457 + LAFHA, some quick questions, thanks

ballooba

Mellor wrote: »

???
There's nothign wrong with claiming LAFHA I thought?

I haven't seen any conclusive evidence to that effect. It seems to be a grey area. Although many tax practices seem to advise that it is OK. LAFHA is intended to be used for employees deployed temporarily away from their usual place of work, AFAIK. Applying it to workers who have never worked with the company at their 'home' seems to be a bit of a stretch.

ballooba

mandrake04 wrote: »

Think they can go back up to 7 years.

Two years for 'mistakes' for ordinary taxpayers, four years for bigger taxpayers. Unlimited in instances of fraud.

karl bracken

is there any charge for a company thats going to sort out LAFHA for you?

from what iv read giving the rent relief seams fine but the food allowance falls under fringe benefit and they have to pay something, is this right or whats the difference between fringe and LAFHA?

Cheers

hussey

karl bracken wrote: »

is there any charge for a company thats going to sort out LAFHA for you?

from what iv read giving the rent relief seams fine but the food allowance falls under fringe benefit and they have to pay something, is this right or whats the difference between fringe and LAFHA?

Cheers

There is no charge to the company, Lafha is a fringe benifit
http://law.ato.gov.au/atolaw/view.htm?DocID=SAV%2FFBTGEMP2%2F00011

laoisforliam

HI, I spoke to a guy from http://www.lafha.com.au/Home.aspx

about getting LAFHA, he called up my office and spoke to the payroll officer who was very sceptical about the whole thing.

How do I actually go about getting the LAFHA?
My boss said that the company have no objections but they dont have a clue about the process..

What process do I follow in order to get LAFHA?
Should I hire an accountant or can I do it my self?
Is an application made to the ATO?
I tried searching for the answers but I cant find anythig clear on it..

Thanks

laoisforliam

[QUOTE=Chapter 11 - Living away from home allowance fringe benefits;]

For FBT purposes, a LAFHA is:

• an allowance you (the employer) pay to an employee, and
• to compensate for additional expenses incurred and any disadvantages suffered,

because the employee is required to live away from their usual place of residence in order to perform their employment-related duties

[/QUOTE]


How does this not cost the employer money?

hussey

laoisforliam wrote: »

How does this not cost the employer money?

They don't pay you extra, you just get less tax ... lots of examples in this thread about how it works

ballooba

laoisforliam wrote: »

How does this not cost the employer money?

Reduce salary by x, increase LAFHA by x. Zero cost to employer.

Salary is taxable, LAFHA is not. WIN!

massdebater

ballooba wrote: »

Reduce salary by x, increase LAFHA by x. Zero cost to employer.

Salary is taxable, LAFHA is not. WIN!

This is the best post I've ever seen. The LAFHA penny finally dropped with me! Must get on to my employer about it.

Does anyone know can the LAFHA be applied at any time? I'm moving to Oz in September on a 457 and my employer will be paying for the first 3 months accommodation for me. Can I get the LAFHA to start after the 3 months are up (assuming I can't claim LAFHA during the first 3 months)?

Mellor

massdebater wrote: »

This is the best post I've ever seen. The LAFHA penny finally dropped with me! Must get on to my employer about it.

Does anyone know can the LAFHA be applied at any time? I'm moving to Oz in September on a 457 and my employer will be paying for the first 3 months accommodation for me. Can I get the LAFHA to start after the 3 months are up (assuming I can't claim LAFHA during the first 3 months)?

Well in that case you prob missed it when it was mentioned above, you should read the whole thread.

The reason I'm saying this is that there is a salary requirement on 457, reducing salary by X, (in order to pay for LAFHA), could cause problems when applying for a 457 visa. They specifically ask for salary information

massdebater

Mellor wrote: »

Well in that case you prob missed it when it was mentioned above, you should read the whole thread.

The reason I'm saying this is that there is a salary requirement on 457, reducing salary by X, (in order to pay for LAFHA), could cause problems when applying for a 457 visa. They specifically ask for salary information

I read the whole thread before posting but it still confused me sorry! Does anyone know where I can find the min. salary level for 457? I searched the immi.gov.au site but couldn't find a definitive answer

EDIT: Found it I think http://www.immi.gov.au/skilled/457-market-salary-rates.htm Not entirely sure which bracket I fall under but my salary is a bit above most of the ones mentioned so I should be able to claim LAFHA without falling below the threshold. I'll need to speak with my employer to try and sort it out. It'd be a shame to miss out on an opportunity like this, I may as well take advantage of whatever tax breaks are available to me.

Mellor

Mostly likely it's;

•$61 920 for all other Subclass 457 visa holders working in Information and Communication Technology occupations, or
•$45 220 for all other Subclass 457 visa holders

However, these are the minimum levels. The employer also has to pay you a salary that is at the market salary rate. If for example, the employer had 3 australians doing the same job, each being paid $75k - then you are supposed to be paid $75k.

If your pay was rediced to $65k + $10 LAFHA, technically you could be refused. There is a place on the form to declare LAFHA or other benefits, bit I'm not sure how it is treated regarding the market salary rate.

laoisforliam

Ok sorry about being so thick on the subject but have I got this correct?

