easygroove

we're in oz on a 457 visa having been sponsored by my employer. Since arriving 3 months ago, i've heard of some expats in similar situations being able to claim LAFHA and others not. My company said that i couldn't claim it but as my principle residence is in the UK (mortage) then why can't I claim it? Are employers reluctant to promote entitlement to claim LAHFA? Should i take this up with HR? Anyone know what the rules are?

Thanks

webgum

I think we are in a similar position. Hubby was reassured by employer that he would receive it and (stupidly) we budgeted accordingly. On arrival all was OK until he contacted the company accountant who said no way. hubby contacted ATO twice and they say he is entitled to it, but accountant is adamant that he isn't. Even after ATO told her he was eligible, she doesn't believe them and is going for a tax ruling. AAAAAARGH Seriously she's on a mission. The complication arose because they have a lot of internal transfers of employees (who are definitely eligible) and hubby was externally recruited. BTW there are people in the company who are in the same position and have it!!
I know this doesn't give you an answer, just lets you know how complicated it can be. It may be worth your hubby contacting ATO direct. Saying that, hasn't helped us yet!

Sandra

I think a lot of companies run shy of the LAFHA because they don't have experience in it. It is supposed to be an allowance that is detailed in your contract of employment setting out what extra living expenses you have because of living away from your permanent residence for a period of time. It is also supposed to be sorted out before you start the job. It is not a set amount as such. Also if you at any point apply for PR the right to LAFHA is withdrawn at the time you apply for, not granted PR.

Also alot of contract companies use it as an extra incentive so the tax man sometimes gets nasty about the checking if he views it as a tax avoidance payment. And sometimes there are FBT - fringe benefit taxes - implications.

I would push for information from your HR department and ring the ATO as webgum says. I received LAFHA from my company and it helped that first year but in no way did it compensate for PR. Most of our LAFHA was eaten up in being in Sydney and having to pay 4500 per child per year schooling fees.

I forgot to say - my company also imposed penalities on the amount of LAFHA I would receive if I rented out my accommodation in the UK! So we were paying our UK mortgage and rental here in AUS - and not on our aussie wages. We cashed in an endowment policy to manage for a year doing that.

JAJ

There are lots of people having problems claiming LAHFA. It's really another reason to forget the 457 and go for PR.

Jeremy

alexwest

From what I understand:
You qualify for LAFHA if:
You have a permanent residence elsewhere (i.e. the UK) which you intend to return to,
The job is the reason for your being there (i.e. if you are already out in Australia when you apply for a job, then the job isn't the reason for your being out there and consequently you do not qualify).
You intend to work in the job for a limited duration at the end of which you will return to your permanent residence.

The type of VISA you have (457 or 136) doesn't affect whether you qualify for LAFHA.

LAFHA Accomodation component applies to additional living costs of being where you are. However this isn't as straight forward as it seems.
As if you rent your house out in the UK, the interest on the mortgage cannot be offset against the rental income, instead it is quarantined, and the rental income is taxable. Also if your mortgage is based out of Australia, you must pay 10% witholding tax on the interest payments.
As such LAFHA for someone with a house in the UK with an interest only mortgage is:
Cost of Aussie accomodation( Rent + Bills)
+ Mortgage Interest Payments
+ Rental Costs
+ Witholding Tax on Interest Payments (10%)
+ Tax on Rental Income
- Rental Income
- Cost of Uk accomodation(Mortgage Interest + Bills).

Let me know what you think of this, also is there anyone out there who is actually paying the witholding tax?

Alex