New Tax Rules Hit Rural Construction Projects

Monday, March 31st, 2014
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New rules which limit tax concessions for Living Away From Home Allowances (LAFHA) are adding to the cost of rural construction projects and placing an unfair burden on business, the nation’s leading body for air-conditioning and mechanical contractors says.

In a recent letter to the Federal Treasurer Joe Hockey and the Federal Employment Minister Eric Abetz, Air Conditioning and Mechanical Contractors Association (AMCA) executive director Sumit Oberoi said changes are affecting the entire supply chain and driving up tender prices for projects which fall outside of major population areas.

Introduced in October 2012, the changes limit concessional fringe benefits tax (FBT) treatment for allowances paid by employers to workers for food and accommodation expenses while living away from home as a result of work. It applies to workers who own or rent a home within Australia and who are able to substantiate all accommodation expenses and expenses relating to food and drink beyond what amounts the tax office deems as reasonable.

In his letter, Oberoi says the new rules pose additional costs on business. Using a guiding example of a business from the state of Victoria conducting a project outside a major population area, he said AMCA estimates the new rules add on average around $280,117 to costs.

He also says limiting the concession to those who own or rent a house in Australia will add to the cost of using apprentices (many of whom live with their family when not on site) and create a disincentive to hire apprentices for such projects, whilst the new substantiation rules are exposing employers to additional risk in cases where they do not retain adequate documentation.

“The cost implications of these legislative changes are already being felt, and will increasingly impact on tendering and project costs going forward, affecting the entire supply chain from the sub-contractors, the builders and those that they engage to work on the projects,” Oberoi said.

“Further, the changes provide a disincentive to train and utilise apprentices — clearly in contra to the intent of the legislation and the future of the industry.”

AMCA has asked to meet with the Minister for Employment and the Treasurer on the formulation of a building and construction whole-of-industry employers’ work group that would include AMCA, Australian Construction Industry Forum, Australian Constructors Association, Master Builders’ Association, National Electrical and Communications Association, National Fire Industry Association and Master Plumbers and Mechanical Services Association of Australia to assist with resolving this issue.

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