LAFHA Guidance
Aug 17th 2011 | 8:00 pm
#16
Lost in BE Cyberspace
Joined: Dec 2010
Posts: 14,040
Re: LAFHA Guidance
Have you signed the deal? If not then make it part of the deal. My company is very reluctant to do it, not because they can't be bothered, but because Ernest and Young have advised them not to for whatever reason.
Aug 18th 2011 | 12:18 pm
#17
Social Grenade Thrower
Joined: Jan 2008
Posts: 3,625
From: South Coast, NSW
Re: LAFHA Guidance
Well thats just ridiculous!! Why on earth Ernest and Young would not promote LAFHA is beyond me, sounds like a very weak excuse to me.
Aug 18th 2011 | 12:29 pm
#18
Social Grenade Thrower
Joined: Jan 2008
Posts: 3,625
From: South Coast, NSW
Re: LAFHA Guidance
http://www.immi.gov.au/skilled/skill...ew-issue-1.pdf
The actual MSLs have been changed since this but it explains the reasoning behind them.
Aug 18th 2011 | 1:22 pm
#19
LAFHA Professional
Joined: Apr 2011
Posts: 32
From: Canberra, Australia
Re: LAFHA Guidance
Hi Guys,
Just a few comments on the issues you have all been discussing in the areas of:
- Including LAFHA in your contract before you come across and I’ll include the reference to Ernest and Young made by che2318 and commented on by Paddyo, and
- The effect of LAFHA on the Minimum Salary Level (MSL) or as it is now termed by Immigration, the Temporary Skilled Migration Income Threshold or TSMIT.
Including LAFHA in your Contract
Some employers choose to do this, some do not. Let’s explore the Ernst and Young advice because this has perplexed everyone. In my opinion the reason Ernst and Young has provided this advice is that there really in no reason to add LAFHA in your contract because it has no negative affect on your guaranteed annual earnings; instead LAFHA increases your cash in hand. I’ll cover this in the effect of LAFHA on the TSMIT.
So, if you feel that you don’t want to rock the boat up front, ask about LAFHA once you hit the ground. For those who have employers that know about LAFHA the only wording I have seen in contracts is:
“an Australian Taxation Office approved Living Away from Home Allowance (LAFHA) may be paid if you are determined eligible.†Then some points of clarification as per the next paragraph.
“Living Away from Home Allowance (LAFHA) is a tax free allowance The Company may pay eligible employees to compensate them for living away from their normal place of residence. It operates as a tax credit, and eligible employees can increase their cash in hand by around $10,000 per year. Once you arrive we engage a service provider to conduct a LAFHA assessment and determine your eligibility. If you are eligible we may pay you this allowance until your visa expires, you leave our employment or you apply for permanent residency in Australia.â€
“Living Away from Home Allowance (LAFHA) is a tax free allowance The Company may pay eligible employees to compensate them for living away from their normal place of residence. It operates as a tax credit, and eligible employees can increase their cash in hand by around $10,000 per year. Once you arrive we engage a service provider to conduct a LAFHA assessment and determine your eligibility. If you are eligible we may pay you this allowance until your visa expires, you leave our employment or you apply for permanent residency in Australia.â€
The effect of LAFHA on the TSMIT
There was a question on the MSL and Paddyo gave a reference. Paddyo knows the pain if searching the DIAC web site and you might find that this link goes into the name change to TSMIT and the current threshold at http://www.immi.gov.au/skilled/457-m...aq-sponsor.htm.
Whilst a good immigration agent will advise not to include LAFHA in the calculations the TSMIT because you don’t want to jeopardise approval, once approved, the official line from the NTAA is “The Department of Immigration and Citizenship (DIAC) has advised that TSMIT will be based on market salary rates, which are guaranteed annual earnings. The Department has also provided clarification regarding LAFHA benefit payments which now considers that LAFHA benefits are to be treated as earnings for the purposes of determining a subclass 457 visa holder’s guaranteed annual earnings. As a consequence LAFHA benefits will be included as part of guaranteed earnings in determining whether market rate salaries are being met for 457 Visa holders.â€
You will find many web pages on the DIAC website that contradict this, that is because they are out of date and you can tell because the TSMIT rate will be lower.
What this means to Paddyo in his question about LAFHA, his novated lease and what is now called the TSMIT, is that 2 years ago this would have been correct, however now LAFHA is considered guaranteed earnings. Therefore, where the total value of the package remains unchanged. So without knowing your situation, had you been leasing now, so long as you were still paying tax with your full LAFHA allowance, then your guaranteed earnings will not change and it could be approved. That’s my understanding of it.
With respect to paying no tax on LAFHA this can get very messy for a number of reasons and we always advise employers that they must ensure that the employee always pays at least $20 tax per week; that way it is managed transparently.
Regards,
Ian
Aug 18th 2011 | 7:38 pm
#20
Just Joined
Joined: Aug 2011
Posts: 27
Re: LAFHA Guidance
I have already signed the contract with the company, the contract does not mention LAFHA.
I will mention the subject while in conversation with the company and see where they stand on it.
It will be quite handy to have LAFHA as the other half will be due while we are over there and that will deplete my wallet faster than a Las Vegas slot machine!
I will mention the subject while in conversation with the company and see where they stand on it.
It will be quite handy to have LAFHA as the other half will be due while we are over there and that will deplete my wallet faster than a Las Vegas slot machine!
Aug 19th 2011 | 5:51 pm
#21
Just Joined
Joined: Sep 2009
Posts: 17
Re: LAFHA Guidance
I'm still confused withnthis issue, my OH has been offered a job in Oz and asked about lafha, they said he would have to workman 6 day week to be eligible for entitlement , does any one know why this would be the case?
Aug 19th 2011 | 10:35 pm
#22
Social Grenade Thrower
Joined: Jan 2008
Posts: 3,625
From: South Coast, NSW
Re: LAFHA Guidance
It isn't, they are talking bollox!! They just don;'t understand LAFHA.
