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Lafha - Tax Alert Warning From The Ato

Lafha - Tax Alert Warning From The Ato

Old Sep 17th 2002, 11:35 pm
  #1  
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Default Lafha - Tax Alert Warning From The Ato

Be careful about getting the LAFHA...

http://www.ato.gov.au/content.asp?do...e/mr200283.htm

Tax Office cautions foreign workers to beware of promoters offering living away from home allowance schemes
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Old Sep 18th 2002, 11:10 am
  #2  
George Lombard
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Default Re: Lafha - Tax Alert Warning From The Ato

Hmmm,

    > http:-
    > //www.ato.gov.au/content.asp?doc=/content/Corporate/mr200283.htm

    > Tax Office cautions foreign workers to beware of promoters offering
    > living away from home allowance schemes

This will drive some of the PQBS businesses out of operation, as the LAFHA
is currently the major advantage they offer. But I think that the legal
advice which is the basis of the current arrangments is pretty strong, so
the Tax Office will need more than a ruling to shift it.

The strange thing is that it took the ATO so long to realise what was going
on...

The text of the statement follows:

A Taxpayer Alert was issued today warning foreign nationals working in
Australia to beware of schemes offering tax-free salary paid as a so-called
'living away from home allowance'.

Tax Commissioner Michael Carmody said the arrangements are being promoted to
backpackers and other overseas visitors on working holidays in Australia,
including IT workers.

"The arrangements involve special purpose companies being established to act
as intermediaries between labour hire firms and foreign nationals working in
Australia," Mr Carmody said.

"These companies seek to re-characterise salary payments as a living away
from home allowance, in some cases paying more than 40 per cent of salary in
what is claimed to be a tax-free allowance.

"On the facts available, the allowance bears no relationship to additional
living costs required to perform their work."

These arrangements raise Tax Office concerns because:

payments described as living away from home allowances may not actually be
allowances of that kind; or
intermediary companies promoting these arrangements may have a fringe
benefits tax liability; and
the Part IVA anti avoidance provisions of the Tax Act may apply.
This alert has been issued by the Tax Office because information currently
available suggests that people need to be wary if approached about
arrangements of this type.

The Tax Office is currently finalising its view on the issues raised in this
alert and will publish this view as soon as possible.
 
Old Sep 18th 2002, 12:26 pm
  #3  
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Default Re: Lafha - Tax Alert Warning From The Ato

I think the driving issue here is one of quantum - I have heard people talk of A$20k per annum tax free as a LAFHA. To me that is provocative and invites the ATO to crack down on what might be seen as abusing the system.

Best regards.



Originally posted by George Lombard:
Hmmm,

    > http:-
    > //www.ato.gov.au/content.asp?doc=/content/Corporate/mr200283.htm

    > Tax Office cautions foreign workers to beware of promoters offering
    > living away from home allowance schemes

This will drive some of the PQBS businesses out of operation, as the LAFHA
is currently the major advantage they offer. But I think that the legal
advice which is the basis of the current arrangments is pretty strong, so
the Tax Office will need more than a ruling to shift it.

The strange thing is that it took the ATO so long to realise what was going
on...

The text of the statement follows:

A Taxpayer Alert was issued today warning foreign nationals working in
Australia to beware of schemes offering tax-free salary paid as a so-called
'living away from home allowance'.

Tax Commissioner Michael Carmody said the arrangements are being promoted to
backpackers and other overseas visitors on working holidays in Australia,
including IT workers.

"The arrangements involve special purpose companies being established to act
as intermediaries between labour hire firms and foreign nationals working in
Australia," Mr Carmody said.

"These companies seek to re-characterise salary payments as a living away
from home allowance, in some cases paying more than 40 per cent of salary in
what is claimed to be a tax-free allowance.

"On the facts available, the allowance bears no relationship to additional
living costs required to perform their work."

These arrangements raise Tax Office concerns because:

payments described as living away from home allowances may not actually be
allowances of that kind; or
intermediary companies promoting these arrangements may have a fringe
benefits tax liability; and
the Part IVA anti avoidance provisions of the Tax Act may apply.
This alert has been issued by the Tax Office because information currently
available suggests that people need to be wary if approached about
arrangements of this type.

