Understanding the Living Away From Home Allowance Changes

There’s still a lot of buzz about recent changes to the Living Away from Home Allowance announced in this year’s budget – especially given the recent extension to the LAFHA benefit.

We thought it would be good to give customers a rundown of the facts so that everyone is clear about the new rules and when they are due to commence.

Under the current rules you can be eligible for LAFHA benefits if you’re living away from home (that is, living away from your usual place of residence) and:

  • The sole reason you are living away from home is in order to perform the duties of your employment; and
  • Your employment in the new work location is on a temporary basis only; and
  • You have not established permanent ties with the temporary work location such that it has become your ‘usual place of residence’.

After 1 October 2012, the following additional rules apply, depending on your employment circumstances.

Additional LAFHA Rules

Domestic Employees with LAFHA arrangements in place before 9 May 2012

The additional rules (see below) will not apply to you until you are due to reapply for the benefit or until 1 July 2014, whichever comes first.

All Other Employees (including Domestic Employees applying for LAFHA after 9 May 2012 and International Employees)

The following additional rules will apply from
1 October 2012:

  • Your usual place of residence (i.e. the home you are “living away from”) must be within Australia; and
  • Your usual place of residence (i.e. the home you are “living away from”) must remain available for your immediate use at all times during the period that you are living away from home – that is, it cannot be rented out or otherwise made unavailable for your use at any time during the LAFHA period; and
  • Your LAFHA eligibility period will be restricted to a maximum of 12 months from 1 October 2012

Leave a comment here.

37 Responses to “Understanding the Living Away From Home Allowance Changes”

  1. 1 Tim July 12, 2012 at 11:33 pm

    So what will happen to 457 visa holders receiving LAFHA before 8th May 2012? Are they going to continue receiving it till 2014?

    What are the chances that this will be revised again?

  2. 2 Simon Ellis July 13, 2012 at 8:40 am

    Hi Tim

    As a 457 holder you will fall into the second part of the table above, i.e. from 1 October this year you will only be able to qualify for LAFHA if, in addition to the standard (i.e. “Old”) eligibility requirements, you also meet the following tests:

    1. Your usual place of residence (i.e. the place you are living away from) must be within Australia, and

    2. That residence must be available to you at all times during your LAFHA period.

    I’m afraid it will be almost impossible for you to meet the first of those new tests – as you are here on a temporary business visa the ATO is likely to assume that you’re only in the country temporarily and that your ‘usual place of residence’ is therefore not within Australia.

    Re the chances this will be revised again – well – how long is a piece of string? I’ve got to say though I think it’s unlikely the rules will change now that the consultation period has finished and the revised legislation has issued.

    Sorry Tim – I wish I had better news for you!

  3. 3 Jean Jones July 17, 2012 at 2:51 pm

    I have a staff member currently receiving LAFHA who identifies her usual place if residence within Australia. She is however under a Regional Sponsored Migration Scheme (Visa BW/857) which I believe is a permanent (not temporary) visa with full work rights. She is not an Australian citizen. She is under a temporary 2 year employment contract with us as this 2 year commitment was a requirement of the Visa.

    Is she classified as a domestic employee or an international employee?

    • 4 Simon Ellis July 17, 2012 at 5:09 pm

      Hi Jean

      If your employee is in Australia permanently and sees her current Australian address as her usual place of residence then she doesn’t qualify for LAFHA as she’s not “living away from home”.

      • 5 Jean Jones July 22, 2012 at 10:50 am

        Thanks Simon. Her identified usual place of residence is in another location away from where she works with us – ie we relocated her from another Australian city to work for us in country Queensland and gave her the RSMS visa to do so. Therefore she is currently living away from her usual place of residence in Australia. I’m still wondering if the Tax Office will classify her as a domestic employee or an international employee as she is not an Australian Citizen and her work rights in Australia is linked to her Regional Sponsored migration visa with us – but she identifies her usual place of residence within Australia.. Thanks.

  4. 6 Simon Ellis July 24, 2012 at 1:11 pm

    Hi Jean

    The Act does not use the terms “domestic employee” and “international employee” – it states that the transitional rules are available if the employee is not a “temporary resident or foreign resident”.

