Hi

Please help!

I am moving to Sydney in September on a 457 visa with my current UK employer.

I have been offered a salary of $95,000 with super to be taken off that, leaving me $87,000 per year, which is roughly $7200 per month (before tax and LAFHA).

I have been told i can claim my rent via LAFHA plus $1500 per month for food.

Therefore, if I was to spend $4000 in rent every month plus my $1500 in my food allowence, this makes a total of $5500.

Do I now subtract the $5500 from the $7200, leaving $1700 to be taxed????

Assumining I pay 20% tax on this $1700, am I left with $1360...???

Do i now add the $5500 back to the $1360 which makes a total of $6860 per month. I then pay my rent of 4000/month, leaving $2860 to spend..?????

Have i got this right or completely misunderstood how to calculate the LAFHA...???

It appears that I am better off paying more in rent, as i get that amount tax free in my salary???? Is that right?

All I want to know is how much money will i be left with every month???!!! Can anyone help me please!

Richard

You understanding is correct - at least that's how it was done when I got it !

The other thing you will have to work out is whether you really want to spend $4000 per month on rent - at that amount I assume you are planning on living somewhere very upmarket or in the city ?

You need to do some calcs to determine whether the amount of money you are planning to spend in rent outweighs the amount of tax you will be saving by paying a high rent.

For example if you paid $2000 pcm in rent (which would get you a really nice place in a lot of suburbs) then you would pay more in tax but be left with $4470 per month to spend/save ! Personally I would rather have the cash to enjoy (or save) than give it to a landlord - but that's me ! My cals above dont include medicare levy/surcharge as I would need to know if you are single or a couple to determine if you would require to pay the surcharge - but assume you would definitely pay 1.5% of you income - I dont think that it is reduced by LAFHA - can't remember for sure ! The surcharge is an additional 1% once you exceed a certain threshold - but this depends on your family income and if you have private medical insurance or not.

Also who told you that you could claim $1500 per month for food ?? Are you single, couple or family ? This is the component that your employer will have to pay tax on so I am surprised that they are letting you claim so much. When I got LAFHA we got something like $600 per month for a couple. I was also under the impression that there were ATO limits on this also - but I may be wrong with that !

For your info the first $6000 of income is taxed at 0%. From 1 July 2007 the next $24000 is taxed at 15%. The next $45000 is taxed at 30% - don't know where you got 20% from. You won't go into the following tax bracket.

So the simple answer to your question is no you are not better off paying more in rent as all this gets you is a nicer place to live in. If that is the most important thing to you then go ahead - however if you want more cash in your pocket then pay less in rent ! One thing I have not considered however is where you would be working and transport costs etc. It could be argued that you could pay $4000 rent in the city and then walk to work. Alternatively you could live further out, pay $2000 in rent then $1500 for public transport leaving yourself $500 better off - depends on where you are going to work ??

Send me a PM if you want to chat further - I must point out that I am not a financial expert - all my comments are based on personal experience of LAFHA and life here in Sydney.

Incidentally $95k is an excellent salary - well above what most people earn here in Sydney !

Colin...i owe you a beer! Thank you for your help.

I might need to check the food allowence bit, but I am sure they said ic ould claim $1500.

I am single and will be taking out private medical insurance. How does this therefore effect the medicare levy you mentioned? Im not too sure what it is you mean by medicare? Do you have to take out insurance AND pay a percentge to the state?

Finally, do i pay tax on the remainder of my salary (ie after LAFHA) - or on the total amount? How do I work out what rate it will be?

Like you mentioned, if i pay less in rent i will have less of my salary tax-free, but will be better off with more cash in my back pocket.

Im aiming to live in surry hills/paddington area...so I can get to work in the city and also to my other office in Parrammatta. Do you think $4000/month is excessive? I want an unfurnished apt possibly with 2 beds and with swimming pool etc. I have been recommended to look on realestate.com.au ...are there any more brilliant websites?

Colin - once again, thank you for you help. Ive never moved abroad to live before, so its just a mine field to start with! That said, I am so excited!

THANKS AGAIN!

Richard

Hi Richard,

I might have to take you up on that beer !

Where in Manchester do you live ? I used to work at BAE Systems Woodford but lived in Congleton.

