Living Away from Home Allowance : LAFHA

This is a copy of an article from the Taxpayers Association of Australia:  http://www.taxpayersassociation.com.au/tax-deductions/living-away-from-home-allowance.html

The government realised long ago that sometimes getting a job, and then keeping it, can be a difficult task for some people. And if it’s hard to find work in your local area, at times the realistic option is to move to another location if a job is available there.

The living away from home allowance (LAFHA) can at least make the task a little easier. It is classified as a fringe benefit that is given to compensate for the additional expenses that crop up from having to live somewhere other than your own home in order to be gainfully employed (although the term ‘additional expenses’ does not include expenses that you will be able to claim as tax deductions anyway).

The Tax Office defines ‘living away from home’ by you having a ‘usual place of residence’ that you would have continued to live in but for the fact that work commitments require you to temporarily live in a different locality. And people who move to a new locality for a stint at a particular job, and who intend to move back at the end of their appointment, will generally be treated by the Tax Office as living away from their usual place or residence.

The living away from home allowance can apply to Australians moving to locations within Australia, to overseas long-stay visa holders, or Australians working overseas.

LAFHA is paid in two parts; the food and the accommodation components. The food part of the allowance is based on what is a ‘reasonable’ calculation of the costs of food, but as additional food expenses in the alternate location will never be a known amount there are no strict guidelines.

Records of food expenses can be kept for a representative period, and used to base an estimate on, for example. The Tax Office has a ‘statutory’ amount for the food component, which is $42 a week for an adult and $21 a week for minors (under 12 years). This is the amount that it says will need to be spent, so that a ‘reasonable’ amount will be that or more.

The Tax Office has set out a maximum ‘reasonable food component’ for expatriate employees working in Australia (for the 2011-12 FBT year), for example, of $233 a week for one adult, $373 for two, or $419 for two adults and two children (see other amounts here).

Accommodation costs also need to be ‘reasonable’, so that if you were previously living in a two-bedroom apartment you can’t then go and rent a five-bedroom house with a double garage and a pool and expect the taxman to put in. But factors that could be considered include whether you’ll need furniture, if family members will accompany you, your present living standards and the employment position you hold.

People claiming the LAFHA must fill in and lodge with their tax return a living away from home declaration (an example can be downloaded here) each year. The allowance is generally administered through the payroll system.