Guest wokster

LAFHA Guidance

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    Guest wokster

    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 or move 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.

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    as far as i am aware you can get a food allowance as well. The ATO publish rates for food..

    i cant remember what they are exactly.. but the 1st $42 per person is not covered.. eg if it was $142 a week.. the ATO think its ok for you to be paid $100/wk per person.

     

    I mentioned LAHFA to my employer and they said ok.. and came back with a rent and food allowance. The rent was a hell of a lot less... $350 comes to mind.. but i havent got the paperwork in front of me

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    I don't think your employer is obligated to do this, so it may be a case of taking what you can get for as long as you can get it.

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    Guest YorkshireGirl

    Hi, I will need to check with my OH as he made the application but I think our LAFHA works something like this - he applied through work ( you can claim a food and rental allowance) and whilst his firm pays his salary the "rebate" through LAFHA is paid by a different organisation. We claimed back our rent in full, his firm aren't involved in paying rent. You should be aware that "reasonable" rent is allowed, I suspect as a family you could claim more than £650 per week. You can claim LAFHA for the duration of your 457 visa, I believe if your children are school age then you can claim some allowance towards the cost of school fees or the overseas student fee. As a guide, as a couple without kids our LAFHA is worth about $1,200 per month.

     

    I suspect you would be better off taking a salary package exclusive of rent and making an application for LAFHA separately. I will ask my OH tonight and get back to you, Laura

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    Hi Wokster

     

    I have a job waiting for me and the company also pays me the LAFHA. My employer does this themselves and not through an external body so they will pay it to me when ever I submit a receipt for my rent. Like Six It says the first $42 is deducted from your allowance and them there is a fixed amount that can be claimed depending on the sixe of your family.

     

    You can claim LAFHA for the length of your 457 visa (4 years) and the only restriction I have been told about by the ATO is that the property you will be renting will be dependant on the position you will be working at in WA and the size of your family.

     

    The maximum that can be claimed in any one financial year is $32,000 but I don't know what you would need to be doing to claim this much. Our LAFHA claim will be approximately $18,000 per year but that is for just 2 of us. As we wanted a 4 bed home we we had to prove that this is what we had in the UK so we were not asking for something that we were not used to.

     

    Because the LAFHA is supposed to be for people who will be returning to their orignating country (hence why it is called Living Away From Home Allowance) there has been cases where people have had to prove that they have a property in the UK to return to. We havent been asked yet but it may well be in the future which isnt a problem as we are renting our house out.

     

    With regards to the 'rent' it is a proportion of the rent they pay and I think it is about 40% but not 100% sure. We have budgeted as if we were not getting LAFHA so anything we get back off our employer is a bonus. We have done this because it is difficult to calculate exactly what you will get until you get your first payment.

     

    I hope this helps in some way.

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    Guest Ian Lindgren

    Hi Wokster,

     

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

     

    The reason the answers are varied isthat LAFHA is the most misunderstood and underulitised allowance in Australiafor three reasons. The first reason is that there is no one repository ofcurrent knowledge on the ATO web site, and to make matters worse theimmigration web site contradicts itself in 13 places. The second reason is thatLAFHA has the word "Allowance in it". This means to most people, thatthey have to pay you more! When in fact your taxable salary is reduced by theLAFHA amount you claim, so there is no more for your employer to pay. They payless 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 officersdo not know all there is to know about LAFHA), they automatically take adefensive stance and say "No to LAFHA" because they think it attractsFBT. 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 itis because they want to pay you "something", but they cannot get holdof the facts on LAFHA. So they may be intending to pay your $650/week taxableand call it LAFHA, when in actual fact it is not LAFHA as you are referring toit.

     

    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 andtwo 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 indicated that there us a maximum that can be claimed in anyone 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 mustremember about LAFHA are that:· Each case must be considered on its ownmerits

    • 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 ATOeach year on 1 April.
    • Never let anyone tell you to claimanything that is blatantly illegal or double dipping; You've got to askyourself, hand on heart, if I was questioned by the ATO, could I win because Iwas truthful?
    • Never let anyone contact your employerabout providing you with LAFHA. That will get your employer off side (as youhave already mentioned), so always control the communications yourself.
    • LAFHA is usually worth about $15000/yearto you additional cash in hand for accommodation and food components. It doesnot cost your employer any more money, and does not attract Fringe Benefits Taxis paid correctly.