The Tax Office is currently finalising its view on the issues raised in this
alert and will publish this view as soon as possible.
Alan Collett is offline  
Old Sep 18th 2002, 11:11 pm
  #4  
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Default Re: Lafha - Tax Alert Warning From The Ato

Hi Alan

I think you may be talking about my post.

I can confirm I got approx 20K for LAFHA, the company I worked for contacted
KPMG to check that I was able to get this FBT.

I had to supply ALL my living costs for the few months I was living in
Australia. Rent, Electricity, food,travel, etc. I also had to supply all
my costs for my home back in the UK. KPMG AND the Australian Tax office
agreed on a daily figure that would be paid to me as the LAFHA.

That years tax was audited by the Tax office and they gave me the OK that
everything was above board.

I do agree that these fly by night agencies that "offer" to save backpackers
or temporary workers tax savings, should be cracked down on. I do agree
with the tax office saying that if your primary reason for entering into a
scheme is to reduce your tax, then you could be liable to pay up at a later
stage.

You should also remember that the LAFHA is not just for backpackers or temp
workers. It was introduced because this country is so big and people were
finding they had to support a home and a work home. I.e lives in NSW but
during the week or for short time would work interstate. The government
understood this and allowed a FBT to be paid by the employer to cover this
cost.

I only got the LAFHA for 12 months, as I changed employers and my current
employer does not give LAFHA for interstate / overseas people.

Kieron


"Alan Collett" <[email protected]> wrote in message
news:[email protected]
.com
...
    > I think the driving issue here is one of quantum - I have heard people
    > talk of A$20k per annum tax free as a LAFHA. To me that is
    > provocative and invites the ATO to crack down on what might be seen as
    > abusing the system.
    > Best regards.
    > Originally posted by George Lombard:
    > > Hmmm,
    > >
    > > > ht-
    > > > tp://www.ato.gov.au/content.asp?doc=/content/Corporate/mr200283.h-

    > > > tm"]http:-
    > > > //www.ato.gov.au/content.asp?doc=/content/Corporate/mr200283.htm[/u-
    > > > rl]
    > > > Tax Office cautions foreign workers to beware of promoters offering
    > > > living away from home allowance schemes
    > >
    > > This will drive some of the PQBS businesses out of operation, as the
    > > LAFHA
    > > is currently the major advantage they offer. But I think that the
    > > legal
    > > advice which is the basis of the current arrangments is pretty strong,
    > > so
    > > the Tax Office will need more than a ruling to shift it.
    > >
    > > The strange thing is that it took the ATO so long to realise what was
    > > going
    > > on...
    > >
    > > The text of the statement follows:
    > >
    > > A Taxpayer Alert was issued today warning foreign nationals working in
    > > Australia to beware of schemes offering tax-free salary paid as a
    > > so-called
    > > 'living away from home allowance'.
    > >
    > > Tax Commissioner Michael Carmody said the arrangements are being
    > > promoted to
    > > backpackers and other overseas visitors on working holidays in
    > > Australia,
    > > including IT workers.
    > >
    > > "The arrangements involve special purpose companies being established
    > > to act
    > > as intermediaries between labour hire firms and foreign nationals
    > > working in
    > > Australia," Mr Carmody said.
    > >
    > > "These companies seek to re-characterise salary payments as a living
    > > away
    > > from home allowance, in some cases paying more than 40 per cent of
    > > salary in
    > > what is claimed to be a tax-free allowance.
    > >
    > > "On the facts available, the allowance bears no relationship to
    > > additional
    > > living costs required to perform their work."
    > >
    > > These arrangements raise Tax Office concerns because:
    > >
    > > payments described as living away from home allowances may not
    > > actually be
    > > allowances of that kind; or
    > > intermediary companies promoting these arrangements may have a fringe
    > > benefits tax liability; and
    > > the Part IVA anti avoidance provisions of the Tax Act may apply.
    > > This alert has been issued by the Tax Office because information
    > > currently
    > > available suggests that people need to be wary if approached about
    > > arrangements of this type.
    > >
    > > The Tax Office is currently finalising its view on the issues raised
    > > in this
    > > alert and will publish this view as soon as possible.
    > --
    > Alan Collett of Go Matilda,
    > http://www.gomatilda.com
    > Posted via http://britishexpats.com
 

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