A brief on LAFHA and its importance

LAFHA is an allowance paid by the companies of Australia to employees who are away from their residence in order to do company work. There are certain guidelines to be met and certain laws to be followed for LAFHA.

LAFHA is the abbreviated form of Living Away From Home Allowance. LAFHA is granted to people living abroad for a definite purpose for a fixed amount of time. This is a tax free allowance that is under the law in the country of Australia. LAFHA is generally claimed by skilled workers who are overseas, citizens of Australia working interstate and holiday makers who work.

LAFHA is not given out according the visa class of the workers. It is granted based on the intention of the person of coming back home. This should be verified every year. There are also certain guidelines concerning the grant of LAFHA. All the people receiving the LAFHA benefits should make sure that the guidelines are met. There are also certain laws that need to be abided if LAFHA benefits are to be received.

When a company employee is required to stay away from the place where he resides for a definite time being, in order to do some company work, the employee is granted the LAFHA by the company to compensate for the additional expenses (non-deductible) and other inconveniences caused. LAFHA benefit can or cannot be taxable; it might also be taxable in parts. The tax issue is decided based on the accommodation, food and the amount of the benefit.

Amongst the many conditions that need to be fulfilled to avail of LAFHA, one is that the LAFHA should be granted on the basis of compensation of additional expenses or disadvantages that the employee faces while away on duty. These expenses which are outside the expenses the employee should be liable for, are not tax deductible. The examples of additional expenses are telephone costs, rent, and additional food expense, insurance on the property that is kept away from the residence and also laundry costs if the employee does not have access to any home laundry.

Another important thing that should be noted is that the allowance should be represented separately on the records. Any unidentified amount of money that is added in the salary amount or figures showing payment of a reimbursement to an employee for expenses will not be sufficient for LAFHA.

LAFHA should not be confused with a travel allowance because a travel allowance comes under assessable income and will not fall under the FBT (Fringe Benefits Tax). Also, it is to be made sure that the employee was indeed living away from is usual residence, in order to comply with the FBT laws.

There are a number of things to be kept in mind while applying for or granting LAFHA. However, it can be non taxable and thus quite beneficiary.