If I earn 60,000 per year
The Temporary Skilled Migration Income Threshold is 47,480

60,000 - 47,480 = 12,520

I get my employer to reduce my base wage by 12,520 and pay me 12520 per anum in LAFHA?
I then pay tax at 20% on the remaining 47,480 of my salary? = 9,496
Tax on 60,000 at 20% = 12,000
Benifit of LAFHA= 2504 per year

Is this correct

Mellor

The Temporary Skilled Migration Income Threshold is not the min salary. It says so on the last link.

The TSMIT has no bearing on what the Subclass 457 visa holder should be paid in the workplace and should not be considered as the applicable market salary rate where the sponsor does not currently employ an equivalent Australian citizen or permanent resident. It is the market salary rate for the nominated occupation, not the nominated worker’s proposed salary, which is compared to the TSMIT

Your salary has to meet the market salary rate. If you reduce it by X, you may not qualify for a 457 visa.
They may or may not consider the LAFHA as part of your salary (for the purposes of being paid the same as other employees)

What visa are you currently on?

Also, you worked out your tax wrong, there are tax credits and such to be applied. There isn't much point in trying to work out the value of LAFHA. Either you can get it or you can't, it saves you money, who cares how much.

hussey

Yeah I think when you apply for your visa it is your gross salary that is taken, not your net

so if your salary (regardless of lafha) is above the rate then you should be fine.

Lafha is a tax break and shouldn't affect a visa minimum salary level

(in my opinion, if someone can overrule this please post up a link)

laoisforliam

Mellor wrote: »

The Temporary Skilled Migration Income Threshold is not the min salary. It says so on the last link.


Your salary has to meet the market salary rate. If you reduce it by X, you may not qualify for a 457 visa.
They may or may not consider the LAFHA as part of your salary (for the purposes of being paid the same as other employees)

What visa are you currently on?

Also, you worked out your tax wrong, there are tax credits and such to be applied. There isn't much point in trying to work out the value of LAFHA. Either you can get it or you can't, it saves you money, who cares how much.

Im on a 457, I am the only person employed in my department except for my manager. I know every little helps and my employer said they will do it if they can but they are leaving it up to me to do the work as in to how it works.
I spoke to the Finace officer who is very sceptical about the whole thing and cant see how the organisation wont lose money. Im trying to get a clear picture of the process so I can outline it to them and they are confident that they are not going to incur any losses.

Ive seen that you are also on 457 if you dont mind saying were you able to get your employer to pay LAFHA?

laoisforliam

hussey wrote: »

Yeah I think when you apply for your visa it is your gross salary that is taken, not your net

so if your salary (regardless of lafha) is above the rate then you should be fine.

Lafha is a tax break and shouldn't affect a visa minimum salary level

(in my opinion, if someone can overrule this please post up a link)

So in theory if I am paid 60,000 and my emplyer thinks 300 rent allowance and 100 food allowance is fair. 400p/w x 52 = 20,800
My employer could pay me 39,200 per year salary and 20,800 in LAFH?

karl bracken

apologies but i think this was asked already and i skimmed through the thread and didn't see it.

do you need to have your 457 approved for LAFHA or if your visa is in progress its OK or if you are on a working holiday your OK? (a lot of ors lol)

Mellor

laoisforliam wrote: »

Ive seen that you are also on 457 if you dont mind saying were you able to get your employer to pay LAFHA?

It was getting messy so i gave up, must look back inot it but don't think it's an option see why below.

laoisforliam wrote: »

So in theory if I am paid 60,000 and my emplyer thinks 300 rent allowance and 100 food allowance is fair. 400p/w x 52 = 20,800
My employer could pay me 39,200 per year salary and 20,800 in LAFH?

39k is below the limit for 457. The LAFHA is a benefit, that you can declare immi when applying but afaik, its your salary that counts (open to correction).

More importantly, as you are on a 457 now, your salary is stated on your visa.
There could be a problem if your company were to reduce your salary below this level. Obviously we all know that your gross earnings are still the same, but in terms of a strict sense, you salary is below what was stated on 457.

I don't get LAFHA, I have been trying to see if i can reduce my salary below the amount stated on my visa, and make it up in LAFHA. But i'm not getting a concrete answer anywere. As it stands, I don't want to go for it unless I'm sure.

Primary Visa Holder Occupation: [Occupation]
Location/Postcode of proposed employment: [0000]
Primary Visa Holder Rate of Pay: xx,xxx.xx
Primary Visa Holder Guaranteed Annual Earnings: xx,xxx.xx

laoisforliam

Mellor wrote: »

It was getting messy so i gave up, must look back inot it but don't think it's an option see why below.


39k is below the limit for 457. The LAFHA is a benefit, that you can declare immi when applying but afaik, its your salary that counts (open to correction).

More importantly, as you are on a 457 now, your salary is stated on your visa.
There could be a problem if your company were to reduce your salary below this level. Obviously we all know that your gross earnings are still the same, but in terms of a strict sense, you salary is below what was stated on 457.

