Who can claim LAFHA

According to the ATO, LAFHA (Living Away From Home Allowance) is a stipend that should be given to the employees in the form of compensation for supplementary expenditures acquired as a result of an employee being obligated to stay away from their actual home so as to work for that organization.

Any employee, who is required to stay away from his or her actual place of residence, be it on a residency visa, interstate, international is eligible for LAFHA. A very general fallacy is that a contractor having a Working Holiday Visa is eligible for LAFHA. This is actually not true. It is very evidently affirmed in the ATO draft legislation for this allowance. This legislation was originally breezed out in May 2000 but has actually become a topic of discussion for the last 6 months or so. It needs to be understood that employees working away from their homes are eligible for LAFHA but the ones holding working holiday visas are not.

Once an employee or contractor begins to build his own choices concerning lifestyle and employment changes, LAFHA cannot be claimed. For instance an ITG employee shifts interstate with ITG then moves employers; he would then no longer be able to claim LAFHA.In fact, even an employee staying away from home with work cannot essentially claim LAFHA. He needs to prove that there is a disparity amid what he was paying in rental expenses and what he will now be necessitated to pay as rental expenses through this phase of inconvenience. LAFHA would be decided based on this difference.In order to confirm whether you are eligible for LAFHA or not you can discuss your case with ITG and a copy of the legislation can be provided to you on the email or else contact the ATO. In case you are eligible you can enjoy excellent financial benefits. It offers vital cost savings and tax efficacy for a standard employee/contractor.The ATO keeps making intensive attempts to audit and find out employees as well as the employers that are enduring to abuse the system. It is quite common to see archetypal overseas contractors who have been getting LAFHA for several years but have had a lot of diverse employers during that period. Such contractors would not be entitled for LAFHA and would be caught in the ATO audit. ATO explicitly talks of its purpose to turn out this legislation by the end of the next financial quarter; that is the ending of September 2003. In case a contractor has been taking LAFHA wrongly on recommendation from their management firm for instance for the last 2 years, at an archetypal weekly rental rate of $300 in Sydney, the contractor would be legally responsible to shell out the tax element of that allowance to the ATO usually within a 30 day imbursement period or stern interest and fine may apply.

It is recommended to go through the ATO legislation properly or seek advice from a professional before claiming LAFHA.