    These terms are not defined so I would imagine they take on their ordinary meaning. I’m not an immigration expert but I would assume that, if you are correct and the RSMS visa is a permanent visa, then your employee would not be either a temporary or foreign resident, and the transitional relief would be available.

  5. 7 Julian September 5, 2012 at 5:36 pm

    Im not that switched on, do you still receive LAHA if you live in a camp while on a FIFO contract where food and accom is paid for?

    • 8 Simon Ellis September 19, 2012 at 12:39 pm

      Hi Julian

      As LAFHA is paid as compensation for additional accommodation and food costs (incurred by virtue of your living away from home) then I think it is unlikely you would qualify for the benefit if your food and accommodation costs were already being covered by your employer.

  6. 9 Paul Hands September 20, 2012 at 9:45 am

    I currently have LAFHA in place prior to the 9 May 2012. I left my usual place of residence and relocate the family [on secondment for the company] for a construction job remotely within Australia. I do not have a permanent residence else where, which prior to the reform was not required. Can you please advise where I stand as of the 1st of October?

    I need a better understanding of how I am paid as of the 1st of October and keeping within the guidelines of the ATO.

    • 10 Simon Ellis September 20, 2012 at 5:06 pm

      Hi Paul

      OK – first up I must state clearly that you should not rely on my comments here as formal taxation advice. I’m happy to give you my opinion but if you want certainty in relation to what your rights and obligations are then either you or your employer should seek advice from a registered taxation advisor.

      Without knowing the details of your circumstances I would say that it’s unlikely you’ll qualify for LAFHA benefits post 1 October 2012. The reason for this is that you do not have a ‘usual place of residence’ to point to during your assigment period. You maintain only one residence – and that’s the one you’re currently living in.

      Having said that there’s still a chance that you could qualify. Assuming you’re a permanent Australian resident whose LAFHA arrangement was in place before 8 May 2012 you do potentially fall into the ‘transitional’ rules that create some exceptions but whether they will make any difference to you depends largely on your ability to establish the validity of your usual place of residence.

      Sorry I can’t be more definitive – again I suggest that your best bet is for either you or your employer to seek formal advice on how the new rules will impact your LAFHA status.

  7. 11 Emma-Lee September 20, 2012 at 2:20 pm

    Hi Julian

    I currently have 2 employees receiving LAFHA which has been in place before 8 May 2012. Do i continue to process this allowance as tax free or do i now tax it?

    • 12 Simon Ellis September 20, 2012 at 5:09 pm

      Hi Emma

      Unfortunately I can’t answer your question based on what you’ve told me. If the employees are here on 457 visas then the answer is that the allowance will now become taxable, but if they’re Australian residents on domestic assignment then you might be able to continue paying a tax-free allowance through to as late as 30 June 2014.

      If you want to obtain certainly on your obligations you should seek formal advice from a refgistered tax agent.

  8. 13 John November 24, 2012 at 8:24 am

    If my employer has asked me to relocate for 12 months to help with a project, does Lafha allow you to rent your existing property to cover a mortgage or is there no allowance what so ever. I will need to rent another property so I am concernsed about meeting ATO requirements but not being disadvantaged.

    • 14 Simon Ellis November 27, 2012 at 10:09 am

      Hi John

      No – under the new rules your usual place of residence must remain “available for your private use” at all times if you are to be eligible for LAFHA benefits.

      If you rent the house out then you will not meet this rule.

  9. 15 Rachael November 25, 2012 at 8:43 pm

    Hi All
    I am currently working on a secondment agreement in Sydney for twelve months and paying rent in both Brisbane and Sydney. I have been told that as I am breaking my lease in Brisbane I am not eligible for LAFHA benefits as I am not reasonably expected to return to that leased premises. Is this a correct interpretation of the Act?

    I have been paying rent in two locations for six weeks to date – would I be eligible for LAFHA for at least that period?

    • 16 Simon Ellis November 27, 2012 at 10:07 am

      Hi Rachael

      That sounds right – under the new LAFHA rules you can only qualify if your usual place of residence is a property that you own and which remains available for your use throughout the LAFHA period.

