Can you claim Living Away From Home Allowance? (LAFHA)
LAFHA – Living Away From Home Allowance
Are you living away from home, relocating or travelling?
As a contractor, you may be eligible for a Living Away From Home Allowance (LAFHA). There are various factors involved in your individual situation that will determine whether you are eligible for LAFHA tax benefits.
What is LAFHA?
LAFHA is an allowance, approved by the Australian Taxation Office (ATO) which reduces your taxable income to assist with food, rent and other removal costs when you are genuinely working away from home. LAFHA is paid in two main components, the Food Component and the Accommodation Component – however, there are also additional travel, removal and storage of household effects and connection of utilities components.
Who is eligible?
Those who can demonstrate that their employment requires them or themselves and their family to live away from his or her normal residence to discharge their employment duties. You must continue to have unconditional use of your primary residence at any time whilst receiving LAFHA.
What are the LAFHA eligibility requirements?
- You must be living away from home for work-related purposes;
- The period you will be away from home is greater than 21 days;
- Your employment contract or temporary move must be of a fixed-term defined by date or completion of work, no greater than 12 months with an employer.
- At the time of applying for LAFHA and while you are being paid LAFHA, you must intend to return home;
- You must be formally assessed as complying with LAFHA legislation, rulings and precedents.
What else can be claimed under LAFHA?
- Travel expenses from your permanent residence to your new (temporary) location. This includes flights, transport, meals and accommodation costs based on receipts.
- Temporary accommodation at the permanent location up to 21 days.
- Temporary accommodation at the new location is limited to an occupancy period that begins seven days before you start work at the new location and ends when you could reasonably be expected to occupy long-term accommodation by lease; this is four weeks.
- Connection or reconnection of gas, electricity and telephone services to your new home so long as you had these connected at your permanent home.
- The costs of removal, storage, packing, unpacking and insurance of household effects, including pets.
What does it cover?
LAFHA is paid in two components, the Food Component and the Accommodation Component:
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- 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 website. 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 circumstances change
It is important that if you decide to remain in the new location, your LAFHA should be stopped as soon as you make that decision, as the move is considered no longer temporary. There is a 12 month limit on the period you can claim LAFHA, however, this can be paused if there is a break in the employment.
Want to enquire about LAFHA? – click here to to fill out the LAFHA enquiry form and we will get in touch with you shortly.