I will try and answer your questions.

www.realestate.com.au is a good site as is www.domain.com.au

Had a quick look and I would say that you could get somewhere really nice for $600 per week (rents here are quoted as weekly) = $2600 pcm. As you say you would not have to worry about travelling costs to work then.

Private Medical Insurance for 457 holders is difficult to find and is also very expensive.

Medicare is the Oz equivalent to the NHS. However it is administered different and it depends on what GP you go to as to how you 'pay' for your treatment. Some GP's will 'bulk bill' for your treatment which means you pay nothing for your treatment. However others will make you pay for your treatment and then you have to take your receipt to a Medicare office and get a refund in cash - however there is a thing called the schedule fee which means that if the doctor has charged more than the standard medicare allowed amount then you will be out of pocket by the difference between the two. And yes you do have to pay the medicare levy even if you have medical insurance. Personally we dont have medical insurance - I am quite happy to make use of the medicare system. We are now Permanent Residents but did not have insurance when we had a 457 visa either. Private insurance just gets you seen quicker and in a nicer hospital (just like in the UK). I would rather pay the surcharge of $1000 per year (it kicks in for couples at $100k)than pay medical insurance of $2500 per year ! But thats just me !

As a UK citizen you are entitled to acess to a Medicare Reciprocal Health Care card. Basically there is a reciprocal agreement between the UK and Oz as they both have a national health system as such. Under this agreement you would be entitled to free treatment for any 'necessary treatment' including seeing a GP. (The bulk billing I mentioned above still applies though). So if you get ill you will get free treatment in a public hospital like you would in the UK.

The Medicare system is paid for by a 1.5% contribution from the taxpayers taxable income. In addition to this if your taxable income is over $50k for a single person then you have to pay an additional 1% medicare levy surcharge. However if you have medical insurance then you don't have to pay the surcharge.

In your case your taxable income will be the amount that you pay tax on.

So lets assume the following:-

$87,000 per year income
less $33,800 per annum rent LAFHA ($650 per week)
=$53,200
less $18,000 per annum food LAFHA ($1500 per month)
=$35,200 taxable income

Medicare levy =1.5% of $35,200 = $528

$35200
$ 6000 = 0% tax rate
------
$29200
$24000 = 15% tax rate is paid on income between $6001 and $30000 (post July 2007) ie on $24,000
------
$ 5200

The next tax rate is 30% which kicks in at income over $30000 up to $75000, so in your case the remaing $5200 will be taxed at 30%.

So your tax bill would be:-

$ 528 Medicare Levy
$3600 15% tax rate
$1560 30% tax rate
-----
$5688 Total tax and medicare.

So we subtract this from $87000 (or from $35,200 and then add back on the 2 LAFHA amounts = same result), and we get a take home annual salary of $81312 = $6776 per month. Subtracting your rent of $2820 per month leaves you with $3956 per month to spend ! Wish I had that !

All tax rates and medicare info you will find on the individuals section of the Australian Tax Office(ATO) website http://www.ato.gov.au/individuals/default.asp

$150 per week will feed you very comfortably.
$150 per month will get you all cable tv channels and internet access with as much download as you want.
$75 per month will pay for your utility bills except telephone.
No council tax or rates to pay - thats included in your rent.

You will love living in Sydney - it's a great place especially if you are into night life. We originally came for 18 months but after 4 months here we decided to go for Permanent Residency which we got last year.

When you get here it will be just starting to warm up again - it's a bit cold and wet here at the moment. Feel free to email me on colinhanna@hotmail.com if you want to chat further !

the food component of LAFHA is a maximum amount based on family size - and its no where near 1500 dollars per month, more like $450 for a 2 child family

Since writing the above blurb I have discovered the details on the ATO website here

http://www.ato.gov.au/businesses/content.asp?doc=/conte...6140.htm&page=13&H13

This indicates that a reasonable food component for a 2 child family is $344 per WEEK which is $1490 per MONTH - so the original poster was quite correct !

What makes you think you can only get $450 per month ? Personal experience ?

my employer informed me that i could claim LAFHA which is identified into two parts:
food
apartment lease

regarding food section, for a couple with 1 child the LAFHA limit is $344 but then my employer subtracted $42 per adult and about $12 for one child....so where did my employer get the subtracted values?

also, can i include transport cost to my LAFHA?

Transport can not be included as part of LAFHA.

