LAFHA – Living Away From Home Allowance
What is LAFHA?
LAFHA stands for the “Living Away From Home Allowance”. It is is an Australian Tax Office (ATO) allowance for individuals who need to travel away from their permanent residence to perform work.
For many people, work is difficult to obtain in their hometowns, and they may need to travel to more populated areas, or regions with higher levels of industry. The allowance can provide a huge benefit to employees and make jobs in remote locations more attractive, therefore benefiting employers. There has been much confusion surrounding the recent changes to LAFHA. This article will attempt to explain those changes.
How is it calculated?
LAFHA is paid by the employer, such as Bookssorted to the employee. Instead of paying cash to the employee, they will be reimbursed for the costs incurred securing accommodation in the new location, and also for food and drink. An employer may also choose to provide accommodation, and or food and drink, to the employee.
When you claim LAFHA it is calculated like any pre-tax expense, i.e. the amount you are claiming reduces your taxable income – therefore you pay less tax. For example if your payment for the month was $10,000 and your claim is $2,000 your taxable income would be $8,000.
This claim of $2,000 is then paid back to you as well as it is an out of pocket expense. This means that you would receive the $8,000 minus tax along with the $2,000 claim.
Recent changes
On the 1st October 2012, changes were made to the LAFHA, however not all of these were legislated, causing much confusion for both employers and employees who wanted to access this popular allowance. Some of the changes that apply to the current LAFHA are;
- Before 2012, taxpayers could claim the allowance for longer than 12 months, however now they are limited to 12 months unless they are flying (FIFO) or driving (DIDO) in and out of their workplace.
- Employees must maintain a home in Australia and it must be accessible for them to live in during the period that they are working.
- Employees must also be able to substantiate their costs for accommodation, and food and drink if costs are more than the designated ‘reasonable amounts’.
- An employee must be paying the ongoing costs of a mortgage, rent and or maintenance in their home, and cannot be renting or subletting their home out for the period that they are traveling away for work. If borders, tenants or house sitters are staying in the home, they must not impinge on the employee using the home for their own use whenever they return on leave from work. Accommodation expenses must be substantiated in full.
What about if I was receiving LAFHA before Oct 1 2012?
If you were receiving LAFHA before 1 Oct 2012 the previous laws still apply. Please contact Bookssorted and we can perform a ‘LAFHA qualification test’ to see whether you qualify or not.
If you have any queries or if you want to find out if you qualify for LAFHA contact Bookssorted Payroll Management.
General Advice Warning & Disclaimer
General Advice Warning The information provided in this article is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information in this article
Disclaimer All statements made in this article are made in good faith and we believe they are accurate and reliable. Bookssorted does not give any warranty as to the accuracy, reliability or completeness of information that is contained.