Are you Living Away from Home, Relocating or travelling?
As a Contractor you may be eligible for a Living Away From Home Allowance. There are various factors involved in your individual situation that will determine whether you are eligible for LAFHA, a travel allowance or relocation costs. Power Pays will take the time to sit down with you on an individual basis to assist you to review your personal circumstances.
There have been changes to LAFHA under the last Federal Budget.
Living Away From Home Allowance
You may qualify for the Living Away From Home Allowance (LAFHA) if you are TEMPORARILY required to live away from your usual place of residence in order to perform your duties of employment.
You must maintain your usual place of residence and have it available to you to return to at any point.
Employees who move to a new locality with an intention to return to their old locality at the end of the appointment would generally be treated as living away from their usual place of residence.
This allowance reduces your taxable income to compensate you for working on a short term basis away from your normal place of residence; usually up to one year.
What does it cover?
LAFHA is paid in two components, the Food Component and the Accommodation Component.
The Food Component.
Every year, the ATO set a reasonable food component that can form a part of your LAFHA. This can be found on the ATO web site. The reasonable component contains a statutory food component. The statutory food component is the amount the ATO assumes to be normally spent on food and is set at $42 per adult and $21 per week per child under 12 years old. Each year a new reasonable food allowance is published by the ATO.
The Accommodation Component.
The Accommodation Component must pass the ATO test so that it is considered to be “reasonable” for you, eg: If you were previously living in a one bedroom apartment and you lease a one bedroom apartment for the duration of your contract, that would be deemed reasonable.
Factors you could take into account when determining the accommodation costs include:
- Whether you will be accompanied by family members
- The position you hold in the workplace
- The location where you will be living
- Whether or not the accommodation will be furnished
- Your current living standards.
Under the new rules you will have to provide evidence that you have incurred the accommodation costs. Any payments in excess of these costs are treated as taxable income. further, all LAFHA payments must be recorded on your annual PAYG summary.
When are you Not Eligible?
It is important that as soon as you make the decision to remain in the new location, then the move is considered NO LONGER TEMPORARY and LAFHA should be stopped from the time the decision is made. There is a 12 month limit on the period you can claim LAFHA for unless you have an existing arrangement in place.
Important facts about Allowances
Please note that Power Pays takes no responsibility for any over payment on LAFHA made to a contractor. Any over payment will have to be paid back to the ATO by the employeein all cases, without exception. When signing your declaration for LAFHA you are signing a legally binding declaration that you are entitled to claim LAFHA and stating that any ATO liabilities are solely your liabilities; not Power Pays’ or your employer’s. For this reason we recommend that you gain your own accountant’s, or the ATO’s, agreement that you qualify for LAFHA because we can only pay you based on the advice you have given us.