What is Live Away From Home Allowance (LAFHA)?

In a world where borders blur and opportunities beckon from every corner, Live Away From Home Allowance (LAFHA) emerges as a financial lifeline for those venturing far from home. This allowance grants nomads and adventurers the freedom to pursue their dreams while receiving crucial financial support.

Join us as we explore the realm of LAFHA, where practicality meets wanderlust, and boundaries become bridges to a world of possibilities.

Diving into the Details: What is LAFHA?

The Live Away From Home Allowance, or LAFHA as it’s often referred, is a unique feature of the Australian tax system.

LAFHA is a fringe benefit, a type of compensation employers provide to employees who are required to live away from their usual residence for work purposes. It serves to cover additional expenses an employee might incur in these circumstances, such as the cost of temporary accommodation and meals.

LAFHA for Expats: Why Should You Care?

If you’re an Australian expat or a foreign investor residing overseas, understanding LAFHA can be incredibly beneficial.

Suppose you’re temporarily relocated to Australia for work, or perhaps you’re an Australian citizen living abroad who’s returned for a work assignment. In such instances, you may be entitled to claim LAFHA, helping to offset the costs of living away from home.

A Detailed Look: Living Away From Home Allowance Australia

In Australia, the LAFHA system is primarily administered through the Fringe Benefits Tax (FBT) legislation. The allowance isn’t typically subject to income tax, which can be a significant boon for those eligible. However, certain conditions must be met to claim this allowance:

Your employer must officially designate the payment as LAFHA.
You must maintain a home in Australia that you’re living away from for work purposes.
You need to substantiate all your expenses related to living away from home, including meals and accommodation.

Live Away From Home vs Working Away Allowance: Spotting the Differences

While both LAFHA and the Working Away Allowance aim to ease the financial burden of work-related relocations, there are crucial differences.

The Working Away Allowance generally refers to compensation for additional expenses incurred when an employee is required to work away from their normal workplace but doesn’t need to maintain a separate residence. On the other hand, LAFHA is specifically for employees who maintain a home that they’re living away from due to work commitments.

While they share similarities, there are key differences between the two. Let’s explore these differences:

Purpose

LAFHA: This allowance is designed to provide financial assistance to employees who need to temporarily live away from their usual place of residence for work-related reasons. It covers additional expenses such as accommodation, meals, and other living costs.
Working Away Allowance: This allowance is provided to employees who are required to work away from their usual place of work for a specific period. It compensates for the additional expenses incurred during travel and temporary work assignments, such as transportation, meals, and lodging.

Eligibility

LAFHA: Employees are eligible for LAFHA if they can demonstrate that their employment requires them to live away from their usual place of residence for an extended period. The distance between the usual residence and the work location is usually a determining factor.
Working Away Allowance: Employees may be eligible for a working away allowance if their job requires them to work at a location away from their usual place of work for a specific duration. This could include short-term assignments, projects, or remote work.

Duration

LAFHA: This allowance is typically applicable for an extended period, such as months or years, during which the employee is expected to live away from home.
Working Away Allowance: The working away allowance is provided for a temporary duration, which can vary depending on the nature of the work assignment. It is usually applicable for shorter periods, ranging from days to weeks.

Expenses Covered

LAFHA: The living away from home allowance covers various living expenses incurred while staying away from the usual residence, including accommodation costs, meals, and other essential living costs.
Working Away Allowance: This allowance typically covers additional expenses incurred due to travel and temporary work assignments, such as transportation costs, meals, and accommodation during the period of work away from the usual workplace.

Taxation

LAFHA: Taxation rules regarding LAFHA can vary by country and depend on specific conditions. In some countries, LAFHA may be subject to certain tax concessions or exemptions.
Working Away Allowance: Tax treatment of working away allowances also varies by country and jurisdiction. Generally, it is important to consult local tax laws to determine the tax implications for such allowances.

Specific details and regulations surrounding living away from home and working away allowances can differ between organizations and jurisdictions. It’s advisable to consult with your employer or a tax professional to understand the specific terms, conditions, and tax implications related to these allowances.

Smart Moves: How to Optimise Your LAFHA Allowance

Maximising your LAFHA benefits begins with understanding your eligibility and what you can claim.

Keeping accurate records of your additional expenses incurred while living away from home is crucial. Ensure that you claim all eligible expenses and consider seeking expert advice to make sure you’re not missing out on any benefits.

Odin Tax: Maximising Your Australian Taxation Benefits

Understanding LAFHA goes beyond knowing its acronym. It’s about fully appreciating the opportunities it provides and leveraging it to your advantage. As an Australian expat or foreign investor, it’s worthwhile to explore this unique benefit and make the most of it.

Are you ready to take control of your finances as an Australian expat or foreign investor? Begin your journey today with our team of tax advisors, adept at guiding you through the intricacies of the Australian tax system.

Contact Odin Tax today to lodge your tax returns.