PayMe - Living Away From Home Allowance (LAFHA)

Living Away From Home Allowance (LAFHA)

This allowance reduces your taxable income to compensate you for working on a short term basis away from your normal place of residence. It is reviewed once a year, and does not normally extend to more than two years. Fringe Benefits Tax (FBT) will apply to this benefit unless it is applied correctly.

Please note for questions that are not related to engagement through PayMe, such as general questions on LAFHA such as "is my son the bricklayer entitled to LAFHA because he is temporarily in Mt Isa", or "whether as a cook in Perth on a 457 Visa with my home in Spain, am I entitled LAFHA", we are not a free advice service, so please do not contact PayMe. Instead, please contact the ATO, your payroll officer, or your accountant.

LAFHA as defined by the Australian Taxation Office (ATO), 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."

Note the use of the words "ADDITIONAL EXPENSE" and "PRINCIPLE PLACE OF RESIDENCE".
These are clear indications of the nature and intention of LAFHA being an allowance for inconveniencing an employee.

Who is Eligible?

Firstly you must be considered an employee, and under the ATO's
FBT Guide for Employers, an employee is:

A current employee,
A future employee, or
A former employee.

So this qualifying criterion is relatively simple.

Secondly you must be considered to be living away from your
usual place of residence when:

There is a change of job location (and the family may follow);
The employee intends to return to their original location after time away; and
The period away exceeds 21 days (ATO ‘rule of thumb’).
Lastly, you must be assessed by PayMe as complying with LAFHA legislation. We provide all contractors requesting LAFHA with a LAFHA Questionnaire so you can be assessed before you may be paid the allowance.

What Can be Paid?

LAFHA is paid in two components, the Food Component and the Accommodation Component.

The Food Component.

The food component will lower your taxable salary by the following maximum reasonable claimable levels that are set by the ATO. This is shown in the table below. The amount the ATO assumes to be normally spent on food is set at $21 per week per child* at the start of the FBT year and $42 per week per adult.

The Food Component	One Adult	Two Adults	Two Adults and One Child	Two Adults and Two Children
ATO Weekly Reasonable Food Component for LAFHA	$206	$330	$370	$370
ATO Statutory Food amount that Cannot be Claimed	$42	$84	$105	$126
Amount that can be deducted from your Weekly Taxable Income	$164	$246	$265	$244

* A child is considered to be under 12 years old.

See ATO Tax Determination TD 2007/9 for a food component reference.

The Accommodation Component

The Accommodation Component must pass the ATO test so that it is considered to be "reasonable" for you, eg a one bedroom apartment for a single person, multiple rooms for a family, not a penthouse, but also not a hovel. In fact it simply boils down to "common sense" and ensuring that you never give the ATO cause to investigate you. We can assist you in identifying what is "reasonable".

An Example

Peter is a contractor earning $90 per hour. If Peter's usual place of residence is in Melbourne, and he is contracted to a client in Canberra for 12 months and intended to return to his home in Melbourne after this 12 months, he could consider LAFHA. If he then temporarily moved to Canberra, and was accompanied by his wife and two children, he would be able to reduce his taxable income for the food component by $244 which is approximately $100 additional cash in hand as compensation. If his weekly rent was $350 in Canberra, Peter could reduce his taxable income by $244 (food component) and $350 (accommodation component) totalling $594 per week. This would provide Peter approximately $230 additional cash in hand as compensation.

When are you Not Eligible?

It is also worth noting at this stage that once the contractor starts to make their own decisions regarding lifestyle and employment changes such as selling their former place of residence or deciding to remain in the temporary place of residence indefinitely, LAFHA ceases to be payable. In addition, if a contractor moves interstate to work for one recruitment company and then transfers to another recruitment company, LAFHA will cease.

Overpayment will have to be paid back to the ATO by the contractor in all cases, without exception. For this reason, PayMe requires that you sign a legally binding document stating that any ATO liabilities are your liabilities; not PayMe's.