In November 2011, the government announced reforms to the Fringe Benefits Tax (FBT) treatment of Living Away From Home Allowance (LAFHA) benefits to commence on 1 July 2012.
LAFHA is commonly used by employers to compensate employees for additional costs incurred when they are required to live and work away from their usual place of residence. This can include accommodation and food costs.
Under the current tax system, the provision of LAFHA can increase the take-home pay of employees, including subclass 457 visa holders. The Australian Government has concerns that LAFHA concessions are being exploited by some employers.
The Department of Immigration and Citizenship has received a number of enquiries about how these changes will impact subclass 457 visa holders.
From the department’s perspective, if an employer committed to pay a subclass 457 visa holder LAFHA, it is expected this payment will continue. The only difference will be how the Australian Taxation Office (ATO) views such payments.
For example, if a sponsor committed to pay a subclass 457 visa holder a base salary of $75 000 plus a $10 000 LAFHA, the department expects the employee will continue to be paid a total of $85 000.
If a sponsor is unable to pay the amount equivalent to the LAFHA they may be failing their sponsorship obligations.
A sponsor may decide to lodge a new nomination application to amend the salary offered to the 457 visa holder.
However, the sponsor must demonstrate that the new salary continues to be the market salary rate.
Click here for further information on the Australian Tax Office’s LAFHA requirements.