457 + LAFHA, some quick questions, thanks

karl bracken

Hi All

I have read threads and googled this, hopefully someone can give me a bit more info.

Some quick questions:

Is there a min salary you need to be on to qualify for the 457?
Or is this the most likely visa i will be offered?

My company are offering a 2 year contract, is this ok for 457 or does the contract have to be longer to qualify?

for LAFHA, i have only found out about this today!!

I am on a WHV and work in IT for the last 3 months what are the basic criteria to qualify or not qualify for this?
I have no real working expenses and they do not house me
I will be working in head office the whole time and not away from where i live now

Thanks for any info

hussey

karl bracken wrote: »

Hi All
Is there a min salary you need to be on to qualify for the 457?

Yes, it's on immi.gov.au - I'll let you find it

Or is this the most likely visa i will be offered?

My company are offering a 2 year contract, is this ok for 457 or does the contract have to be longer to qualify?

Nope, 2 years is fine

I am on a WHV and work in IT for the last 3 months what are the basic criteria to qualify or not qualify for this?

Main criteria is that you are living away from your normal home to work, and your company agrees to pay it.

You can claim rent and food costs as apart of lafha - again do a search of the forum, only 2 weeks ago there was a detailed post of how to calculate this

karl bracken

Hi hussey thanks for the info i have read all the threads here about both before posting.
the part i was unclear about was what is the definition of living away from home.

I am here since dec 2010 and living and working in sydney so to me this does not seam like living away from home as i live in Sydney or because im Irish am i considered to be living away from home because i live here!?!
i hope this is a little clearer

I also forgot another question about how much does the 457 cost me if i pay or the employer if they pay and what is the norm with Oz companies?

Thanks again

hussey

well that's the thing, since a 457 is a temporary visa, many people can claim 'away from home'

It's one of those loopholes.

457 the price listing is on the website, but if you go through an agency it is around 1.5-2k

karl bracken

cheers that was what i was trying to find out, maybe phrase my questions better lol

Mellor

karl bracken wrote: »

I am here since dec 2010 and living and working in sydney so to me this does not seam like living away from home as i live in Sydney or because im Irish am i considered to be living away from home because i live here!?!
i hope this is a little clearer

you are here on a holiday visa, so you don't live here.
The 457 is a temp visa, and you are still an irish resident

hussey wrote: »

457 the price listing is on the website, but if you go through an agency it is around 1.5-2k

i've seen charges up and above 3k.
Visa agents, grade A ripped off merchants

amybabes

As its coming up to tax returns time, it got me thinking on what this whole LAFHA thing is about.....
We got sponsored last year, myself as the defacto on my bf's 457 visa - is it correct that only one of us can claim LAFHA? I got in there first anyway so we decided that i'd claim it.
I get paid through Geoffrey Nathan so they just signed me up for it and never really explained what it was about.
Basically if I was to try and explain it in my own words.... I barely get taxed. I should be getting taxed about 200-300 a week and instead I pay about 20. But i haven't a clue how GN worked it all out and i don't think its on my payslip.
How they work it out is like they had a dollar fifty or so onto my hourly rate which baffles me completely and from what i could make out - its just that instead of claiming tax back at the end of tge financial year, i have just not been taxed all along (good thing too as id never have survived this year on 200 less a week off my wages)

Can anyone tell me a bit more about it/is it more complex than that??
Feel pretty foolish having signed up for something I knew nothing about - think they charge me a weekly fee to claim LAFHA on my behalf but ive been temping all year so didnt have the one direct employer to ask.

All info and advice appreciated!

hussey

Both of you can claim it as both of you are Living away from home (I assume)

LAFHA is an employer tax benefit, that means your employer gives it to you, rather than you claim it.

How your employer works it out is up to them - best thing is to ask the payroll department

amy you haven't really give us any information to help you out there, your figure of $50 an hour and less $200 a week doesn't really make sense to us.

As I said best to ask them.

also if there is something wrong with lafha then it is also on the company - so they can get into a lot of trouble. I wouldn't be too worried
wait till your end of year tax slip

amybabes

Hey hussey thanks for your reply. Had to look back to where you thought i said $50 an hour (I wish) ha - what I meant is that they add about $1.50 onto my hourly rate (Geoffrey Nathan) so my hourly rate is $28 and then lafha is say $1.50 per hr so end up getting paid $29.50 an hour - this is how Geoffrey Nathan explained it to me.... I'm still lost! Ha hope that explains it a bit better!

karl bracken

From what iv read it seams like its a tax break not a pay increase, correct me if im wrong as im going off things iv read here and there.

for example if you got 1000 a week and you get an allowance of 100 for rent and 100 for food you take 200 from 1000 and then you get taxed on 800.

