Two particular areas of focus last week in the world of tax policy and advocacy have been changes to: transfer pricing; and the living away from home allowance.
The legislation containing the transfer pricing changes announced in November last year has passed the House of Representatives, but before it is considered by the Senate, the Economics Legislation Committee will be inquiring into the Bill.
As The Tax Institute has consistently argued, tax professionals have grave concerns about the use of retrospective legislation to effect tax changes. It is our strongest view that legislative changes should not apply retrospectively except in very specific circumstances and after thorough public consultation.
Where the Government considers a deviation from this principle is warranted, it should be thoroughly consulted upon and explained, including in relation to the anticipated impact on revenue. Increasingly we are seeing the Government use revenue concerns as a reason to enact retrospective changes and we will be continuing to present the case against such an approach.
Living away from home allowance (LAFH)
The original policy intent behind the introduction of the LAFH concession was to exempt from FBT a reasonable amount of compensation provided to an employee by an employer who required the employee to live away from home to perform their employment duties. The allowance was to compensate the employee for additional expenses suffered through having to live away from home.
However, excessive amounts of allowances were to be subject to FBT. Therefore, the focus of the provision of a LAFH allowance is compensatory in nature for additional private or domestic expenses incurred for employment purposes.
The Government has made two announcements since November last year, both serving to significantly restrict the availability of the LAFH allowance. The Bill to legislate the changes is to be examined by the House Economics Committee and The Tax Institute will ensure that the Bill and Explanatory Memorandum accurately reflect the intent of the changes and do not unduly add to the compliance burden faced by those complying with the laws.
Robert Jeremenko is Senior Tax Counsel of The Tax Institute.
The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.