Julie Owens (Parramatta, Australian Labor Party) Share this | Link to this | Hansard source

On behalf of the Standing Committee on Economics I present the committee's Advisory Report, incorporating supplementary remarks, on the Tax Laws Amendment (2012 Measures No. 4) Bill 2012, together with the minutes of proceedings.

In accordance with standing order 39(f) the report was made a parliamentary paper.

by leave—The Tax Laws Amendment (2012 Measures No. 4) Bill 2012 is similar to other tax amendment bills in that the three schedules are designed to finetune and improve the tax law. The report being tabled today focuses on schedule 1 of the bill and relates to changes to the taxation treatment of living away from home allowances and benefits. The amendments seek to address concerns that the current concessions are being misused, resulting in a significant and growing cost to revenue.

The committee supports the schedule's intent to compensate employees for the additional expenses associated with living away from home at the request of their employer. However, the committee believes that the living away from home allowances and benefits were not designed to provide a wage subsidy for workers in certain industries and that as a general principle if employees are not incurring extra costs as a result of a temporary relocation they should not receive the tax concession.

After scrutinising the bill the committee has recommended a number of measures aimed at improving the application of the legislation. The bill aims to limit the exploitation of the tax concession. In this regard the committee supports the introduction of tightened eligibility criteria which impose a 12-month time limit per location and the maintenance of a usual place of residence within Australia. The committee noted industry's concern that the 12-month limit will not provide coverage for the duration of all projects. However, the tax concessions for living away from home allowances are intended to be temporary and are not designed to support workers who have essentially moved residence. The committee recognises the unique nature of remote construction sites and supports the decision to exempt fly-in fly-out and drive-in drive-out workers from the 12-month limit. It is recommended that drive-in drive-out workers who use their own transport to access their place of work should also be exempt from the time limit. Furthermore, it is recommended that the definition of FIFO and DIDO workers be expanded to include workers who do not meet the test of maintaining a usual place of residence within Australia. The committee has also sought clarification from Treasury on the circumstances in which the 12-month time limit will be paused.

The committee is supportive of the proposed stipulation that an employee must be maintaining a primary residence. However, it should be noted that the committee believes that the definition of an employee's 'usual place of residence' and 'ownership interest' must be broadly interpreted and clearly articulated.

To access the tax concession, all accommodation expenses will need to be substantiated, while food and drink expenses will only need to be substantiated if they exceed the amount prescribed by the Commissioner of Taxation. The committee has recommended that Treasury investigate whether there are any substantive impediments to allowing partners or spouses to incur deductible expenses on behalf of an employee where all other eligibility requirements are met.

While the intention of the schedule was to bring the majority of a living-away-from-home allowance under the income tax arrangements, 'ordinary weekly food and drink expenses' and living-away-from-home benefits are still treated under the fringe benefits regime. The committee strongly supports the single taxation treatment of a living-away-from-home allowance and believes that it may be prudent for it to continue to be treated under the fringe benefits regime.

The reforms will generally apply from 1 October 2012. However, there are transitional provisions for employees who entered into employment arrangements prior to 8 May 2012. Temporary residents who are not maintaining a primary residence in Australia will not be eligible for the transitional provisions. The committee has had to rely on the guidance of Treasury and its advice that the schedule and the ensuing transitional provisions are compatible with Australia's human rights obligations and do not breach any double taxation agreements. Submitters were concerned that if a contract is materially altered then the transitional arrangements could be negated. The committee has sought clarification as to what constitutes a 'material variation' as a matter of urgency.

I would like to thank the organisations and individuals who assisted the committee during the inquiry through submissions or by participating in the hearing in Canberra. I would also particularly like to thank the secretariat, who had two major reports to do in the last few weeks. I did not have the opportunity earlier today to thank those who were specifically involved in the report into the Australian Charities and Not-for-profits Commission bills, but I would like to acknowledge them all now. Stephen Boyd, David Monk, Philip Hilton and Natasha Petrovich worked on the charities commission bill, and Zoe Smith and Shivaun Coughlan worked so very hard on this one. I also thank my committee colleagues for their contributions to the report.

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

by leave—Coalition members on the committee made supplementary comments on the Tax Laws Amendment (2012 Measures No. 4) Bill. In broad terms, we were supportive of the recommendations of the committee. However, there were aspects of the government's changes to the living-away-from-home allowance that raised concerns with the coalition members on the committee.

Although we are not opposing the recommendations and are not opposing schedule 1 in the bill in particular, there can be no doubt based upon the clear testimony of a number of witnesses before the committee that the ramifications in particular for 457 visa holders are significant. 457 visa holders, of which there are approximately 90,000, make a very substantial contribution to the skilled labour force that Australia enjoys. 457 visa holders make a very significant contribution to ensuring that the skilled worker gap that exists within this country both currently and previously has been met by the ability to attract foreign workers to Australia on a competitive remuneration basis.

The changes that Labor is proposing to the living-away-from-home allowance have a very profound impact upon the ability of Australian employers and more broadly the research and education sectors as well as the more traditional 457 industry—that is, the mining and resources industry—to create an attractive compensation package to attract those skilled workers that Australia vitally needs. In the absence of the government having any clear program to ensure that skilled labour will be available in plentiful supply in the future, the simple and inescapable fact of the changes to the living-away-from-home allowance is that this government, without having transitional arrangements, has immediately made 457 visa workers disadvantaged, made Australia less competitive when it comes to attracting skilled workers and fundamentally made a profound change to the landscape when it comes to our national ability to attract the best and the brightest to a number of jobs where there is a skilled labour shortage.

In addition, I would also highlight, though, that we strongly endorse the committee's position with respect to recommendation 5—that it be handled under one tax regime specifically. I would simply bring those two matters to prominence.

I also seek indulgence to make some comments about the Australian Charities and Not-for-profits Commission report which was tabled by this committee earlier in the day to which the Deputy Speaker indicated I would be able to make some comments, and I will do so very briefly. Coalition members lodged a dissenting report with respect to that inquiry because we did not agree with the recommendations of the committee. In fact, coalition members had the view that the bill ought not to be passed. The objectives through the establishment of the ACNC are certainly objectives that we would support. However, the reality is that the not-for-profit sector is likely to be faced—the evidence was very clear on this—with a significant increase in the amount of red tape and compliance regulations as a consequence of the creation of Labor's bill and its passage, as expected, through the parliament. The reality is that, although it is designed to maintain and protect public trust and confidence, there has been no clear example provided by the government of the way in which these matters have already been diminished or eroded. There continues to be in the not-for-profit sector strong public trust and confidence. Most importantly, there was no compelling argument put forward about the way in which this will overcome the red tape and compliance aspects that were raised by so many witnesses before the inquiry. For that reason, we lodged a dissenting report.