What's LAFHA?

The Living Away From Home Allowance (LAFHA) is a tax-free allowance used by temporary overseas skilled workers and working holiday makers in Australia to offset additional expenses and discomfort incurred while living away from your usual home for a defined period of time.

Your class of visa, for example your Working Holiday Maker visa, does not automatically entitle you to LAFHA. It is based on your intention to ultimately return to the vicinity of your primary residence and this intention is reassessed every 12 months.

The LAFHA benefit generally arises where your employer pays you an allowance as compensation for additional non-deductible expenses and other disadvantages that you incur because you have to live away from your usual place of residence in order to do your job.

Important Notes:

The LAFHA must be wholly or partly to compensate the employee for additional non-deductable expenses or disadvantages incurred because the employee is required to live away from home, such as additional rent, food or telephone costs incurred while living away from home.
The allowance must be represented by a separately identifiable amount, not an unidentified amount included in the wages or salary of the employee or by a payment of an amount to the employee as a reimbursement of expenses.
Any allowance for additional disadvantages incurred by living away from home must be paid in conjunction with allowances for additional expenses. Otherwise it will be included in the assessable income of the employee.
Certain industries and professions are excluded from LAFHA legislation.
LAFHA is not a travelling allowance

Legal Information

The LAFHA is dealt with under specific provisions of Australian tax law, namely, specific provisions in Division 7 of Part III of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)

Sub-section 30(1) of Division 7 of Part III the FBTTA states:

Living Away From Home Allowance Benefits

30(1) [Provision of benefit]

Where:

(a) at a particular time, in respect of the employment of an employee of an employer, the employer pays an allowance to the employee; and
(b) it would be concluded that the whole or a part of the allowance is in the nature of compensation to the employee for:
- (i) additional expenses (not being deductible expenses) incurred by the employee during a period; or
- (ii) additional expenses (not being deductible expenses) incurred by the employee, and other additional disadvantages to which the employee is subject, during a period;

by reason that the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment;

the payment of the whole, or of the part, as the case may be, of the allowance constitutes a benefit provided by the employer to the employee at that time.