bench

Hello - been in sydney nearly a month now and have been asked by my new employers to provide them with my "reasonable living away from home allowance"

After lots of calls to the ATO and to HR block type companies - I am coming up with a big blank.

Can anyone spread any light on the subject or point me in the right direction - will repay in beer.

Cheers

Ben

ps. have read the ATOs deffinition and spoken to them in person, however, they are as unsure of how to calculate it as me.

mike7

Ben,

We arrive in Sydney on the 18th April 2004, relocating from Scotland.

My new Employer mentioned this benefit to me in our salary discussions and identified the basis of the tax benefit.

My initial thoughts were that it was too good to be true (based on my experience with the UK tax system) but after considerable investigation it would appear to apply.

I would agree with you, in that there is conflicting information from the ATO on how the benfit should be calculated. I believe that it mainly falls into two categories, food provision and accommodation costs.

To avoid confusion, I requested that my new employer calculate the benefit for me. When received, it appeared very straight forward, basically your rent costs and food allowances are deducted from your salary, the relevant tax is then applied, and then these allowances are added back. From the calculation it would appear that 100% of rent costs are deductable. The advantage in getting your employer to calculate this is that it is quite a bargaining tool in the future should the extent of the benefit not be realised.

Something to be aware of, I read on one website, that the ATO will take into account any rental benefit that you have in the UK (if your existing house in the UK is rented out for example), the calculation is then the difference betwen what you are paying in rent in Australia and what you are gaining in the UK. This won't apply if you have sold your UK house.

Unfortunately, I don't think that I have answered your question !.

bench

Thanks Mike,

Im not sure there is a deffinate answer!

Will put in a calculation based on rental price, food costs and see what happens.

I owe you a beer.

Cheers

Ben

jayr

LAFHA is the best tax break going, my annual rent costs about $20k, I am not taxed anything on the income I earn to pay this, effectively saving 48.5% or $9700 of tax each year.

The food allowances work differently in that is based on a figure calculated on the number of people (adults/kids) in the household and some Fringe Benefits Tax (FBT) is applied . My Food and drink allowance is $15964 per annum and attracts FBT of $6170. For tax purposes I therefore earn $22134 ($15964+$6170) and pay a tax (FBT) of $6170 or 28%. Again, against an income tax of 48.5% I save (48.5-28%) of $22134 or about $4500/year.

All up I pay $14,000 less in tax per year as a result of LAFHA.

I take it you are on temporary visa? Anything you do to become more permanent, i.e. invest in property or apply for PR and you will immediately lose your LAFHA, otherwise you can get it for up to four years.

topcat

I've never heard of this LAFHA. Is it available to anyone
on a temp visa, or does there have to be special circumstances?


Does anyone have the link for the ATO pages on this I only found a tax ruling.

Thanks
TC

jayr

I've been searching the ATO for the link unsuccessfully but will keep looking. Generally your employer has to offer it to you but there's no harm in asking

ABCDiamond

Check this thread in case its relevant to you !!

http://britishexpats.com/forum/showt...home+allowance

ABCDiamond

Also check this ATO web page:

http://www.ato.gov.au/corporate/cont...t/mr200283.htm

jayr

Can no longer find anything on ATO site relevant to LAFHA, it used to be there before theey upgraded the site.

A few points though:

You geenrally need to have got your job offer whilst not living in Australia.

Your salary after LAFHA and some other allowances need to exceed about $35k. i.e. if you got $20k worth of LAFHA you would need a Total Remuneration of $55k (or otherwise youneed to reduce the LAFHA).

ABCDiamond

I agree that there is very little about it now, but I did also find this;

http://law.ato.gov.au/atolaw/view.htm?locid='PAC/19860039/30'#30

quote:
it would be concluded that the whole or a part of the allowance is in the nature of compensation to the employee for disadvantages to which the employee is subject, during a period, by reason that the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment;


The object of the allowance is to compensate the worker for HAVING to live away from home during "that" period of employment.

Any intention to migrate permanently will negate that reason, and therefore the ATO would disallow the benefit.

This is one area that the ATO is looking into, albeit slowly The ATO are quite hot on reclaiming any underpaid taxes.

If you have sold your current home in the UK, the ATO may look at it as if being here is not a "disadvantage".

topcat

Hmm it all sounds very open to interpretation.

I didn't have to come here in the sense that I could have got a job elsewhere after my last contract ended (but not where I was working previously) and I don't intend to stay after my contract ends.

It's certainly true that there are costs which have to be covered because of being here: home is rented out, but still have to pay for storage of furniture in UK and buying of new furniture/all other home stuff etc. etc. here.

Off topic slightly, but are the costs of obtaining a 457 visa
allowable as a tax deduction? I could argue that they were a necessary part of being able to do my job here... Unfortunately employer wasn't able to help with relocation costs apart from a single flight to oz.

TC

jayr

TC

In which country where you when you got your job offer?

topcat

In which country where you when you got your job offer?

Back home in the UK.

jayr

Well that's another tick in the box given you can't get it if you got your job whilst in Oz. I would talk to your employer and see if they will give you LAFHA. Whilst they are legally responsible for the FBT element (I think) basically you pay it.

I take it you are temporary (not PR) and have not bought a house here?

bench

Dear all - thanks for the replies

Below is the link ATO gave me - again, it doesnt make much sense.

http://www.ato.gov.au/businesses/con...tm&page=13#H14

If it doesnt work then type in "FBT guide" into the ATO search engine and then click on the first option (giude to FBT tax) and then click on chapter 9. - Its all there.

Cheers

Ben