    You can also claim things like:

    • Removal and insurance of household effects to Australia and back home
    • Temporary accommodation at home before you leave, and in Australia, and the same on the way home
    • Storage of furniture at home
    • Telephone, gas and electricity connection
    • Leasing of household goods
    • Return flights back home during yourtemporary stay in Australia
    • So all in all, if you only receive LAFHA as your employeris 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 youare 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 sothey “know they can legally pay you LAFHA at no additional cost and with noFBT, then you are usually on your way to being paid LAFHA correctly. We can assist so “you don’t upset theapplecart”.

    Sure we have some minor one off fees, but you will getthese back in your first week or so of LAFHA payments. I hope I have helped insome way.

     

    Regards,

     

    Ian

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    Guest Ian Lindgren

    Hi Dean and Margaret,

     

    I always feel bad mentioning fees because I’d hate to think that anyone thought I was trolling for business when in fact I established this company 6 years ago to assist people. So I often neglect to mention them.

     

    We have three services that may assist you:

     

    • Free LAFHA Assessment. If you call us on 1800 082 006 or email to enquiries@payme.com.au, we will send you a free LAFHA Assessment. This is in the form of a questionnaire that asks all the questions we need to conduct a Formal LAFHA Assessment.

     

    • Formal LAFHA Assessment. Fee $280. This determines your eligibility for LAFHA based on a completed LAFHA Questionnaire. Most significantly; it also provides your employer with the legal advice that LAFHA can be paid to you, at no extra cost to your employer, and without attracting Fringe Benefits Tax. This is critical information to have at hand because LAFHA is perhaps the most underutilised allowance approved by the Australian Taxation Office because it is least understood by accountants and payroll officers. This will clarify for then that you can get it for children and all the other items I mentioned in my previous post such as connection of utilities, removal costs, storage costs etc.

     

    • LAFHA Payslip. Fee $220. This payslip shows the increased cash in hand you would receive per pay cycle for use to confirm the accuracy of your employer’s payroll solution. Most importantly, it also provides up to 20 minutes with our Accountant to assist in your LAFHA payroll setup because there are a number of items that can be easily missed.

     

    You would get these expenses back in your first week or so of LAFHA so it is a good investment, and you can tax deduct them in your next tax return, so again you receive a bit less than half of the cost back at the end of the tax year.

     

    Something to think about in any case so you have certainty.

     

    Regards,

     

    Ian

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    Hi Wokster,

     

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

     

    The reason the answers are varied isthat LAFHA is the most misunderstood and underulitised allowance in Australiafor three reasons. The first reason is that there is no one repository ofcurrent knowledge on the ATO web site, and to make matters worse theimmigration web site contradicts itself in 13 places. The second reason is thatLAFHA has the word "Allowance in it". This means to most people, thatthey have to pay you more! When in fact your taxable salary is reduced by theLAFHA amount you claim, so there is no more for your employer to pay. They payless 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 officersdo not know all there is to know about LAFHA), they automatically take adefensive stance and say "No to LAFHA" because they think it attractsFBT. 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 itis because they want to pay you "something", but they cannot get holdof the facts on LAFHA. So they may be intending to pay your $650/week taxableand call it LAFHA, when in actual fact it is not LAFHA as you are referring toit.

     

    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 andtwo 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 indicated that there us a maximum that can be claimed in anyone 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 mustremember about LAFHA are that:· Each case must be considered on its ownmerits

    • 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 ATOeach year on 1 April.
    • Never let anyone tell you to claimanything that is blatantly illegal or double dipping; You've got to askyourself, hand on heart, if I was questioned by the ATO, could I win because Iwas truthful?
    • Never let anyone contact your employerabout providing you with LAFHA. That will get your employer off side (as youhave already mentioned), so always control the communications yourself.
    • LAFHA is usually worth about $15000/yearto you additional cash in hand for accommodation and food components. It doesnot cost your employer any more money, and does not attract Fringe Benefits Taxis paid correctly.

