Sue Boyce (Queensland, Liberal Party) Share this | Hansard source

I will use this time to speak on a bill which I was unable to speak on during the week, the Tax Laws Amendment (Measures No. 4) Bill which is related to reforms to the living away from home allowance. The coalition voted for this legislation because we have no problems whatsoever with reform of the living away from home allowance provisions. However, I particularly have some concerns about some of the inequities and the potential discrimination that has been introduced in the bill by this government because of the way of treating foreign temporary residents working in Australia under this act.

Whilst the living away from home allowance will not change for Australians until well into next year, the government's current plan is to change the situation for people on 457 visas from October, in a few weeks, without any notice whatsoever. People here on 457 visas who receive the living away from home allowance will now have to have a home in Australia from which they are absent. That might seem quite reasonable on the face of it, except that large numbers of employers, universities and others, have quite lawfully employed people under the current conditions of the living away from home allowance, and all this will have to be changed almost overnight. It is a serious situation for some of them.

There was a survey of 304 foreign workers which was conducted in May this year by the recruitment firm Robert Walters. It found that 72 per cent of them said that losing the allowance would make it harder for them to stay in Australia and 57 per cent said they would consider leaving once it was withdrawn. The other problem with this legislation is that it will transfer the costs from the government system and the tax-free aspects of a living away from home allowance to employers. For example, if someone is currently on $75,000 with a $10,000 living away from home allowance, the government thinks the employer will suddenly pay $85,000. This is by no means certain in some areas. It also brings into question the fact that people here on 457 visas who were entitled to the living away from home allowance do not receive Medicare benefits, they pay for the education of their children in the state system and they have higher costs of living. A lot of them have signed contracts to come here on the basis of the current living away from home allowance regime. They will be seriously disadvantaged when it changes.

We need to keep in mind too that the majority of people who will be affected by this, despite the fact that they are not Australian voters, are people filling jobs that we have difficulty filling from within Australia. Many of them have very high, unusual, rare and sought after skills. The Deputy Vice Chancellor of the University of Sydney, Professor Ann Brewer, said that the living away from home allowance had been used to attract researchers and it would be incredibly difficult to compete with other countries if the current changes went ahead. She said they used the benefits to attract high-quality international academics to Australia, despite the fact that we have quite a high cost of living. Professor Brewer said:

The bill is likely to have a significant and unintended negative impact on the quality and international competitiveness of the Australian university sector. Australia will miss out on getting some of our best internationally-based researchers to return to Australia rather than go somewhere else.

One person who wrote to me in regard to this sets out the problems that we are causing by cutting off 457 visa people from the living away from home allowance in October. This gentleman wrote:

After visiting Australia many times over the past 15 years, in June 2011 I was offered the opportunity to work in Australia. I signed a 4 yr contract to come to work in Sydney and in August 2011 my wife and I made the move here. When making the decision to come we calculated my net pay (including the Living Away from Home Allowance component which was offered as part of my contract) in accordance with all Australian tax law and ATO guidance. Upon doing so, my wife and I were satisfied that although the cost of living in Sydney was far higher than in our home town in Yorkshire UK the fact that we would get the tax free allowance of LAFHA would enable us to afford to come to Australia.

We wound up a small business we were running in the UK and I signed a fixed term contract on that basis. This was completed prior to any mention of any consultation on reform of LAFHA. At the beginning of November 2011, again before any mention of LAFHA reform we signed up to a two year contract on a rental property. The budget again was calculated with LAFHA included.

There is a human factor of the number of people who will be affected by this change. As I said, we can argue that this is something that is being done to noncitizens, so what does it matter? But these are people with families, with highly sought after skills and who may very well leave Australia.

The other issue is that it is quite likely, according to PricewaterhouseCoopers, that the provisions are discriminatory against these people. We have tax treaties with the United Kingdom, the United States, New Zealand, South Africa, Japan, Norway, Finland, Turkey and Chile, and these all include non-discrimination clauses. Under the International Tax Agreements Act 1953 these treaties are incorporated into Australian domestic law and they take precedence over contravening domestic tax legislation. Each non-discrimination clause prevents the parties to the treaty from overtly discriminating against nationals of the other country as regards taxation.

The conditions around transitional arrangements in the bill are, in my view, overtly discriminate because they require only foreign workers to maintain a home in Australia that they do not live in to access the living away from home allowance. This is not a condition that is required for Australian workers. Australian workers do not need to maintain a home to be eligible for the living away from home allowance. This overt discrimination is notionally unlawful as it applies, for example, to UK residents by virtue of the applicable tax treaty. In particular, I am advised that there may be a breach of the UK-Australia Double Taxation Convention, in which article 25 states:

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.

I appreciate the savings that the government is trying to make by the reform of the living away from home allowance. I do not believe that people who come here on 457 visas to assist Australia and its development should get special treatment but nor should they be discriminated against in the way they have been by the government's transitional arrangements just because they do not have a vote.