LAFHA Guidance
 

Hi Guys,

I realise that there are a few threads open regarding this, but was not sure of the etiquette, so I decided to start another one. Please feel free to merge if necessary.

I have been offered a transfer to Perth with work and when discussing the package they said they were willing to pay $650 per week for our rent for our first year on a 457. Near the end of the discussion I said that I had been reading about LAFHA, but did not know much about it. My Director then said that this is what they are using to for the rental allowance.

I have since read that you can claim this not only for the first year, but throughout the duration of the 457, is this correct?

I have also read that you can claim food allowance as well (I am married with two children), is this correct?

Just wondering if the food portion would be worth mentioning to my employer, or does it effect them in any way?

I am obviously trying to get the best package available to me, but don't want to upset the applecart.

Any feedback/responses will be greatly received. Thank you in advance.

Re: LAFHA Guidance
 

I am the CEO of PayMe Australia and we are the premier provider of LAFHA advice for employees and employers in Australia. You've asked a good curly question that will give you many varied responses. I shall attempt to confirm the correct information you have been given, and correct that which is incorrect.

The reason the answers are varied is that 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. I would say that the advice you have been given by your employer is the way it is because they want to pay you "something", but they cannot get hold of the facts on LAFHA. So they may be intending to pay your $650/week taxable and call it LAFHA, when in actual fact it is not LAFHA as you are referring to it.

LAFHA is available to Visa Holders, Contractors and Australian Citizens moving within Australia and overseas.

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 with a partner and two children and additional reduction in salary for the food component of $293/week.

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.

One of the replies in the other blog indicated that there us a maximum that can be claimed in any one financial year of $32,000, but this is incorrect; there is no maximum. The immigration web site will indicate that Minimum Salary Levels do not allow you to receive LAFHA. This too is incorrect; they just have not published the latest rulings.

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

A subset of these are claimable if you are an Australian Citizen.

So all in all, if you only receive LAFHA as your employer is discussing it, you will be out of pocket every year by the accommodation component (reduction in tax of $12,000/year), and also for the remaining number of years you are in Australia and still intending to return home for Accommodation also.

Never be afraid to seek assistance from PayMe. 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. We can assist so “you don’t upset the applecart”.

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.

Regards,

Ian Lindgren
CEO PayMe Australia

Re: LAFHA Guidance
 

Ian this is excellent advice. Could you please do me a favour and pm me a contact number for either you or one of your colleagues please.

I work for a Recruitment company and we have just offered an Account Manager from the UK a position, so I would be looking for advice for me and them.

Thanks

Re: LAFHA Guidance
 

Ian,

I am coming over on a 457 visa this year and I have LAFHA as part of my salary package. I intend to one day apply for PR. Would I have to pay the LAFHA back as I won't be returning home as my visa would suggest.

Cheers

Re: LAFHA Guidance
 

Cracking post Ian, cheers!

Re: LAFHA Guidance
 

Ian - outstanding - sticky please.

Re: LAFHA Guidance
 

Ian,

would you be able to expand on these a bit more? My company provided everything else you've mentioned (although $450 a week for a family of four for rent is a joke), but I've put out a considerable amount of those three so it would be good to get something back if I could.

Re: LAFHA Guidance
 

Though Ian did so that LAHFA is mostly misunderstood, how does one prove they intend to return home? Obviously assets etc but these can be easily desovled. After all LAHFA is available to Australian citizens if they were to move cities. In many cases the receipient is a "lets see what happens in my new location" without the actual intent to move home.

Re: LAFHA Guidance
 

Re: LAFHA Guidance
 

Hi,


Does LAFHA need to be sorted out prior to starting the job or can it be sorted out once you are already in Oz and working?


Many thanks.

Re: LAFHA Guidance
 

Can be done afterwards. No problem.

Re: LAFHA Guidance
 

Re: LAFHA Guidance
 

Ian, just a point here and maybe why BingoBob was not getting full rental LAFHA, I was paying $750 pw rent and had the food component and also had a Novated Lease. My company had to reduce my LAFHA to keep me ABOVE the MSL (2 years ago). I fully understood it and when my Novated Lease finished they just upped my LAFHA up to full value as I was now above the MSL.
Forgetting the actual MSL figures and who gets what (I am aware they have changed recently) but is this still the case that for all Inpatriates you still have to remain above the MSL to ensure you maintain the conditions of your Visa?? If so it is worth mentioning this to people so that they don't think they can have all these tax benefits thereby potentially reducing their Taxable Salary to almost Nil!!

Re: LAFHA Guidance
 

Nope....also, do not mention applying for PR UNTIL you decide to do so as it may necesitate you losing your LAFHA there and then!

Re: LAFHA Guidance
 

Im not sure if the company does LAFHA so I might wait untill I get closer to the moving date and ask the manager of my office. If he says yes then I will get it sorted before I leave, if not, then I will wait untill I am over there.


Whats MSL? :blink: