18/06/2009 - 00:00

Widespread criticism of tax proposal

18/06/2009 - 00:00

Bookmark

Save articles for future reference.

CONTRACT miner Byrnecut Group has joined a host of industry and finance groups calling for the federal government to rethink budget reforms that will increase tax paid by Australians working overseas.

CONTRACT miner Byrnecut Group has joined a host of industry and finance groups calling for the federal government to rethink budget reforms that will increase tax paid by Australians working overseas.

In a submission to a Senate inquiry, privately owned Byrnecut said about a quarter of its $700 million annual revenue was generated offshore.

The Cloverdale-based business has contracts in 12 countries, from Indonesia where income tax bills are similar to Australia, to Kazakhstan where tax is levied at a flat 10 per cent.

"We employ several hundred expats in this way, generating export service income for Australia," Byrnecut Offshore director Bob Evers wrote in the submission.

Under the proposed changes to the tax laws, most Australians working overseas paying foreign income tax will no longer be eligible for an income tax exemption in Australia.

Byrnecut and industry groups have expressed concern about their ability deliver on current projects if the changes proceed.

"The tenders for the contracts under which we operate were prepared on the basis that [current tax laws] would continue to apply to the employment of our expats," Mr Evers wrote.

He added that it "is unrealistic to suppose that we will be able to continue to staff our offshore projects to the standard required by our clients" should the amending legislation not provide an avenue for exemption.

The Treasury stated in its submission that the changes are "designed to reduce the potential inequities in the tax system, and to build a stronger revenue base", as well as minimising incidents of tax avoidance.

It's estimated that the proposed amendment would result in 15,000 to 20,000 Australians working overseas losing their current exemption, with the average impact an increase in tax of $11,000 per annum.

Deloitte Touche Tohmatsu said in its submission that the "total cost for employing an Australian worker will be more than employing a foreign worker".

KPMG said the changes would affect job preservation in Australia, as they would make Australians more expensive to employ.

The Senate submissions conclude that the proposed amendment would cause administrative problems as companies with overseas workers would be forced to withhold PAYG, as well as other employment taxes.

Although the double taxation would be refunded, this could lead to cash-flow problems for employers and employees.

The Association of Consulting Engineers Australia said it was happy with the current system and fears that engineering, construction and service companies will be the hardest hit if the amendment succeeds.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options