Welcome breathing space for LAFHA arrangements

by Stephanie Zillman10 May 2012

Foreign workers already receiving the living-away-from-home-allowance (LAFHA) won’t have to say goodbye to the lucrative tax concession until 1 July, 2014 – so long as they were already a recipient prior to 7:30pm 8 May.

Treasurer Wayne Swan announced the decision in Tuesday’s Budget speech, after flagging the changes were on the way late last year. Swan made no secret of the fact that the system was a considerable carrot with which employers could lure foreign workers – but he also said the concession was being exploited by rich foreign executives at the expense of Australian taxpayers.

Despite the phasing out of the benefit, the two year extension of the tax concession is likely to positively result in many workers staying on and applying for residency, migration agent John McQuaid said.

The Treasury announcement, under A fairer and more sustainable tax system, confirmed the following key points of information:

  • LAFHA will be now be limited to employees who are maintaining a home for their own use in Australia that they are living away from for work.
  • There will be a 12 month time limit on how long an employee can receive the tax concession at a particular work location.
  • The changes will mean businesses will no longer be able to give a taxpayer-funded tax break to employees who aren't maintaining a second home, or are maintaining two homes indefinitely – such as one overseas.

Notably, the measure will not affect:

  • The tax concession for 'fly-in fly-out' arrangements, as these employees will not be subject to the 12 month time limit;
  • The tax treatment of travel and meal allowances, which are provided to employees who have to travel from their usual place of work for short periods (generally up to 21 days).


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