AndrewMarilyn

Does anyone here know how this works?

I'm coming in on a company sponsored 457. Is it correct that my Employer can reduce my tax liability by deducting an allowance from my gross salary for rental, prior to tax?

Is it simply routine to do this, or do I need to set anything up to take advantage?

Thanks

MrJenkins

If you type LAFHA in the search, you will see a lot of posts that have covered this.

ABCDiamond

Basically yes, as long as your employer knows what to do.

If they don't, then they need to get professional advice which will cost them.
There are some employers who decide it is too hard to do that, but most, if they are employer on a 457 will be set up for it.

The employer may have to pay FBT on some of the allowances, so they do need to work out the right figures.

Meligy

I just got 457 visa approved as a senior software developer. I should arrive Sydney from Abu Dhabi on September 4th. My company will provide accommodation for first 4 weeks, then I'll need to find long term accommodation for myself, wife and 11 months baby.

I hope you can help me with those questions:

Probably in the beginning I'll need furnished apartment. Is this problem for LAFHA?

Actually, I wonder, is there a way I can guess / make approximate calculation how much LAFHA will probably cover from my rent total based on my salary and some rent figures I find online for example?

Also, I read I need to give a catalog of prices in the area I rent in or something to justify the rent I choose. Is this very common when I'm looking for rent or I should keep noting as special requirement to brokers, etc... ?

Thanks a lot.

bingobob777

Your company need to offer it. If they do there will likely be a LAFHA food component which is a fixed amount set by the Govt and a LAFHA rent component which will be decided by whatever you decide to rent, but must be something within reason based on your job level and family size (ie. a couple without kids won't get a 4 bedroom house and a low level engineer won't get a penthouse apartment on the river 1km away from the CBD).

Both these components effectively become a tax free element of your salary.

The offer I've just accepted to move to Brisbane is as follows (exluding super which is on top):-

At first - 105k base salary and 15k LAFHA (food) - so 105k out of 120k taxable

Once I rent - 75k base salary, 15k LAFHA (food) and 30k LAFHA (rent) - so 75k out of 120k taxable.

it's no wonder there's such a demand for Brits to move over, it effectively costs companies 15-20% less to employ someone on a 457 Visa!!

Meligy

Thanks for your answer.

Yes, I know my company applies for it for me, and it's deducted from the amount I pay for taxes.

My job in Sydney is a senior software developer, I cannot reveal how much I get, but let's assume it's the medium of this job on "pay scale" site, without super- assume $ 90,000 (a number I can easily convert to my salary).
I plan to get either studio or 1 bedroom apartment. To get something furnished, this typically costs $ 480-650 per week.

My new question now, what do you think may be deducted from taxes for these figures?

Also, If I'm married, and have a baby, would it be unlikely to get support for renting 2-bedroom apartment?

Thanks again,

Bermudashorts

Surely it is the same cost to the company. The only difference is that you pay less tax.

paddyo

[QUOTE=

it's no wonder there's such a demand for Brits to move over, it effectively costs companies 15-20% less to employ someone on a 457 Visa!![/QUOTE]

How do you figure that out???

The company pays your salary, the LAFHA aspect is managed by them but is a tax incentive by the ATO for those who have a Permanent residence somewhere else and only intend to stay here temporarily. The salary is the same to the company irrespective of your LAFHA, if anything, with FBT aspects it may work out slightly more expensive for them.

To simplyfy, your salary gets calculated, 9% Super taken off, LAFHA element taken off plus Novated Lease, then you get taxed, then LAFHA and Novated Lease put back on and you are paid.

Here is a basic spreadsheet of the figures you can expect. Just amend the figures to suit your circumstance and LAFHA amounts.

Remember, the food amount is set by ATO depending on family size (if I remember correctly its $371 per week for a 2 ad 1 ch family for Food). The rental amount varies and is agreed between you and your company. Generally for a 2 adult 1 child family I would use $500 per week as a rental example.

paddyo

We have 1 child and have a 4 bed detached house!! Its just reasonable rent, whatever you can get for that rent is your business.

paddyo

Rental, Food and also check out Novated Lease (Car).

ABCDiamond

How much super will they be paying for you ?

It is supposed to be 9% of salary, therefore 9% of the original $120k = $10,800
but 9% of the $75k is only.. $6,750

The only saving to the employer is in the reduced Super they pay out.

Employer Cost:
$120k salary = $120k + $10,800 super = $130,800 cost

$75k salary + $45k LAFHA + $6,750 super = $126,750 + (maybe) some extra accounting expenses

Meligy

So, again, for 90-100K salary (w/o super), you think how much I can get deducted from taxes for LAFHA given it's me, wife, and an infant?

My real target is trying to define how much I can budget for the rent when I'm searching, based on how much I'll get saved from paid taxes using LAFHA.

bingobob777

Once I rent I will receive 75k taxable and 45k non taxable, that will give me a take home pay of $104,350.

If and when I come off LAFHA I'm not going to take a 20k paycut so for me to still take home $104,350 my company would need to pay me just short of 150k salary. An increase of nearly 25% for them.

ABCDiamond

If they feel an employee is worth that extra 25% they may pay it, but it may be cheaper to get someone else, maybe on a a 457 visa with LAFHA ?

The LAFHA ends when you give an indication of becoming permanent, ie applying for PR.

bingobob777

Always a possibility they'll get rid of me Just need to show them i'm worth it!