What is a living away from home allowance fringe benefit?
A living away from home
allowance is an allowance the employer pays to an employee to compensate
for additional expenses incurred and any disadvantages suffered because the
employee is required to live away from their usual place of residence in order
to perform their employment-related duties. The term 'additional expenses' does
not include expenses the employee would be entitled to claim as an income tax
deduction.
Examples of employees on appointments of finite
duration who will generally be living away from their usual place of residence
are foreign nationals employed in Australia (expatriate employees).
The employee would be regarded as living away
from the usual place of residence provided that they intend to return there at
the end of the term of the transfer.
An employee is regarded as living away from
their usual place of residence if they could have continued to live at the
former place if they did not have to work temporarily in a different locality.
The residence does not have to be the employee's permanent place of residence.
Employees who move to a new locality
with an intention to return to their old locality
at the end of the appointment would generally be treated as living away from
their usual place of residence.
A 457 Visa holder is normally allowed to claim
this allowance from the Employer, and it is the Employer who has to handle all
the paperwork.
You do need to complete a declaration stating
what your Usual Place of Residence is for each period, and an example of this is
at ATO Link
Financial Benefits ?
The financial benefits vary depending on each
appointment, and on how much each employer decides, and is allowed by the Tax
Office, to allocate as the Tax Free payment towards living expenses.
I have seen figures where about $1,000 per
month is paid Tax Free by the employer to cover allowable living costs.
This will normally be deducted from your agreed total salary package.
(This figure could be more, or even less, depending on individual circumstances)
eg: $100,000 per year normal salary would
attract Tax/Medicare of $29,350 per year (2006/2007 rates), leaving you with
$70,650 per year net.
With $1,000 per month set as LAFHA, the gross
salary would become $88,000 with Tax/Medicare of $24,371 per year (2006/2007
rates), leaving you with $75,629 per year net, after adding back the LAFHA paid
to you. ie: Almost $5,000 per year better off.
How much is a reasonable figure for the Food component in a LAFHA (Living away from
home) claim ?
That is a question I was asked recently, and I came across some figures for
the 2007 tax year at
www.law.ato.gov.au, which show the following figures:
$206 per week for the first adult, $330 for two Adults, $370 for two adults
and two children. HOWEVER, these figures need to be reduced by an amount
that you would normally expect to pay for food at home. In 2007 this was
$42 pw per adult and $21 per week per child.
Applying for Permanent Residence Visa
Based on the
Australian Tax Office (ATO) statement that a living away from home allowance
(LAFHA) is for people who intend to return to their usual place of
residence, it is logical that the LAFHA is no longer tax free from the date an
application to become a Permanent Resident is made.
Refunding the LAFHA benefits
There are cases where people have claimed the LAFHA, but then the ATO do not
allow the claim. When this happens, any benefit must be repaid. I
have read that changes such as selling their former home can trigger this event.
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