Our explanation of LAFHA or the Living Away From Home Allowance is simple. It's a great way for Contractors, Freelancers and Interim workers to make sure most of their money ends up in their back pocket. It specifically targets those who move because of work, and this obviously is a great match for most of our customers. Unfortunately the ATO (Australian Taxation Office) has changed the rules on LAFHA so it no longer applies to foreign nationals on work visas in Australia. But for local contractors working away from home - LAFHA is great!.
The Australian Tax Office definition is "- an allowance that must be in the nature of compensation to the employee for additional expenses incurred as a consequence of an employee being required to live away from their principle place of residence in order to perform the duties of that employment." Read more here
LAFHA is used extensively by most Contractor Management Companies, Umbrella Companies and Professional Employer Organizations and direct Employers in Australia to give the greatest benefit to employees who have had to relocate for work.
The interpretation depends very much on intent
- you should be relocating for a temporary period
- you should have the intention to return to your original place of residence
- you should be incurring additional expenses as a result of the move Even if your move is not temporary you can still get some tax relief through relocation benefits.
LAFHA will be evaluated by the tax office on a number of factors including:
* Distance of move
* Type of occupation
* Tax and or visa status
* Minimum salary levels
* Time before relocation
* Length of relocation
* Accommodation arrangements
* Family situation
* Intent to return to your original place of residence
Of course we aren't qualified tax advisors and so you should do your own research. Our advice is simple : make sure you are dealing with a reputable company who is cautious in their application of Living Away From Home Allowance and any other tax reduction measures. Remember if it sounds too good to be true then it probaby is! If you'd like more information about LAFHA or a free assessment of whether you qualify, we're always here to help.