    You can also claim things like:

    • Removal and insurance of household effects to Australia and back home
    • Temporary accommodation at home before you leave, and in Australia, and the same on the way home
    • Storage of furniture at home
    • Telephone, gas and electricity connection
    • Leasing of household goods
    • Return flights back home during yourtemporary stay in Australia
    • So all in all, if you only receive LAFHA as your employeris 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 youare 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 sothey “know they can legally pay you LAFHA at no additional cost and with noFBT, then you are usually on your way to being paid LAFHA correctly. We can assist so “you don’t upset theapplecart”.

    Sure we have some minor one off fees, but you will getthese back in your first week or so of LAFHA payments. I hope I have helped insome way.

     

    Regards,

     

    Ian

     

     

    Thanks Ian

     

    It may be worth you putting a link to your website on this site as I am sure your services will help a lot of people. If you look at the top of the page and click on links it is very easy just to put your site on there.

     

    I am interested in the part where a claim for removal costs can be covered and also flights back to the UK. Could a claim be put in if the rental of your UK property does not cover the mortgage?

     

    Also do you do one off claims, eg if my employer who will pay my LAFHA directly but now the mentioned claims could you do those as one off payments?

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    Guest Ian Lindgren

    Hi Dean & Margaret Ann,

    Thanks for the suggestion….I'll do that.

    Removal costs, you just need receipts. Then once you have LAFHA approved by your employer, all they do is reduce your taxable income by that amount. This might take a few pays because you will run out of tax! We can assist them in knowing how to do this.

    Flights back to the UK work the same way. The ruling is: you may return home any number of times a year, and subject to supplying receipts, claim 50% of the cost of travel for you and each of your dependents. This includes all costs associated with that travel such as taxis, accommodation and meals to and from the location, but not for any period at your home location. Travel can include any class of air travel, not just economy. The period of time away from Australia must exceed three days.

    Unfortunately nothing can be claimed re your UK property.

    Re the payment of LAFHA, only your employer can pay you LAFHA. PayMe does it through the contractors that are on our payroll because although their recruitment company is the employer, we pay on behalf of that recruitment company. If you do engage us to provide you with service, what we can do though is advise your employer on how to do it legally, and then they have to be comfortable before they pay it.

    Regards,

     

    Ian

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    Guest Ian Lindgren

    50% of the cost of the travel. So say it cost you $2000 for your returnflight, $150 in taxis getting to and from the airport, and $50 for food whileyou were travelling, the total would then be $2200, and you could claim 50% ofthis amount if your employer approved it because remember that it is theemployer that has to be comfortable paying LAFHA.

     

    If you claimed 50% of $2200 this is $1100and your taxable salary would fall that pay period by $1100. Therefore your cash in hand will increase bythe amount of tax you would have paid on that $1100.

    I hope that helps?

     

    Regards,

     

    Ian

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    Hi Ian

     

    I've been given the following figures from my new employer, do they look correct? Its a whole new way of thinking for me!

     

    My annual salary is 65k inc super.

     

    Gross Pay - $3,768.33

    LAFHA - $1,201.09

    Tax - $602.00

    Nett Pay - $4,367.42

     

    I was just expecting to see it worded differently!

     

    Thanks....

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    Guest Ian Lindgren

    Hi,

     

    No.....that looks right. Remember LAFHA is a payment that is not taxed, and of course just like statistics there are a number of ways to show it on the payslip!!

     

     

    I assume this is a monthly payslip which would have seen you paid $4,969.42 per month plus super if you were not paid LAFHA, and then your tax would be $1,018.

     

     

    So what this says is that since you are receiving LAFHA of $1,201.09 your taxable salary is lowered to $3,768.33.

    So you tax is lowered to $602, and

    you recieve $1201.09 tax free.

    This gives you $4,367.42 in the hand.

     

    Easy pezy!

     

    Regards,

     

    Ian

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    THanks Ian for all of the friendly and worthwhile advice! I thought that the LAFHA would have been a bit more generous for the house component, we have a 5 bedroom house in England, but are looking fora 3/4, in certain suburbs its around 500+pw. would I have a case for asking for it to be revised?

