Australian LAFH tax change deadline extended to 1 October 2012

Australian tax changes to reduce the scope of companies to offer tax free allowances to cover employee expenses associated with relocation and living away from home (LAFH) have been delayed.  While the government justified the changes as necessary to clamp down on abuse of LAFH allowances to provide benefits for executives, it ignored the severe impact the changes will have on the ability of Australian companies to flexibly respond to business opportunities through employee relocation and access to foreign-sourced skills not available locally.  We reported on these changes HERE and HERE.

The government has held two extensive consultation processes in relation to these reforms.  But do not get your hopes up for changes to recognize bona fide living away from home allowances for foreign sourced and other workers that the original draft legislation did away with.

Instead, the Government has taken the decision just to defer the start date of the reforms from 1 July 2012 to 1 October 2012.

Nevertheless, this should be welcome, as a key issue emphasized in submissions was the time (not to mention another additional cost borne by businesses) needed to reprogram payroll systems to cope with the changes.

The government has also made a number of technical changes to the amendments in response to feedback on the exposure draft of the legislation.

However, there still remain annoying uncertainties in the draft legislation that will go before parliament when it resumes in August.  For example, an unusual provision in the transitional rules applying to those in receipt of allowances on budget night (the 8th May) could end relief if the person receives a pay increase.

The explanatory memorandum for the Bill is HERE and the actual Bill is HERE


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