Hi All,
I can see that there is a lot of uncertainty about Living Away from Home Allowance (LAFHA) when you move to Australia and I?d like to take the opportunity to clarify the uncertain issues for you.
My name is Ian and I am the CEO of PayMe Australia. We are the premier providers of LAFHA advice for employees and employers in Australia. LAFHA is the most misunderstood and underulitised allowance in Australia for three reasons. The first reason is that there is no one repository of current knowledge on the ATO web site, and to make matters worse the immigration web site contradicts itself in 13 places. The second reason is that LAFHA has the word "Allowance in it". This means to most people, that they have to pay you more! When in fact your taxable salary is reduced by the LAFHA amount you claim, so there is no more for your employer to pay. They pay less tax on you, and you get in the hand what they do not pay.
The other reason is that LAFHA is administered under the Fringe Benefits Tax (FBT) Act, and because people (including accountants, CFOs and payroll officers do not know all there is to know about LAFHA), they automatically take a defensive stance and say "No to LAFHA" because they think it attracts FBT. It does not as long as it is paid correctly.
LAFHA is not an entitlement; it is only paid if your employer agrees to pay it. If you were eligible for LAFHA, and your rental was $650/wk, then you would receive a reduction in your taxable income by $650/wk and if you had a partner and two children and additional reduction in salary for the food component of $293/week. These figures combine to give you $943 per week LAFHA which is $49,036 per year. So if your annual taxable salary was $100,000 it would fall by $49,036 making your new taxable salary $50,964. So you would receive an increase in cash in hand of about $18,000 per year.
LAFHA can continue for the whole 4 years you are on a 457 visa, so long as you intend to return home. The moment you decided not to return home and apply for PR, LAFHA must stop.
Minimum Salary levels now have no impact on LAFHA, meaning LAFHA is considered now as ?salary? for the MSL. The immigration web site is currently incorrect because it does not show the latest legislation. Therefore maximum confusion because 13 different pages tell you 13 different things.
The big things that you must remember about LAFHA are that:
? Each case must be considered on its own merits
? You must intend to return home
? Your accommodation costs must be ?reasonable?, ie not a penthouse unless you are on $300,000 per year and a senior employee, but also not a hovel!
? Your meals costs are fixed by the ATO each year on 1 April.
? Never let anyone tell you to claim anything that is blatantly illegal or double dipping; You've got to ask yourself, hand on heart, if I was questioned by the ATO, could I win because I was truthful?
? Never let anyone contact your employer about providing you with LAFHA. That will get your employer off side (as you have already mentioned), so always control the communications yourself.
? LAFHA is usually worth about $15000/year to you additional cash in hand for accommodation and food components. It does not cost your employer any more money, and does not attract Fringe Benefits Tax is paid correctly.
? You can also claim things like:
o Removal and insurance of household effects to Australia and back home
o Temporary accommodation at home before you leave, and in Australia, and the same on the way home
o Storage of furniture at home
o Telephone, gas and electricity connection
o Leasing of household goods
o Return flights back home during your temporary stay in Australia
Never be afraid to seek assistance from PayMe to identify exactly what you will be paid. Once you understand how we can help you, and what we can provide your employer with so they ?know they can legally pay you LAFHA at no additional cost and with no FBT, then you are usually on your way to being paid LAFHA correctly.
Sure we have some minor one off fees, but you will get these back in your first week or so of LAFHA payments. I hope I have helped in some way. By the way, next week we will have a LAFHA calculator on our web site.
Regards,
Ian Lindgren
CEO PayMe Australia
www.payme.com.au/LAFHA.html