     

    By the way, I'm more than happy to introduce your company to my new one when I get there, I know they use an external org to help them with LAFHA :)

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    Guest Ian Lindgren

    Hi,

    It’s my pleasure. We all get a great kick out of assisting people, and LAFHA is a minefieldof confusion that we aim to make simple! So I can answer correctly, what is the makeup of your family if you don’tmind:

    No of adults:

    No of children over 12 and by male and female

    No of children under 12 and by male and female

    What I am getting at is how can we define a requirementfor a 5 bedroom house? This will helpme understand, as it would the ATO, and as it should your employer. This is important because some employers justput a limit on LAFHA Accommodation, and while this is OK for small families, itdiscriminates against larger families. We can use this information in a way to influence your employer, but wehave to remember that it is all their decision to pay LAFHA.

    I’d feel very happy if you did tell your employer aboutPayMe, but I don’t expect it. The sortof help you ate getting off me, is the sort of help our team give on a dailybasis.

     

    Regards,

     

    Ian

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    Guest Guest4575

    Ian - my thanks for this most helpful explanation! I've already contacted my new employer, and have heard from Maria in your absence. I'hope my new employer can take this all on board - and can one assume it can even be activated retrospectively? I ask because I'm on the payroll from 12th October - which doesn't give them a whole lot of time to set this up?(And given this is effectively a "win-win", I wonder why ANY employer would refuse to consider LAFHA where appropriate?)Looking forwards to hearing from you when you're back!Ian

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    My employer is extremely reluctant to take LAFHA on board. I've had so many excuses, including FBT, that it is getting extremely annoying. The problem is, it's only them that can obtain LAFHA for me, so I'm losing out to the tune of $17,000 a year!

     

    It's a local authority and they see it as tax avoidance, or they see me getting paid more than people on the same grade and that isn't fair. However, those people don't have to pay private health insurance and overseas rated college fees if their kids want to do further education!

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    WIth regards to LAFHA the ATO have plans to abolish LAFHA on the 1st July for overseas employees who claim this. I received a call from KPMG who are our tax advisors explaining this. Some people will be able to still get this but there are restrictions.

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    Guest Guest4575
    WIth regards to LAFHA the ATO have plans to abolish LAFHA on the 1st July for overseas employees who claim this. I received a call from KPMG who are our tax advisors explaining this. Some people will be able to still get this but there are restrictions.

     

    You mean - for exisiting recipients of LAFHA, and not just new claimants? :o That would be a body blow :(

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    You mean - for exisiting recipients of LAFHA, and not just new claimants? :o That would be a body blow :(

     

    this is the initial email i received;

     

    Further to the discussions at last week’s conference, Government has released a press release and consultation paper regarding proposed reforms to Living Away from Home (LAFH) Benefits that, if enacted, will take effect from 1 July 2012.

    Under the proposals, access to the LAFH tax concessions will be limited, and will not be available for inbound expats on temporary assignments.

    A summary of the proposals follows:

    · The Federal Government proposes that the fringe benefits tax (“FBT”) exemption for living away from home benefits will cease to apply to many taxpayers’ situations from 1 July 2012.

    · Foreign nationals whose usual place of residence is overseas will be ineligible from 1 July 2012.

    · The Federal Government only appears to be open to considering transitional relief for existing arrangements in the not for profit and rural sectors.

    · This change will increase the cost for Australian employers of attracting talented individuals from overseas to come and work in this country. The great majority of employers were not “rotting” the rules, but providing the benefits in a manner consistent with the legislation and with the Australian Taxation Office’s public rulings.

    Ongoing LAFH concessions will generally only remain available to employees working on FIFO arrangements, and Australians on domestic assignments.

    You may want to consider if you see merit in seeking our assistance to make a submission to Government on the proposed reforms.

     

    http://www.treasury.gov.au/contentitem.asp?NavId=002&ContentID=2235

    http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=pressreleases/2011/148.htm&pageID=003&min=wms&Year=&DocType

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    Guest Guest4575

    Thanks for that! I guess my stay here will be short-lived after all......unless......a university like my employer is not-for-profit?

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