      Since you do not own your Brisbane residence and it will not be available to you during the secondment period you will probably not be eligible for LAFHA status.

  10. 17 Delyse Kelly March 3, 2013 at 4:51 pm

    Hi Simon,
    I am currently empolyed as a Traffic Controller and am often stationed away from home. My accommodation and meals are provided, am I still entitled for LAFHA from my employer?


    • 18 Simon Ellis March 4, 2013 at 9:37 am

      Hi Delyse

      Unfortunately I can’t give you a definitive answer as LAFH eligibility is generally a complicated question that requires a detailed evaluation of your personal circumstances.

      However from what you’ve written above I would say that the answer is no – after all if your accommodation and meals are already being paid for while you’re away then there’s no basis for an allowance to compensate you for additional accommodation of food costs.

  11. 19 Gail April 4, 2013 at 12:24 am

    Hi Simon,
    trying to work out all this lafha & tax stuff & just getting lost Husband just started job in carnarvon W.A. fly in fly out we rent house in rockingham W.A. which kids & I are living in still. Company provides him with serviced unit & pays him a weekly allowance for his food costs. does he pay tax on his lafha.

  12. 20 Simon Elllis April 4, 2013 at 4:29 pm

    Hi Gail

    Provided your husband qualifies as ‘living-away-from-home’ – which he probably does based on the information you’ve provided – then the food allowance he receives should be exempt.

    Probably best that you check with his payroll to see whether the payment is actually a LAFH food allowance or just a straight food allowance.

  13. 21 Jody April 24, 2013 at 8:49 pm

    Hi Simon,
    My husband recently starting work, away from home. He drives in and out and does 2 weeks on 1 week off, while he is there is does not live on site, and rents off site he provides his own food everyday and also pays rent for the 2 weeks he is there at a house. Does he qualify for LAFHA? And is this something the employer pays or is this sub by government?

    • 22 Simon Elllis April 26, 2013 at 11:06 am

      Hi Jody

      Unfortunately I can’t say whether your husband qualifies as living-away-from-home for taxation purposes or not – that’s a decision his employer will need to make – although, as with Gail above, it sounds to me like he probably does.

      A LAFHA is not paid by the government – it is either a special tax-free allowance paid by your husband’s employer OR, if the employer does not offer this, a salary packaging option that is potentially available to your husband.

      As such you’ll need to check with your husband’s employer to find out what their policy is on this. Do they have a salary packaging provider like Smartsalary or is it all done in-house?

  14. 23 Joe July 31, 2013 at 6:01 pm

    if you relocate for work for 12 months, and your home is empty while you are away, can you deduct your new location accommodation costs from your salary, even if your employer refuses to pay an allowance (just negotiates a higher salary)

  15. 24 Matt October 9, 2013 at 4:02 pm

    Hi I moved from Sydney to Perth for project work, and have been receiving LAHFA pre tax via salary packaging. This will finish in 2 months, but so will my project. If I move on to another Perth based project does this restart the 12 limit in terms of receiving LAHFA. I still intend on moving back to Sydney, and am maintaining my house over there.

    • 25 ceosmartsalary October 10, 2013 at 1:04 pm

      Hi Matt
      Which employer do you work for? Your employer would need to approve the LAFHA as a salary packaged item.
      Lisa – Smartsalary

      • 26 Matt October 14, 2013 at 9:48 am

        Thanks Lisa, but what are there any rules around my situation? Ie starting a second 12 month period of LAHFA? There seems too be a small amount of conflicting and confused information on the ATO website.

      • 27 Simon Ellis October 14, 2013 at 10:22 am

        Hi Matt

        Please see my comment below – unfortunately you can’t extend your LAFHA beyond 12 months.

    • 28 Simon Ellis October 14, 2013 at 8:28 am

      Hi Matt

      No – unfortunately the 12 month period doesn’t re-start when you commence a new project in Perth. Under the revised LAFHA rules the longest period of time you can claim LAFHA for is 12 months, period.

