LAFHA to be abolished for 457-visa holders in Australia

Yip, indeed - the Living Away From Home Allowance (LAFHA) formally granted to 457-visa holders in Australia will be abolished come July 2012. Start saving the bucks now, no more help from the man behind the curtain. 

What's more, the tax exemption that came with LAHFA (the portion of your income that was your allowance was not taxed), will now be taxed. So, be prepared for this as well. As an example:

Hello GlobalNomad, Yes LAFHA will be abolished as of 30 June 2012. The government is seeking to apply a 'level' playing field of Taxation for locals and expats alike, reason being to stop the ‘RORT’ of FBT that is apparently taking place. It appears LAFHA benefits will only eligible for individuals who maintain 2 or more homes within Australia - the likes of FIFO contracts. However, this does not provide a level playing field - as temporary residents on 457 Visa's we do not qualify for benefits which PR’s are entitled such as free schooling - as temporary resident in NSW we are expected to pay circa $4500 upfront for Schooling, we are not eligible for Child Benefits and we required to take out Private Medical Aid where PR's obtain this free. This is a very touchy subject, but I don't think that the Powers-of- be have not really thought this through and will prove to be a deterrent in obtaining 'Key Skilled' staff in Australia, unless Employers are willing to pay over the odds to compensate to attract those ‘key skills. All be it a sunshine state the cost of living in places such as Sydney are extremely high compared to the likes of the US and UK, and in my view the extremely high costs of living and taxation will outweigh the Sunshine and many Expats will leave to pastures new.

If the goal is to provide a level playing field for local and expat employees, then by purely removing LAFHA the govt is tilting the field in favour of local residents. Expats have to pay for Schooling, healthcare etc and still maintain their residence back home. I am hopeful that the govt will think thru' the implications on expat families before they change it.

This is not set in stone yet as the above post would have you believe. There is a consultation exercise ending in March 2012 and then the Bill will be debated in Parliament. Hopefully the changes will only apply to new expats.

Like the Gillard Govt care or for that matter has a clue what they are doing? Leave now! Aus is buggered mining is about to see a 20% reduction in orders and The dollar has killed of retail and manufacturing and well basically there is nothing else, lets be honest the house building sector has been ding a death for 2 years.time to jump ship.

Stepjanie, please don't provide misleading information. Nothing is approved, nothing has been abolished yet. They are still consulting and this issue will be decided in the paliament. LAFHA is still there and no changes has been anounced yet.

Hi, Budget 2012 confirmed abolition of LAFHA except for those having a permanent house in Australia.

Hi all

The abolition of LAFHA has been formally announced in the 2012/2013 budget speech. The good news is that those expats on LAFHA before the announcement (before 8 May 2012) will have two years (until 1 July 2014) before the change affects them. So, GlobalNomad, you've got a little while to save up :)

As I understand it, the only way to qualify now is if you maintain a property in Australia, which you don't rent out to others, in addition to the place you live (also in Australia) in order to work. Even then, you only get the tax break for 12 months. Anyone applying after 8 May will need to meet these critieria to qualify for LAFHA.

Hi all

Apologies GlobalNomad, seems there was a lot of confusion just after the changes were announced about the transitional period.

The transitional period only applies to permanent residents of Australia who maintain two homes in Australia. All 457 visa holders don't qualify for the transitional period at all. In other words, from 1 July 2012, you'll be paying tax on what was previously tax-free because of LAFHA.

Since many expats are in Australia on the 457 visa, there'll be a lot of you who are paying up to $1,000 extra a month in taxes - maybe more - to live and work in Australia!

Hi all

For more info, take a look at this article on the changes to LAFHA.

Remember that none of this is final, as it still needs to be approved in Parliament. However, it certainly looks like it'll basically be done away with except for those meeting a few specific criteria; 457 visa holders will not qualify.

The main question is whether there'll be a transition period for those currently enjoying the benefit, as at the moment, it doesn't look like there will be. As it stands, expats on the 457 visa will need to start paying tax from 1st July.