These are all made up figures but i think thats the gist of it!

karl bracken

what kind of price is the 457 if you do it yourself?

or is it not worth it and i have a higher chance of it been turned down as i dont know the in's and out's of the 'system'!

anyone any idea how much it would cost the company to do it all?

thanks.

hussey

karl bracken wrote: »

what kind of price is the 457 if you do it yourself?

or is it not worth it and i have a higher chance of it been turned down as i dont know the in's and out's of the 'system'!

anyone any idea how much it would cost the company to do it all?

thanks.

Have a look in this thread http://www.boards.ie/vbulletin/showthread.php?p=72541507

hussey

amybabes wrote: »

Hey hussey thanks for your reply. Had to look back to where you thought i said $50 an hour (I wish) ha - what I meant is that they add about $1.50 onto my hourly rate (Geoffrey Nathan) so my hourly rate is $28 and then lafha is say $1.50 per hr so end up getting paid $29.50 an hour - this is how Geoffrey Nathan explained it to me.... I'm still lost! Ha hope that explains it a bit better!

they might explain that it is 'like' an extra $1.50 an hour, but in reality it's a tax break.

e.g. Amy earns $30 p/h (1200 per week) and pays $200 a week rent, and gets a $50 food allowance
so with LAFHA her taxable income is 1200 - 200 - 50 = $950, as opposed to $1200.

again that is just an example - every company is different, you'll need to get the real info from GN

Mellor

I don't get LAHFA, I asked my pay department about it and I think my boss thought that is was an extra cost for them.

My understand is that it isn't.
Can somebody who understands it, or gets it help me this into easy terms for the payroll dept.

Using round figures for ease.
Say my salary is $52,000, so $1,000 a week
After Tax I take home $800, this is without LAFHA

If LAFHA was applied, what would my salary/weekly wages and tax look like. Roughly.
We can ignore super.

Also, I imagine that I can't apply it retrospectively come july.

hussey

okay gonna go with 1k a week, 800 take home = tax = 20%

say your lafha allowance is 250 so your taxable income = 750 x 20% = 150

so 1000 - 150 = $850 take home.

Note I am not 100% sure if lafha is taken before super or after

if taken before
then
1100(pay+super) - 250 = 850
85(super) + 765(taxable income) = 850
765 x 20% = 153
1015(1100 - 85) - 153 = $862 take home

can someone confirm if it is taken before or after super?

jank

Lafha is taken after super.

Also if you are on lafha things like flights home and local transport can also be deducted at the end of the financial year. Lafha is great, unreal how its actually legal but **** it! Im on it and I'm riding the gravy train!
I get an extra 1k a month because of it!:D Going to delay my PR application as I can squeeze every last bit out of it.

Just add the rent (e.g. 500) and food (e.g 75) = 575

If weekly income is 1500 gross then taxable income is 1500 - 575 = 925
It adds up very quickly.

ballooba

LAFHA is a fringe benefit of employment and works off the tax legislation for same. It's the same as having a company car or a free uniform. Certain fringe benefits are tax free up to a certain threshold, all others are heavily taxed.

Because it is an fringe benefit, it is taxable in the hands of the employer, not the employee. If you were to exceed the allowable limits, or to be wrongly paid LAFHA, the employer would pay tax on the excessive amount.

Fringe Benefits are taxed as if they were paid out of after-tax wages and the employee was paying the top rate of tax. I think most employers make you sign a document indemnifying them from any tax liability arising out of the arrangement.

EDIT: From my understanding of FBT legislation the way the employer would be taxed is that you would take the excessive amount, for instance $10,000. Multiply it by the fringe benefit gross up factor (to equate to it being paid out of after tax wages) of 2.0647 and then calculate the tax at the rate of 46.5%. Giving a tax liability for the employer of $9,517. You can see now why employers do not want to stuff this up.

jank wrote: »

Lafha is taken after super.

That sounds very strange. LAFHA is an expense for the employer, not wages. So it sounds odd that there would be super paid on it.

Mellor wrote: »

I don't get LAHFA, I asked my pay department about it and I think my boss thought that is was an extra cost for them.

It is, but if they reduce your salary by the same amount then it is cost neutral.

Feelgood

hussey wrote: »

can someone confirm if it is taken before or after super?

LAFHA is taken after super Hussey. Super is calculated off gross pay and then LAFHA is calculated on the remainder.

So if Im on $100 an hour, initially $9 (9%) comes off for super and then LAFHA is calculated on remaining $91.

Mellor

ballooba wrote: »

That sounds very strange. LAFHA is an expense for the employer, not wages. So it sounds odd that there would be super paid on it.


It is, but if they reduce your salary by the same amount then it is cost neutral.

By cost neutral, do you mean (again using the example above)
They reduce wages to $750/wk + $250 LAFHA

That's kind of what I was suggesting, but the immediate issue there would be the fact that its a condition of my visa that i'm paid the same as similar employees. Going that route might vreate an issue as I'd no longer be on par in terms of salary (even if total benefits are the same)

Tricky one

Feelgood wrote: »

LAFHA is taken after super Hussey. Super is calculated off gross pay and then LAFHA is calculated on the remainder.