  16. 29 jean January 31, 2014 at 1:13 pm

    hi Matt,
    I first started with a company called Lend Lease . I live in Adelaide and buying my home, Now working in Sydney they will not pay me LAHA as i have not got a trade. I am a getting payed as trades assistant working as a peggy. Can you please tell me is this right. Im paying a morgage in Adelaide and rent in Sydney

    • 30 Simon Ellis February 3, 2014 at 9:04 am

      Hi Jean

      There are no laws or other legal instruments that force employers to pay LAFH benefits to employees – it is an entirely voluntary process.

      Your employer is free to set whatever conditions it wants about who it offers these benefits to and under what circumstances, and so if they have elected not to offer LAFHA to employees without a trade then that is their right.

      Obviously this isn’t a great outcome for you but all I can do is wish you the best of luck in your Sydney assignment!

  17. 31 Ronald Inglesby February 12, 2014 at 12:07 pm

    I am an IT contractor that is working for 3 months away from home. My Contracting agency is telling me I do not qualify for LAFHA due to secondment reasons, can you please comment if this is correct?:

    Unfortunately this temp will not satisfy the secondment requirement within the LAFHA provisions in the tax law and is therefore is not eligible to receive LAFHA.

    To satisfy this secondment requirement the temp would firstly need to be working for our Agency X in the Q placement in Perth and then be required by Agency X to work for Agency X in the Q placement in Melbourne. I understand that this is not the case and therefore the secondment requirement within the LAFHA provisions is not satisfied.

  18. 32 Simon Ellis February 13, 2014 at 10:24 am

    Hi Ronald

    First of all – and as per my post immediately above – the payment of LAFH benefits is not compulsory.

    That is, even if an employee happens to qualify as living-away-from-home their employer is not obliged to offer LAFH salary packaging. In fact even if the employer does elect to offer it, it would be free to add whatever additional restrictions it wants (over and above the basic eligibility rules).

    Having said that, I note that the basic eligibility rules (which are a combination of ATO policy and legislative requirement) do not require that the employee work for the employer in Location A before being transferred by the same employer to Location B. It is enough that the employee usually resides in Location A and is temporarily transferred to Location B for a short-term assignment.

    Hope this helps . . . .

  19. 33 Vincent May 7, 2014 at 9:18 am

    Hi Simon,

    First thank you very much for sharing all this information with everyone.
    My employer has a checklist to decide on employees’ eligibility to receive LAFHA. On of their checklist points is:
    “Has the employee applied for or received permanent residency in Australia? (If the answer is Yes – NOT ELIGIBLE)”

    I was wondering if this was an ATO rule or just my employer’s rule, as I don’t understand how permanent residency applications would be relevant to be eligible for LAFHA.

    Thanks in advance,


    • 34 Simon Ellis May 29, 2014 at 3:07 pm

      Hi Vincent

      The ATO guidelines aren’t entirely clear, but one of the fundamental principles of eligibility for LAFHA benefits is that you must have an intention to return home to your usual place of residence at the completion of a temporary period of assignment. Applying for permanent residence in Australia would strongly imply that you do not meet that requirement.

      But it’s all a bit of a moot point now since, under the new LAFHA rules, you cannot qualify for LAFH benefits at all if your ‘usual’ place of residence is outside Australia.

  20. 35 Dil May 8, 2014 at 9:16 pm

    I have a dilemma;

    The company I work for asked me to move to one of their regional locations for 2 years. On top of my salary the company is paying me 200pw rent allowance which they don’t deduct any tax.
    My query is will I have to pay tax on that $10400(200×52) ?
    I was a renter in the city at $180pw. Regional I’m paying $290pw.
    I have read things about LAFH and also fringe benefits.

    If someone can shed some light on this that would be good.

    Thanks you.

    • 36 Simon Ellis May 29, 2014 at 3:12 pm

      Hi Dil

      Rent allowances are usually taxable salary – even if you live in a remote area – so on the face of it I’d guess that you do need to pay tax on the $10,400 p.a..

      However rent allowances also are generally subject to PAYG withholding – i.e. your employer should be deducting tax unless it believes that the rental allowance will be a tax free for some reason.

      I would recommend asking your payroll guys the following question: “why are you paying me this allowance free of tax – what reason do you have for assuming it will be tax free in my hands?” Their answer should provide the answer as to whether or not the amount is tax free for you!

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Deven Billimoria
Chief Executive Officer

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