Tax break loss may force foreign professionals abroad

Woman cupping her hands around a miniature house

The career choices of international professionals working in Australia may be affected by the Government’s decision to abolish the Living Away From Home Allowance (LAFHA).

A survey, conducted by Robert Walters, questioned over 300 professionals to discover how the changes will affect their decisions.

“The reaction of the removal of their LAFHA benefits for some international professionals might be to look elsewhere for higher remuneration, or pressure current employers for a pay increase,” said Sinead Hourigan, Brisbane director of Robert Walters.

The decision to abolish the LAFHA was handed down in the federal budget, and will come into effect on 1 July this year.

Over 70 percent of professionals currently receiving the LAFHA believe that losing the benefit will make it harder for them to live in Australia, with over half of these stating they will consider moving to a country to better tax breaks. However, many employees are still keen to keep working here.

To offset the loss of the LAFHA, 75 percent of survey respondents said they will be seeking a pay increase from their current employer. Over three quarters of employees said they are likely or very likely to enter the job market to look for a better paying role.

“To avoid staff retention becoming costly, especially in those industries with a high proportion of overseas professionals, employers should be using non-financial drawcards to retain the best talent,” Hourigan said.

Hourigan believes there are five easy ways to recruit and retain overseas professionals: Employers must sell the Australian standard of living, and explain to candidates that our economy survived the global financial crisis and is still growing. Also essential is selling the company culture and offering career progression, as well as making the move easy for family and providing an appropriate remuneration package.

“Attraction strategies should be designed to draw the desired candidates to the region, not only from overseas but interstate as well, by presenting them with a well rounded opportunity that is too good to refuse,” Hourigan said.

  • New Aussie

    It is astonishing, that people who moved here a couple of months ago and now are cut off from any transitional agreement, which is open to Australians, are not mentioned. Additionall to 15-20% loss of home salaries, families will have to still pay school fees as compared to their Australian peers. Expats returning to their home countries can further not receive the entire amount of super, when transferring into their home country’s fund. Further, many foreign expats (especially with families) will have to return back, breach their rental leases and perhaps even their employment contract. In summary, the short stay in Australia (and the number of severe compromises such as relocation) will not have paid off, in contrary may leave a lot of people financially damaged. The saddest part of it is, however, that non one the Australian media even bother to cover this issue. At the end it just manifests that foreigners are just workforce with no votes, have to be content with whatever circumstances are imposed (in fact be grateful) on them and even bear the fact, that we have been stigmatised as “highly paid executives”, even though many 457’s receive modest salaries. This is not the way to treat and discriminate against a class of highly educated, skilled and devoted people who have strongly contributed to the welfare of this society!

  • Bret Menzies

    Not much point gibbering about the lifestyle in Oz when the guy can no longer afford to feed his family or pay his rent – OVERNIGHT!

  • Big aL

    Oh stop whinging please. These reforms were announced last November. People have had 6 months to prepare for this eventuality.

    • Big Bell

      Big Al, all well and good, but when you sign a contract overseas it takes a number of months to go through and move your family to a new country. For a short sighted government to do this in such a short time frame is ridiculous. The extra money would have gone on firstly paying for the basics (which compared to the UK is approx 30-40% more expensive anyway) and the rest (if any left) on travelling and/or enjoying the lifestyle here, whilst supporting local business, such as cafes etc – now that is taken away with very little notice – these businesses will directly suffer also.
      Plus many companies have been taken by surprise by the speed of this and the federal governemnt have decided to ignore the findings from worldwide companies such as Ernst and Young, KPMG etc.
      All I can say is all the best Australia, ‘cos in 12 months, most of the foreign talent will have gone, the over inflated rental market will drop massively, small business supported by foreigners will have less income….All in all a complete mess.
      The government could easily phase the tax allowance out gradually to give people the proper time to adjust – but all for the sake of a few votes and budget surplus.
      I’d welcome your comments Big Al !!!

      • Big aL

        I would hardly call 6 months a ‘short time’. From legitimate sources, I can tell you most 457’s are being processed and granted in a couple of days. My husband is the APAC Director of a global company and has staff here within a month of the visa being granted. Surely when you move to a country you research the place and what the cost of living will be and whether you can afford it or not. It is not the Australian’s responsibility to subsidise your ‘basic’ living expenses nor your travel and lifestyle choices. Fair enough, if your employer has dangled the LAFHA carrot in front of you, it is them that should be making up the difference when your wages drop. They are only including LAFHA so that they can offer you a lower wage (therefore increasing their bottom line) at the expense of the taxpaying Aussie. What you also don’t understand, is that for every one of you threatening to leave, there are another 15 chomping at the bit waiting to to take your place. Just Google forums on emigrating to Australia and you will see how desperate people are to get here. They won’t know anything about LAFHA, but will sure as hell be happy to be here and take your job.

        • e.g. John Smith

          err Big Al I doubt it…… My company have been trying to recruit for months and have 20 open roles that they cannot fill with either Australians or foreigners.
          I understand what your saying and agee that foreigners shouldn’t be subsidised by local tax payers, but when you come to a new country with a family and agree to arrangements, such as house rental and other basics and then for this ‘expected budget’ to be taken away so quickly, whilst your committed is unfair to say the least. In addition those on a temporary residency contract don’t receive many of the same benefits that locals receive, so this allowance acts a buffer on the costs.
          The system has been abused in the past by people ‘rorting’ the system, but a much fairer way of either means testing this or phasing this out (as proposed by nearly every letter submitted to the treasury, and duly ignored) to allow people time to adjust their incomes, is surely more sensible ?