End of LAFHA no laughing matter

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Serious repercussions for India’s IT force in Oz, says PAWAN LUTHRA

While on one hand the government is keen to build its credentials promoting Australia as a good place to do business for Indian and other multinational companies, on the other hand, a grab for cash by removing the tax benefits related to Living Away From Home Allowance (LAHFA) as per the current budget, will be a serious detriment to Indian companies sending their top professionals to work in Australia.

In a global marketplace where countries are competing for top talent to enhance their local workforce skills and business opportunities, shutting this perk could be another shortsighted measure by the Gillard government. LAFHA is paid to overseas workers on a tax-free basis to allow them to meet their expenses and to an extent, compensate them for other charges (such as cost of children’s education even in the public school system) which they pay as overseas residents.

It is to be remembered that it was under Julia Gillard’s tenure as the Minister for Education that the private college system was reviewed and effectively dismantled, which not only affected the future of a number of overseas students but also had an adverse impact on the export earning capabilities of the education sector. Enrolments have fallen, colleges have closed, students have faced and continue to face uncertainties, and a number of Indian businesses have closed down due to the slowdown in new student arrivals.

Indian IT companies such as Infosys, Wipro, TCS, HCL and other NASSCOM Australia members are active contributors to the Australian economy.  With a combined workforce of over 10,000, these companies employ Indian IT workers to work on projects in Australia. By doing so, they are able to crossover Indian IT skills with their local Australian workforce, and allow for a high level of skills transfer. NASSCOM Australia member companies have currently invested upwards of $100m to set up more than 20 development centres in Australia; they have strong links with many universities in Australia to recruit students for global projects, run student internships programmes and have established scholarships.

All this is under scan now as these companies, which provide back up services to various Australian companies such as Telstra, Qantas, Westpac, Commonwealth bank etc., scramble to make the employment opportunities here more exciting for their potential employees from India. Not being able to package part of their salary package under LAFHA and still bearing the full costs of public school education for their children or their Medicare costs, makes Australia a less attractive destination for these employees whose skill sets are in demand globally.

As an Indian Australian community, we lose out on a new set of educated and ethical future migrants; as Australians, we miss out on attracting top talent down under.

The Minister for Immigration and Citizenship, Chris Bowen MP, has just returned from India where he reaffirmed the importance Australia places on its longstanding bilateral relationship with India.

But it seems that his colleagues in Canberra are not of the same mind as they implement new taxes on a large number of Indian workers on 457 visas, by taking away their LAFHA benefits.

Whether this effects the Australian economy in a similar way as the changes to the education policy, only time will tell.

But one suspects, these increased costs will be passed on to the Australian clients by their Indian IT suppliers, which then will be paid by the local consumer.

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