Tax changes to cut pay of foreign workers

Foreign workers in Australia stand to be punished under tax changes in the federal budget at the same time as the government is striving to attract more overseas labour to meet skills shortages in the country.

In changes that will potentially cut the salary of thousands of foreign workers already in Australia, the government is planning to cut tax breaks for people living away from home.

The government has billed the changes as an attempt to stamp out rorts by highly paid senior executives in Australia and said local fly-in, fly-out workers in the mining sector would be exempted.

But the impact will be keenly felt by people on temporary 457 visas who have accepted jobs in Australia with the expectation of tax relief built into their salary package.

The mining industry has warned the tax changes expected to be unveiled in the federal budget to take away the right to deduct rental and food expenses from income will make it more difficult to attract skilled workers from overseas.

But the impact will be felt across the economy, including in universities and blue-collar industries.


Jim O'Brien was recruited from New York to the University of Sydney to a fund-raising job, with his experience in the competitive US philanthropic sector unavailable in Australia. But Mr O'Brien said the changes could impact on his ability to keep working in Australia.

Despite flagging the changes will take effect on July 1, the government is yet to explain whether transitional arrangements will be made for skilled temporary migrants already in Australia.

''I'd love to get a little bit of clarity so I can make plans,'' Mr O'Brien said.

''I accepted a job based on an agreement to be paid a certain amount and the proposed changes potentially represent a dramatic change in that basic agreement.''

Some foreign workers fear a pay cut of up to $20,000 for those recruited to a wage of around $130,000.

The Immigration Department has advised temporary foreign workers it is up to them to renegotiate the terms of their employment with their sponsor - fuelling concerns the financial burden will be shifted to business.

Frank Drenth, of the Corporate Tax Association, said the change appeared cynical given the foreign workers did not vote.

The change runs contrary to Labor's recent drive to attract US construction workers - particularly plumbers and electricians - to meet needs in the mining sector, with an expo to be held in Houston, Texas, in the coming weeks to showcase jobs in Australia.

Ian Lindgren, who runs a Canberra-based payroll agency PayMe, has suspended a service for employers and employees to claim the living away from home allowance after ''confusing'' advice over the changes. Mr Lindgren said one of his clients who recruited panel beaters from Britain for an annual salary of about $75,000 faced the prospect of having to make up $10,000 for each worker or lose them.

The Australian Mines and Metals Association's Minna Knight said there was often no short-term alternative than to attract skilled workers from overseas, but changes would make such recruitment more of a struggle.