The three schedules to this bill are highly concerning. The Tax Laws Amendment (2012 Measures No. 4) Bill 2012 proposes the following changes. Firstly, it alters the living-away-from-home-allowance, or LAFHA, rules. Secondly, it clarifies the GST treatment for certain transitions involving incapacitated entities, which I will go into further, and it clarifies the treatment of interest payable on sums overpaid or underpaid by the Australian Taxation Office—in this case the amended assessments under the consolidation regime. I want to be clear that I and my colleagues do not oppose this bill—particularly the changes that have been forthcoming at the last moment—but I stress that it is critical that the appropriate policies be implemented if Australia is to have a workplace that is capable of ensuring strong growth for our nation and continued economic success while meeting our future skills needs.
The coalition members of the House of Representatives Standing Committee on Economics strongly support its recommendations that the living-away-from-home allowance and associated benefits be treated within one taxation system. The committee supports retaining the taxation treatment of the living-away-from-home allowance wholly within the fringe benefits tax system. As one who sits on the economics committee, I am pleased that the recommendation has been adopted by the government. At least we now see the benefit of the economics committee recommendations being considered after nearly 30 submissions and contributors to the public inquiry, several weeks ago. One contributor to the inquiry was the legal firm Ashurst Australia, which said in its submission:
… such a system is likely to be unworkable in practice, will significantly increase compliance costs for employers and employees and will give rise to uncertainty.
You have to ask the question: why would we burden people with having to comply with both fringe benefits tax and income tax legislation? Such eminent bodies as the Tax Institute have indicated that the approach in the bill would present an additional compliance burden on the ATO as well. We are seeing yet again the government's continuing habit of making amendments before bills are halfway through a debate or even before they are introduced.
The government's response on this matter indicates a serious disregard for 457 visa holders and proves more concisely Labor's complete lack of interest and empathy for business, in particular for the mining sector, the resources sector and the university sector—in my electorate is the University of Queensland Gatton campus—but, more importantly, for the agriculture and horticulture sector, a sector that is vitally important to my electorate of Wright.
The government does not have appropriate policies in place to address current and future labour shortages in Australia and is, essentially, starting to panic. How can a government fail to realise that temporary labour migration is a useful mechanism to manage labour market fluctuations, demands and gaps? Living-away-from-home allowance is one incentive that has been used by employers to attract skilled workers to Australia and especially to the regional areas, where the jobs are, particularly in the mining, resources and university sectors.
With reference to the universities, we heard evidence at the inquiry that we throw our net to the world looking for specialists in their field to come and contribute to research in Australia. There is a small talent pool from which we can try to get people to come here. We heard evidence from universities about the implications of this bill and the ramifications it would have for that sector. Yet the government has made no transitional arrangements for temporary residents, and Treasury has not even undertaken to model such a possibility, despite widespread industry submissions pointing to the detrimental effect and hardship this would cause for both current and prospective 457 visa holders.
These amendments mean that all temporary residents who are not maintaining a home in Australia will lose access to the concession. However, while I acknowledge that there is a problem with exploitation of the current living-away-from-home allowance rules, I believe it is of interest to the wider Australian economy and my electorate that we move forward with accepting these amendments. The exploitation, I believe, is where business owners source personnel from overseas. They pay them, say, $100,000 a year and top them up, over and above that, with the allowance. As I mentioned earlier, the living-away-from-home allowance is one incentive that has been used by employers to attract skilled workers to Australia, particularly to regional areas and to the mining and agricultural sectors.
This bill as originally proposed would essentially have split the taxation treatment of the food and drink allowance, making it more confusing and tying business up in even more red tape. Thankfully, the government has recognised the error of its ways on this issue. The economics committee recognised that introducing this change midstream would mean greater uncertainty for temporary migrants and would potentially damage Australia's attractiveness as a destination for temporary skilled migration. This is particularly relevant for the mining sector, where a guaranteed supply of skilled workers is critical in providing the investor security needed to get huge projects started and to guarantee long-term investment in Australia for Australians. It would have a detrimental impact upon industry decision making at a time when important investment decisions are being made and need to be encouraged. I stress that they need to be encouraged, not hindered. In particular, I am talking about the mining and resources sector.
I mentioned earlier the university sector and that we want to encourage experts in their field to come to Australia. But I also draw attention to the agricultural sector, which is employing migrants and skilled workers on 457 visas. In Queensland—and I am sure also in other horticulture states—the loss of these workers would be a great disadvantage. Our fruit and vegetable growers depend on these workers; they are hardworking and reliable and are a vital part of farm life at the moment.
While there are only a small number of foreign workers in Australia on 457 visas, their economic contribution is substantial. According to Access Economics estimates, the more than 90,000 people entering on 457 visas in 2010-11 will have generated just on $2.2 billion over three years, or more than $27,000 each, while permanent skilled migrants will generate a net fiscal impact of $22,000 each over three years. Furthermore, the imposition of a 12-month time limit has raised concerns that these measures will create widespread uncertainty and may dissuade people from pursuing temporary visas in Australia, leaving many industries with chronic skills shortages and gaps.
The other section of this amendment is a technical clarification to the tax law, which I do not oppose. It clarifies the GST treatment of a representative who is an 'incapacitated entity.' This means, firstly, that no interest would be payable by the ATO if an overpayment of tax is made by a company and then a subsequent assessment finds a deduction is allowed, and that a company will not be liable to pay the shortfall interest or administrative penalties if an amended tax return increases income tax liability because a deduction is subsequently disallowed.
Both these changes are in relation to the amendment of the consolidation regime passed in the Tax Laws Amendment (2012 Measures No 2) Bill 2012.
In conclusion, I reiterate that, while I do not oppose the changes in this amended legislation, it should be noted that they have a very profound impact upon the ability of Australian employers to create attractive compensation packages to attract those skilled workers that Australia vitally needs. With the fact that there is no 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. It has made Australia less competitive when it comes to attracting skilled workers, not to forget the profound change to the landscape of our national ability to attract the best and the brightest to a number of jobs where there is a skilled labour shortage.
This bill shows yet again that the excessive regulations that burden business in this country are reaching new highs. Since November 2007, over 18,000 new regulations have been implemented. Perhaps this government should make a greater effort to understand that there are many people currently working in Australia on 457 visas who have made deliberate financial and career decisions to work here in Australia on the understanding and basis that they would be eligible for the living-away-from-home allowance. To remove this condition without warning does nothing to assist in creating confidence amongst current and future temporary migrants. So, on top of an already preposterous and hurtful carbon tax, the Australian people and, closer to home, the people of Wright are once again forced to settle for a government that is intent on unnecessary complexities and poor tax system designs.