LAFHA Allowance clarified

Jun 22, 2010

Department of Immigration and Citizenship (DIAC) relating to Living Away From Home reimbursement payments.

DIAC advise the Living Away From Home reimbursements are to be treated as 'guaranteed earnings' under 457 visa obligations. 

Maria Jockel, an immigration law expert from Russell Kennedy Lawyers described DIAC's confirmation as "welcome clarity for employers and good news for employees."

This clarification comes amid current mass confusion regarding how Living Away From Home allowances and reimbursements, are treated by DIAC and whether they are to be included in the 'guaranteed earnings' that must be stipulated by employers of 457 visa holders.

Previously, many employers have treated reimbursements, of rent in particular, as not being part of 'guaranteed earnings' for the purposes 457 visa obligations. . 

Kumar Krishnasamy of PKF's International Employment Taxation practice, said, "This  confirmation from DIAC provides much needed clarity for employers, as well as reassurance for many that they would not need to change from a 'reimbursement' to 'allowance' model for Living Away From Home benefits in order to meet their full obligations of the 457 visa."

Ms Jockel said, "The concepts of 'earnings', 'reimbursements' and 'guaranteed earnings' must be properly understood.  A failure to pay the correct amount to a 457 visa holder could be in breach of 457 visa obligations, which could result in fines to the employer of up to $33,000 per breach.

"Employees working on 457 visas and currently receiving Living Away From Home reimbursements can finally be certain that their full income and benefits should be included in the 'guaranteed earnings' stipulated by their employer," she said.

Mr Krishnasamy did, however, warn that employers need to manage their LAFH agreements carefully. "Employers need to ensure they are treating those payments properly under tax law as well as visa and employment law," he said.

Source: PKF

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