I don't get LAFHA, I have been trying to see if i can reduce my salary below the amount stated on my visa, and make it up in LAFHA. But i'm not getting a concrete answer anywere. As it stands, I don't want to go for it unless I'm sure.

I suppose that this is where the issue lies, have you contacted the Department of Immigration on this subject?

The whole process is messy and confusing to my employers and myself. Its hard to sell them the idea without a clear assurances that they or I wont get burned in the process.

hussey

laoisforliam wrote: »

So in theory if I am paid 60,000 and my emplyer thinks 300 rent allowance and 100 food allowance is fair. 400p/w x 52 = 20,800
My employer could pay me 39,200 per year salary and 20,800 in LAFH?

You are not getting how it works.
Lafha is a salary benefit not a bonus you don't add it on your salary you take it away from taxable income.

so if your employer pays you 39k, you're taxable income is 39k-lafha
you don't get it paid 39k - tax + lafha.

karl bracken

Something i never considered until now but if you are on a low wage and drop to accommodate for LAFHA you should watch out for the min wage i think its around 29000
You should also think of what it will do to you super contributions so you may be saving money now but loosing it off your super down the road if you intent to head home with it as savings.

massdebater

I've asked my employer about it and they're going to get back to me this week about getting LAFHA so fingers crossed!

With regards it making a difference to the super, I've tried to do some quick calculations to see what my net benefit will be. Getting LAFHA increases my take home pay by approx $6,000 p.a. and reduces my super by approx $1,800 p.a.

I'm not totally sure about this but is the super taxed at 35% if you leave the country and look to take it with you? Can someone confirm this is correct? If so, my 'take home' super would only be reduced by $1,200. The net benefit of getting LAFHA is still fairly obvious (either $4,200 or $4,800 better off depening on the tax on super).

massdebater

Dammit, I wasn't allowed get LAFHA because it would have brought my salary below the salary of an Australian employee in the same role :mad:

mandrake04

The minimum salary for 457 went to $49330 last Friday.

The Temporary Skilled Migration Income Threshold (TSMIT), is currently set at $49 330 per annum, from 1 July 2011. The TSMIT is set at that level to ensure that all Subclass 457 visa holders have sufficient income to independently provide for themselves in Australia.

The TSMIT helps to ensure that Subclass 457 visa holders do not impose undue costs on the Australian community or find themselves in circumstances which may put pressure on them to breach their visa conditions. This is particularly important given these workers do not have access to a range of government support available to Australian citizens and permanent residents.

For nominations lodged and approved before 1 July 2011, the old TSMIT of $47 480 applies. If your sponsor lodged a nomination with the department before 1 July 2011, and that nomination is yet to be decided, the new TSMIT of $49 330 applies.

If your sponsor decides to lodge a new nomination with the department after 1 July 2011, whether that be for yourself, or another overseas skilled worker, the new TSMIT of $49 330 also applies.

Should Subclass 457 visa holder be paid the TSMIT?

The TSMIT has no bearing on what the Subclass 457 visa holder should be paid in the workplace and should not be considered as the applicable market salary rate where the sponsor does not currently employ an equivalent Australian citizen or permanent resident. It is the market salary rate for the nominated occupation, not the nominated worker’s proposed salary, which is compared to the TSMIT. Therefore, it is not possible for a 457 sponsor to inflate a nominated worker's proposed salary in order to meet the TSMIT requirement.

Example: If the market salary rate for an occupation is $39 500 – that is, the market salary rate amount that is paid to an equivalent Australian in the sponsor's workplace – then the nomination is likely to be refused, as the market salary rate is below the TSMIT. Even if the sponsor decided to offer the nominated worker a salary of $49 330, then the nomination would still be refused, as it is the market salary rate that the department compares to TSMIT, not the actual salary proposed.

Mellor

mandrake04 wrote: »

The minimum salary for 457 went to $49330 last Friday.

The sponsorship/nomination/visa fees went up too

jank

Got some bad news. Apparently my company is going to stop offering LAFHA altogether. Have no idea why but they took legal advice and the advice they got was they could be done if they got audited. Sounds like they arent doing it right so, but to cut it all off rather than adjust it?

Might be able to squeeze another 2/3 months out of it.

FreeAnd..

jank wrote: »

Got some bad news. Apparently my company is going to stop offering LAFHA altogether. Have no idea why but they took legal advice and the advice they got was they could be done if they got audited. Sounds like they arent doing it right so, but to cut it all off rather than adjust it?

Might be able to squeeze another 2/3 months out of it.

Thats the thing about Lafha though...its the company that are wholly liable to the ATO should they be paying it incorrectly and not the employee...

to be honest, unless a company has hired someone (temporarily even long term temporary) interstate/internationally with lafha being one of the benefits of employment I cannot see why they would risk offering it to someone that falls into any grey area at all...

mandrake04

You are not far wrong Freeand...

Some employers just don't offer LAFHA because it causes resentment from other staff as its a benefit that ordinary staff don't get.

Have a look at BritishExpats some people being whinging that they lost their LAFHA for this reason.

jank

That is understandable. I will just see what the story is as I think they are stopping it for the entire company. Ill just have to ask for a pay rise