agree that it went on too long, and was perhaps overused, but 1 year maximum of LAFHA as a policy moving forwards, with a reasonable notice period for ending it would make much more sense.

    Who does this policy actually benefit? In the long term will the net job loss/influx of skilled migrants be more of a loss to the economy than the temporary increased income tax revenues. Let’s not forget, companies benefit from LAFHA through increased incentive to come to Australia, lower wages as a negotiation point (it’s absolutely true that LAFHA recipients have less negotiation leverage than those without, all else being equal) and therefore less tax/superannuation burden on those wages.

    Was LAFHA a piss take? Maybe. Could there have been a sensible compromise reached? I would’ve thought so. Is the new policy a bad move? I’d say so.

  117. Citizen Smith
    12 May 12
    9:29 am

  118. A big problem here is that the lafha community is not being represented in Australian politics. This is taxation without representation. Visit to register your support.

  119. Les
    12 May 12
    7:17 pm

  120. The issue for me is simple. As a 457 holder. If I lose monthly earnings, I’ll be moving home unless my work increases my salary.

    People ranting at the unfairness of lafha should consider that 457 holders do not get ANY state benefits. And have to pay for the lot. Schooling etc.

    For WA anyway, they are already desperate for skilled workers. This is only going to make WA employment a lot more difficult or expensive for companies already based here. Perth has the same prices if not higher than London. In fact I believe it is higher than NYC and LA.

    Australian taxpayers do not spend a penny to substitute lafha Claiments. Lafha is a tax deductible expense.

  121. Ron
    13 May 12
    11:27 am

  122. It has been argued by some that LAFHA made the government effectively subsidise the companies hiring people on a 457. I disagree with that contention, because a 457 visa holder lives with the risk of being sent back home within 28 days if he were to lose his job, and therefore needs a risk premium built into his salary to compensate. The question is whether the employer or the government should bear this risk premium, and given that it is the government that sets the rules of visas and immigration in the first place, it is only fair that the burden be borne by the government. As far as workers returning home is concerned, I expect that employers would renegotiate salaries for the most part; but only the truly desperate or those in the 250k+ bracket would stick on after losing A$1000 a month or more, from their package. Other than impacting the smaller companies directly, this would also mean a higher percentage of jobs getting outsourced to India, at least in the technology space. Does it all make sense? The LAFHA hole is 740 mn out of a budget deficit of 47 bn or so – 2% of the total. At a time when every sector in Australia is suffering at the expense of Resources, I don’t think it does.

  123. fensaddler
    13 May 12
    4:31 pm

  124. Ron,

    I’m neither desperate nor anywhere near the $250k bracket, but I doubt either that my employer will be paying me any more, nor that I will be moving on. They pay me what they pay their Australian employees, so it would be difficult for them to pay overseas workers more – despite all the points you and others make about risk premiums, lack of benefits, additional costs etc (all of which are true). Moving on would mean another company in Aus (not many of them in my field, and probably not paying any more, as well as the risk that they could turn out to be bad employers rather than the excellent mob I’m with), or leaving Aus – which we could just about afford, but which would leave us many tens of Ks down after just coming out here, and not having got anywhere. We’ve been shafted, and so, to some significant extent have our employers. Swann doesn’t care, because we don’t vote, and the damage he causes to the economy in terms of skills supply will only begin to bite once he has been turfed out of office.

  125. Ryski
    13 May 12
    7:21 pm

  126. All these points will have been covered when employers and industry bodies responded to request for submissions as part of the consultation.

    Probably why the Treasury will not make them public (unlike other consultations).

    Check the Treasury website under “latest consultations” – you can review responses on the other ones, but not LAFHA.

    Wonder why…….

  127. An arrest
    14 May 12
    8:48 am

  128. @Fensaddler

    You have not been shafted at all. The copy on any forms signed by yourself would have stated that your LAFHA could be taken away / conditions can change etc

    You have chosen to come to Oz (you haven’t been marched here) and what comes with great weather, some of the best cities in World, some of the greatest food, amazing coffee – (you get the picture) comes sacrifice and balance. Blimey, stop whinging will you!!

    Can you imagine back in the 1850’s when the diggers came over for the gold rush with nothing but their clothes, a tent and a pick. You sound like a whinging teenager and certainly not like the original, resilient diggers; they would turn in their graves if they could read your sorry post.

    Australia used to have to offer LAFHA to attract skilled workers. Australia simply doesn’t need to now. Half of Ireland is knocking on the door. Half of London is indeed knocking on the door. Lifestyle wise you can walk home at night without the fear of being mugged. Get a grip ffs! You are living in paradise!

    When I book a luxury hotel room I have to pay for it – why on earth should Australia subsidise when it doesn’t need to anymore?

