LAFHA – Common Questions

LAFHA – Living Away Form Home Allowance

Q: Who can receive LAFHA?

A: Anyone who is required by their work to temporarily live away from their usual place of residence may be eligible to receive a tax free ‘Living-Away-From-Home’ allowance. This is with the provision that they intend to return after the cessation of their contract. Examples include: An Australian citizen or permanent resident moving from the city to the country, or vice versa, an Australian moving overseas, or an expat moving to Australia.

Q: Work has required me to live away from home for several months, but I only recently discovered that I am eligible for LAFHA. Can I claim LAFHA for these prior periods?

A: This depends upon your employer’s payroll department and procedure. In particular, if your employer has already paid your super and PAYG obligations for the periods in question, then adjusting and resubmitting the payroll with the new figures can be time consuming and thus costly them. Some employers may be willing to undertake such, however in most cases it is advised that one just receive the LAFHA moving forwards.

Q: I have spent an exceptional amount of money on food whilst working away. How much of this can I claim under LAFHA?

A: The ATO has set fixed amounts as to how much LAFHA can be claimed under the food component of the allowance. Any amount claimed beyond these limits will accrue Fringe Benefit Tax to your employer. We are aware of these limits, and can ensure that the amount claimed does not exceed them for you.

Q: I will be renting an apartment; can the entire rental amount be claimed as LAFHA? Can any amount beyond my actual rent be claimed?

A: In most cases the exact amount of your rent will form your rental allowance. However, if your rent is excessive, because the accommodation claimed is unnecessary or otherwise incapable of justification to the ATO, then only a lesser amount, according to what is ‘reasonable’, can be claimed.
Although it is theoretically possible to claim more than your rent in LAFHA, this is not permissible unless one is paying significantly less rent than they would, considering all the circumstances, otherwise be expected to – however this is only acceptable in a most exceptional situation.

Q: I will soon be applying for Permanent Residency in Australia. How will this affect my LAFHA?

A: As this is substantial evidence of your intention not to return to your main residence overseas, you would no longer be eligible for LAFHA. Consequently, you should let your employer, or LAFHA specialist, know as soon as you apply for Permanent Residency.

Q: When will I receive my LAFHA benefits?

A: As LAFHA is administered by your employer rather than the ATO, the LAFHA benefits will be provided to you on a timetable set by your company’s payroll. Generally once LAFHA has been installed your LAFHA will be deposited in your bank account at the same time as your normal pay. Consequently when the time for your personal tax comes, you will find that you have less taxable income to declare as the LAFHA is a non-taxable component of your package.

Q: How long can I receive the LAFHA benefit for?

A: The legislation does not specify a maximum time limit for receiving LAFHA. Rather the ATO, in determining one’s eligibility for LAFHA, or in auditing any LAFHA granted, will objectively analyse all facts that suggest the individual does have a home from which they are living away and to which they intend to return. Obviously the fact that someone has stayed in the same location for an extended period of time may suggest that they have established a home in that new location, or are not intending to return to their previous location. Consequently the amount of time one stays in any location is one factor among many that the ATO will consider when deciding if LAFHA can be granted, or should continue to be received.

If you need assistance in incorporating the LAFHA, we are CPA-qualified payroll specialists and tax accountants and will help you understand what’s required. Contact us through our site or call (02) 9419 5322 for LAFHA assistance today!

 

Take advantage of our small business accounting services during which we will help you to refine your needs and consider an accounting and tax planning solution for your business going forward… make an online enquiry today or call us on +61 2 9419 5322 and let us help you solve your accounting or tax problems.

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