# LAFHA - Just some questions about it.



## ghosty06 (May 17, 2010)

I was recently approved for LAFHA a few weeks ago and also was quoted the amount that I would be receiving to be about $1500 AUD monthly. I'm really trying to understand why it's so much. It's about 18% of my gross income. 

Background: US citizen, working in AUZ for 2 years. Single, do not own property in the US, annual salary above the median wages there.

What determining factors go into this? It's great and I'm not complaining about the allowance that I'm receiving, but from what I read, the government can change their mind at anytime what they'd provide for me. What scares me if the government makes an over payment and requires me to pay them back.

Questions:

LAFHA is a government allowance that is given on top of take home salary. It doesn't increase my income, but I'm essentially taxed less? If this is true. I'd pretty much only be taxed at about 12%? Please correct me if my assumption is incorrect. 

I would like to know what others have experienced with LAFHA. 

Do I need to take any precautions with this?


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## ldouglas68 (Jun 10, 2010)

We're in a similar situation and I did a lot of research on LAFHA. The way it works is that your gross annual salary is reduced by the amount of rent and food component for the year. What is left then is your taxable salary. You will probably pay a lower tax rate as your taxable salary has decreased. Once you have worked out what your net annual salary will be from this you then add on rent and food component to give you your net annual salary. 



ghosty06 said:


> I was recently approved for LAFHA a few weeks ago and also was quoted the amount that I would be receiving to be about $1500 AUD monthly. I'm really trying to understand why it's so much. It's about 18% of my gross income.
> 
> Background: US citizen, working in AUZ for 2 years. Single, do not own property in the US, annual salary above the median wages there.
> 
> ...


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## hammer88 (Apr 27, 2010)

good question... is this something approved by the government? i think that number is something your company is willing to approve. the government approves the LAHFA program itself, but not the number. 

i'm in a similar situation where i'll be moving in october and i've been given a LAHFA number from a tax consultant that makes the taxes a bit more bearable.

and just like you.. i'm a little suspect of the number. my understanding that it can be interpreted as either cost above what it costs you to live in your original country OR the new costs to live in australia. in addition to that is some number for food allowance. 

that's my novel understanding. if somebody would like to clarify, please do.


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## smcc3573 (Jun 22, 2010)

hammer88 said:


> good question... is this something approved by the government? i think that number is something your company is willing to approve. the government approves the LAHFA program itself, but not the number.
> 
> i'm in a similar situation where i'll be moving in october and i've been given a LAHFA number from a tax consultant that makes the taxes a bit more bearable.
> 
> ...



From what I have read it is a tax deductable so its not an extra payment. What I would say is that I have read horror stories where people have just claimed for 2 years only later to be told that they have either claimed too much or shouldnt have received any LAHFA and are stuck with thousands to pay back. I would get it confirmed from tax authority what your allowance is set at is correct so that you dont get a BIG surprise later


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## Cnf (Mar 17, 2010)

LAFHA is essentially a tax structuring to compensate you for the *additional *cost of living away from your normal residence.

Your company needs to support it (as the payroll needs to process it) but you are open for an audit just as you would be for your normal tax.

So be honest and careful and you should be fine. Can you justify the allowance? For me it is relatively simple as the cost of living in Australia is significantly higher than in South Africa. However, I will consult a tax consultant before finalising my position.


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## ldouglas68 (Jun 10, 2010)

At the end of the day, your reduced taxable salary plus the lafha component should still be the same as your original gross salary. The 'extra money' is coming from the reduced tax you pay. I had one of those outsource companies quote me a figure that had nothing to do with cost of rent and food. They weren't concerned about seeing rental agreements. They just used a percentage of your gross salary. The figure was quite high but then they charged 20% admin/man fee which the reduced total take home pay. Need to watch out for those sort of companies


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## hammer88 (Apr 27, 2010)

yes, LAHFA is not any money paid. it just reduces the taxable wages.

douglas - what was the percentage they used for your gross salary? 

I have consulted a local tax consultant and the figure I've gotten is derived from the rent I will be paying plus an estimated food costs. Which is why i'm suspect based on what I've read on this forum.



ldouglas68 said:


> At the end of the day, your reduced taxable salary plus the lafha component should still be the same as your original gross salary. The 'extra money' is coming from the reduced tax you pay. I had one of those outsource companies quote me a figure that had nothing to do with cost of rent and food. They weren't concerned about seeing rental agreements. They just used a percentage of your gross salary. The figure was quite high but then they charged 20% admin/man fee which the reduced total take home pay. Need to watch out for those sort of companies


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## ldouglas68 (Jun 10, 2010)

*Lafha*

Don't know what the percentage was that they were using, but on a gross annual salary of $200,000 they were advising that they would pay lafha of around $8900 on top of reduced taxable salary. But they also wanted to charge 20% admin fee to do this. I wasn't comfortable with this as I knew that even if my rent was around $1200 per week plus food component this would equal about $6500 per month. They reckoned they could give us another $3000 per month extra through them. I would be very careful of any of those companies offering LAFHA in place of employers. If you go onto the ATO site there tons of info about LAFHA and also the fact that amongst other things you can also claim back the tax on relocation costs (incl sale/purchase of house/commission charges/marketing costs). 

You'll need to access it from businesses/tax topics/fringe benefits tax/advanced topics/guide for employers.


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## WorldOfDub (Nov 20, 2010)

ldouglas68 said:


> Don't know what the percentage was that they were using, but on a gross annual salary of $200,000 they were advising that they would pay lafha of around $8900 on top of reduced taxable salary. But they also wanted to charge 20% admin fee to do this. I wasn't comfortable with this as I knew that even if my rent was around $1200 per week plus food component this would equal about $6500 per month. They reckoned they could give us another $3000 per month extra through them. I would be very careful of any of those companies offering LAFHA in place of employers. If you go onto the ATO site there tons of info about LAFHA and also the fact that amongst other things you can also claim back the tax on relocation costs (incl sale/purchase of house/commission charges/marketing costs).
> 
> You'll need to access it from businesses/tax topics/fringe benefits tax/advanced topics/guide for employers.


Hi,

Can you point me in the direction of the part of the ATO website(or other official documents) that cover the relocation part of the LAFHA claim.

I've seen reference to this on a few sites, but can't find the ATO info.

My employer (I travel in 3 weeks time) have said that only food & accommodation can be claimed under LAFHA.

Thanks,

Paul.


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## johnat21 (Jan 19, 2010)

LAFHA is administered by your employer and without them paying the admin fee you would not be allowed LAFHA. Any discrepancy is the fault of your employer and should not come back to bite you.


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## Darla.R (Mar 27, 2011)

Yes the LAFHA really IS that generous, especially if you're getting the food as well as the rental allowances. I think it's meant to cover you for the extras you'll have to find e.g. higher medical insurance, higher medicare levy, can't claim benefits, school fees in some states, etc. 

Make the most of it because you'll certainly miss it if you ever apply for PR


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