    Roll with it, life can suck, however your whinging will only make it worse for you – look at the positive and react in a way that doesn’t make you appear like a spoilt little brat.

    Be lucky!

  129. Charles La Trobe
    14 May 12
    8:59 am

  130. @Les

    See you then Les. I hope you have a safe journey home; there will be 20 plus awesome resume’s queuing up to be read the day you hand in your notice.

    Ta da!!

  131. RD66
    14 May 12
    1:37 pm

  132. And so the exodus begins…

  133. NewAussie
    14 May 12
    8:53 pm

  134. @An arrest

    A very simplistic perspective of things. Let me clarify, what sort of people come into this country. I work in research and had fantastic offers from great institutions all over the world (including Ivy league universities). I have chosen Sydney because of the lifestyle and the salary (including Lafha) which allowed me to save money in this expensive place whilst enjoying the good lifestyle. And just to mention, I work for a University, so nobody can excuse me of being a highly overpaid senior executive exploiting the system! With LAFHA gone, my savings will practically vanish. Now one can argue as you did, that we have to be grateful of being here (and I truly admire this place and people here). But just bear in mind, that we made a choice of coming to Australia, because LAFHA made it competitive. If you are satisfied with an influx of workers, who are drawn away from Europe due to the, so be it!!!

  135. JJ
    15 May 12
    12:05 am

  136. @ Les

    Les no one is irreplaceable, for every family affected by the loss of LAFHA there will be 20 more young single/couple applicants ready to give their right arm to get sponsored. New contracts can be offered to new people.

    People on 457 without kids pay tax and don’t consume them, WA, Vic & QLD do not charge school fees and so the 457’ers with kids in those states are consumers as well as tax contributors. If you go Les you will probably just be replaced by a contributor only.

  137. An arrest
    15 May 12
    9:48 am

  138. @New Aussie

    You mention two main reasons why you are here in Australia. (One of these is an enormous reason why people work here as opposed to putting up with the rain in London): “Lifestyle”.

    In the year 2012, it is a novelty to be able to live in an international city, where the sun shines, where the food is great and the chance of getting mugged is tiny.

    – Do you head back to wherever it is you are from? (I am guessing the “lifestyle” isn’t as grand there?)

    – Do you head over to somewhere like Singapore where you wont pay much tax, however you will live 3/4’s of the year sweating whenever you go outside, spending your spare time with pompous expats, who have nothing much else to do other than drink.

    Australia holds it’s own. it is a country, who’s cities are in demand and smart people are knocking on the door. What would you do if you were in government – just keep throwing out tax breaks when you don’t really need to?

    (I don’t mean you any harm and I wish you well with whatever it is you decide to do!)

  139. RaoulDuke66
    15 May 12
    11:27 am

  140. Concerned individuals who contacted the Treasury last week were told that a press release and exposure draft legislation in relation to LAFHA reform would be released on 14 May 2012 to clarify the chaos caused by Wayne Swann’s less than transparent Budget Paper 2. This has not materialised, leaving worried 457 workers and their families in the dark once again.

    However, I have no doubt that this is as a result of various legal firms, accountancy firms and foreign offices, pointing out the obvious illegality of targeting 457 workers in an immediate salary grab whilst affording Australian workers the obviously required transitional period to re-arrange their existing unbreakable financial and employment obligations.

    The source of the illegality is the breach of Australia’s tax treaties with other nations, all of which contain non-discrimination provisions applicable to the treatment of income tax and FBT. The wording in all such treaties is substantially as follows:-

    “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.”

    The reforms breach all of these treaties because, for the first two years, only foreign workers under existing arrangements will be required to show that they maintain a home for their own use in Australia. Australians under existing arrangements will not be required to do this until July 2014.

    The point has nothing to with the benefits received or not received by foreign workers living in Australia.

    There has also been a spectacular failure to follow government guidelines in relation to consultation with stakeholders:

    “Policy agencies need to…provide feedback on how they have taken the consultation responses into consideration.”

  141. DJ
    15 May 12
    12:56 pm

  142. Simple fact is that when overseas 457 workers made the decision to come over here and negotiated a salary it was done with the cost of living and LAFHA taken into account. Take away LAFHA and you will still get people coming here but the vast majority will negotiate higher salaries if they do not get LAFHA. Therefore taking away LAFHA will just cause wage inflation to rise significantly and with Australia looking to lower interest rates then this is a very bad combination. Also I agree you cannot provide a tranistionary period for some classes of 457 and not others – that is discrimination and lawyers will have an absolute field day bringing claims on behalf of those affected if this goes through

  143. SM
    15 May 12
    4:40 pm

  144. JB Camerom
    7 Jun 12
    11:00 am

  145. Where are we at with the LAFHA for overseas workers on secondment to Australia until Jan 2013. Currently, I qualify for the allowance but am totally confused if it end in July or is extended until 2014..