So if Im on $100 an hour, initially $9 (9%) comes off for super and then LAFHA is calculated on remaining $91.

The numbers slightly wrong. Super isn't 9% of your wage/salary, its 9% on top, makes a difference.

If your rate is $100, its $109 including super
If its $91 it's $99.19 inc super

Eitherway the LAFHA is on the base rate or the base salary
I just ignore super for the most apart anyway.

Coileach dearg

jank wrote: »

Lafha is taken after super.

Also if you are on lafha things like flights home and local transport can also be deducted at the end of the financial year..

I heard this too but when my employer asked me to show me where this is stated by the immigartion office, I couldn't find this.
Have you ever actually claimed this back yourself? If you have a link to a document that states this it would be deadly?

ballooba

Coileach dearg wrote: »

I heard this too but when my employer asked me to show me where this is stated by the immigartion office, I couldn't find this.
Have you ever actually claimed this back yourself? If you have a link to a document that states this it would be deadly?

It's not immigration law, it's tax law. I've never heard a conclusive answer on this though.

ballooba

Mellor wrote: »

By cost neutral, do you mean (again using the example above)
They reduce wages to $750/wk + $250 LAFHA

Yes. Either they pay you $1000 dollars wages, or they pay you $750 wages plus $250 LAFHA. As long as they do not incur Fringe Benefit Tax, it is cost neutral for them. They may also avoid payroll tax on the LAFHA component.

Mellor wrote: »

That's kind of what I was suggesting, but the immediate issue there would be the fact that its a condition of my visa that i'm paid the same as similar employees. Going that route might vreate an issue as I'd no longer be on par in terms of salary (even if total benefits are the same)

Tricky one

I believe you're right. Technically I would consider this a breach of the 457 visa conditions. I know when I was claiming LAFHA and there were defined minimum salaries for 457, we had to limit our LAFHA to ensure we did not breach the minimum salary.

Feelgood

Mellor wrote: »

The numbers slightly wrong. Super isn't 9% of your wage/salary, its 9% on top, makes a difference.

If your rate is $100, its $109 including super
If its $91 it's $99.19 inc super

Eitherway the LAFHA is on the base rate or the base salary
I just ignore super for the most apart anyway.

You're right LAFHA is off base salary. Thats the way in works in contracting though mellor, your daily or hourly rates will always include super. If I pull a contract on $100 an hour, what that really means is my base salary is $91.

Feelgood

Coileach dearg wrote: »

I heard this too but when my employer asked me to show me where this is stated by the immigartion office, I couldn't find this.
Have you ever actually claimed this back yourself? If you have a link to a document that states this it would be deadly?

You can claim back a percentage of flights and travel, the figure I heard was 30% but I haven't managed to find any solid documentation on this either.

As ballooba said its not an employment, its a tax law. So when you are submitting your tax return at the end of the year you will include this as an expense. You need to keep boarding passes as proof though.

Mellor

Your still not geting my point, I know contracting is always quoted as $100 inc super, my point is the numbers are wrong.

If the total rate is $100 inc. super then the base rate is $91.75 not $91, that's all I was pointing out.

Feelgood

Mellor wrote: »

Your still not geting my point, I know contracting is always quoted as $100 inc super, my point is the numbers are wrong.

If the total rate is $100 inc. super then the base rate is $91.75 not $91, that's all I was pointing out.

Ah yeah I see what you're getting at, $100 = 109% so 0.91 x 9%

Sorry too much beer this week. :pac:

ballooba

Feelgood wrote: »

As ballooba said its not an employment, its a tax law. So when you are submitting your tax return at the end of the year you will include this as an expense. You need to keep boarding passes as proof though.

I don't think it is worth drawing attention to yourself. Keep it vanilla when lodging tax returns, it's not the time to stand out from the crowd;). By claiming deductions for flights you are drawing attention to your LAFHA benefits.

Mellor

ballooba wrote: »

I don't think it is worth drawing attention to yourself. Keep it vanilla when lodging tax returns, it's not the time to stand out from the crowd;). By claiming deductions for flights you are drawing attention to your LAFHA benefits.

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

hussey

Mellor wrote: »

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

There's not, but if you claim a big tax break, they can invesigate you, and you have to produce everything you claim etc - up to 3 years (I think)

but once it is legit, then claim it

mandrake04

hussey wrote: »

There's not, but if you claim a big tax break, they can invesigate you, and you have to produce everything you claim etc - up to 3 years (I think)

but once it is legit, then claim it

Think they can go back up to 7 years.

Best to fly under the radar if you like to be creative with your tax return.

Mellor

Well yeah, if you are being a bit excitable with claims, but the other posts simply said drawing attention to LAFHA. I thought I might of been missing something,

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.