Reforms passed in parliament yesterday could result in a salary drop of up to $12,000 per year for an engineer, according to Consult Australia.
The industry group for consulting engineers and firms responsible for the delivery of critical infrastructure said changes to the Living Away from Home Allowances (LAFHA) is a major blow to the Australian economy.
Consult Australia has been highly critical of the Tax Laws Amendment (2012 Measures No. 4) Bill 2012, which was passed by both houses of federal parliament yesterday.
Consult Australia CEO Megan Motto said the reforms will drive many of Australia’s highly-skilled professionals, whose salaries have been supported by LAFHA, out of the country.
She said the sudden implementation of these reforms will have a devastating impact on industry and the wider Australian economy.
“Some of the consulting firms we represent recruit approximately 15 per cent of their workforce from overseas due to the current skills shortage,” Motto said.
“One of our members has over 4,000 employees and reports that over eight per cent of its workforce is currently employed under the visa subclass 457.
“These reforms could equal a loss in salary of up to $12,000 for an engineer.
“With no time to prepare for and budget around these changes, it is simply not viable for many of the professionals who are suffering this kind of loss in income to remain in Australia with their families," she said.
“The sheer impact of these reforms is enormous and the haste with which this decision has been made, clearly shows a lack of due recognition by government.”
Consult Australia has long-argued for the reforms to be phased in over two years to allow companies and individuals to form long-term plans to cope with the changes.
“The reforms will create vacancies that are hard to fill, thus harming companies’ abilities to deliver projects on time,” Motto explained.
“The cost to employers from ‘filling the income gap’ will drive up employment costs and widespread wage inflation will occur because the level of wages sufficient to attract skilled migrants will increase markedly.
“A major challenge to our firm’s success and that of the projects they deliver is the chronic scarcity of the engineers and related professionals needed to get the job done. These reforms will put much stress on an already stretched industry.”
The LAFHA reforms will now take effect from October 1, 2012.
The government had originally intended to bring the reforms into effect from July 1. However, in response to submissions received as part of earlier consultation processes, the start date has been pushed back to October.
For arrangements entered into prior to Budget night on May 8, the reforms will apply from July 1, 2014.
Announcing the reforms, Assistant Treasurer David Bradbury said they are designed to ensure tax breaks are not misused or exploited.
"The tax concession will continue to support people who are bearing additional costs because they have to maintain a home in Australia that they are living away from for work purposes, for up to 12 months," he said.
These reforms will provide savings of $1.9 billion over the forward estimates. They make up part of over $130 billion in savings that have been delivered since the government came to office.
Asst Treasurer David Bradbury
