Does your current job require you to live away from your home or relocate?
You might qualify for LAFHA (living away from home allowance).
Settle in comfortably and let’s find out what LAFHA is and what are the conditions to qualify for it…
What is LAFHA?
A living from home allowance is a financial compensation intended to reimburse an employee’s accommodations and food expenses, for the period of time they are living away from home, due to their job.
There are three types of LAFHA your employer can provide:
- Payment of an allowance
- Expense reimbursement
- Direct provision of a benefit – for example, your employer can provide your accommodation
What are the conditions to qualify for LAFHA?
- You are required to move away from home due to your job
- It’s a temporary work relocation
- Your employer requests your relocation
- After your relocation, you will return home
LAFHA vs travel allowance
People usually confuse these two types of allowances. So, let’s clear things up a bit.
You can benefit from a travel allowance if your job requires you to travel, but not move away from home.
LAFHA is paid when the employee is required to relocate due to their temporary job location.
If you’re travelling for business for an extended period of time (less than 21 days) you can receive a travel allowance.
Tip: Is your spouse living away from home with you? You can receive LAFHA for your family members including spouses and children.
[ctt template=”7″ link=”8h3TM” via=”no” ]You can receive LAFHA for your family members including spouses and children.[/ctt]
You might also be interested in: What You Need To Know Before Claiming A Tax Deduction For Your Work Clothing
Taxable or not?
Here’s some great news – your LAFHA is tax-free.
You don’t have to include it on your tax return.
Also, you can’t claim a tax deduction for expenses that have already been included in your allowance.
If your employer offers you a living from home allowance for an extended period of time, namely over 12 months, they will have to pay Fringe Benefits Tax for it.
What you’ll need to do is…
Keep the records of all your expenses:
- receipts, credit card or bank statements (or copies of these documents)
- a declaration explaining and offering all needed information on your expenses
Not all food and drink expenses need to be backed up by records. Only those exceeding the reasonable amount established by the Commissioner.
However, when it comes to your accommodation expenses, all expenses need back up.
I’d say, keep all those receipts. It’s better to be safe than sorry…
Now you know whether or not you qualify for a living away from home allowance.
Let’s discuss practical solutions that can help you save money in the long run. Sometimes, the right solutions can start with identifying which of your monthly expenses can be deductible. Let’s get in touch here.