LAFH changes to hurt business and constrain mobility

9 May 2012

Businesses that rely on employees moving between locations will face higher costs as a result of changes to the Living Away From Home (LAFH) rules announced last night, according to PwC Partner Norah Seddon.

"Sectors with a large mobile workforce or that need skilled workers from overseas, such as the resources and construction sectors, will be particularly hard hit by these changes, which now apply to both international and inter-state moves."

The changes are broader than those in the previous announcement of 29 November 2011.

From 1 July 2012, the LAFH concessions will only apply where an employee moves for work purposes and is living away from their Australian home. The concessions will only be available for a maximum period of 12 months per work location.

Ms Seddon said the only welcome news from the announcement last night is that the Government has listened to extensive feedback from the recent consultation process and have introduced transitional provisions for pre- budget arrangements where existing concessions will continue until 1 July 2014."

"Subject to the transitional rules, employees who move interstate and do not maintain a home in their home location and employees who move from overseas to Australia are unlikely to be able to claim the LAFH concessions for accommodation and food from 1 July 2012."

In a survey conducted by PwC in February 2012 businesses were surveyed about the changes originally announced in November 2011. The key concerns raised by business in the survey in relation to the changes were:
  • 83% expected additional costs
  • 49% expected difficulty retaining current talent
  • 58% expected difficulty in attracting new talent
The transitional rules in the Budget merely defer both the issues in relation to retaining current talent and the cost to business in relation to current employees. The changes announced last night do not address these issues in relation to employees that move after 8 May 2012 and in relation to difficulties in attracting new talent.

"Attracting new talent and encouraging employees to be mobile are significant issues facing many businesses and the changes in relation to the LAFH concessions will make these more difficult and costly for employers", said Ms Seddon.

"Expanding the LAFH concessions further so that they apply to any employee who maintains a home in their home location (regardless of whether that home is in Australia) would significantly assist in addressing the difficulties in attracting new talent from overseas to work in Australia."

Aside from paying more salary to attract employees, businesses will also need to consider changing arrangements to travel or permanent relocation arrangements. Employers will also face additional employment costs including payroll tax and additional superannuation costs.

"There is little doubt that the attractiveness of Australia as an employment opportunity for overseas residents will suffer, with the vast majority of secondees relying on the previous concessions to offset the additional costs associated with these employment based relocations," said Ms Seddon.

"There will also be a significant impacts on interstate moves for work purposes, as the cost to employees and / or employers will rise significantly because the changes now apply to these moves."

There remains some ambiguity on whether related concessions for education and home leave will continue.

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