As for the employer deducting the money from the food allowance, I think that the ATO amount is a maximum permitted - it is up to the employer to decide how much they give you.

The food component attracts fringe benefit tax so this may be why they have done it.

Hi Colin,

Your explanation was great. I just had one doubt - I have known that the minimum income (base salary) shouldnt be below the specified levels for 457 Visa and that it shouldnt be below even when the employer gives allowance (in this case LAFHA). So, while you explain Richard about the amount of LAFHA he can claim, did u consider if his base salary (after LAFHA) is below the minimum salary level or not? According to your calculation, his base income becomes 35,200 AUD after LAFHA, which I suppose would be below the minimum salary level. Or, the salary calculation goes this way -> 35,200 AUD + LAFHA = Base salary?

Look forward to your reply.

Regards
Vicky

This message has been edited. Last edited by: vickyt82,

You are quite right - I obviously didn't mention the minimum salary level in the above thread - I have mentioned it in others though !

The bottom line to LAFHA is that the underlying requirement is that you must declare an income to the ATO that is greater than the minimum salary level for your occupation group. This salary level does vary from occupation to occupation.

So I guess the limits on how much LAFHA you receive is your gross earnings less the minimum salary amount.

It should be up to the employer to ensure that you meet the requirements of your visa.

I hope this clarifies things ?

So where are you moving to ??

Hi Colin,
I have been reading a number of threads and your name pops up a lot. You seem a pretty genuine bloke and as I’ve just received the good news of a sponsored 457 visa I have found your comments and advice very useful. Thanks Quinny

Hiya,
I am new to this site... and the subject of LAFHA.

I am applying for a 457 visa and wondered whether everyone is automatically entited to LAFHA and how it is awarded. Does the employer have to give permission to claim this or is reserved for certain jobs?
Could anyone fill me in or point out where I can start looking for info?


please help!!

Liz

If you search for 'LAFHA' on this site you will find many posts on this subject.

It is not reserved for certain jobs and the employer just needs how to adminsister it and keep on the right side of the ATO.

The employer also DOESN'T have to give it to you either, but if they do it must be negotiated as part of your contract before you come to Oz.

Colin you are quite right to say that for 457 temporary residents LAFHA should be negotiated before you arrive in OZ but maybe we should emphasis that LAFHA is part of the overall tax system in Oz and can apply to any tax resident.

If you are here say as a permanent resident and employed and you employer asks you to to move to another State for a year and to then move back then it would be reasonable to ask your employer to provide LAFHA.

It can be utilised by any tax resident who will have to live away from home as part of their job as long as the employer is willing to negotiate.

Finally I would say that I doubt if any temporary tax resident who is already in OZ can expect to change job and negotiate LAFHA.

I hope this is helpful to any permanent residents who are reading these forums.

Hi,
Please advise further below matters.

I'm been transfered to my current Oz employer to Brisbane last 01/07/2008.I'm still confuse with my status now as I've 457 visa for 4 years duration. Gross salary I have $59,000 per annum.

Am I a Temporary resident ? As I have intention to apply Permanent Residency. But I didnt submitted any form or documents to DIAC yet. With this condition am I still eligible to claim LAFHA ? I heard from my colleague I'm not eligible to do so.
Depress...

Beside I would like to further my degree study in local Uni's or colleges for part time.
Most Uni's admin told that I'm have to pay for international course fees which cost me sky high with 457 visa. Is that true ?

Well if yes then I try to seek for bank advice to get a personel loan. But most bank not entertain a 457 visa holder if applying for this. My goodness.. I'm really felt constrained... and more depressing.

Health Insurance, understand that Employer will given a standard package. I'm not sure if any medical fees or phamacy fees I have paid can be claim from employer ? As Last 2 weeks ago, almost my whole body grow with rashes. I've a day off and seek for public clinic doctor advice and bought some cream and tablets from phamacy which total cost $150.

If I'm can't claim from employer, which Health Insurance I'm eligible to have and affordable for 457 holder. Thank god I'm healthy now.. but health can't predict forever in good condition.
Felt unsecured with current situation.

Please advise and give some thought with your thoughtful mind.

cheers,
Livia

Hi there - I will try to answer some of your questions:-

"Am I a Temporary resident ? As I have intention to apply Permanent Residency. But I didnt submitted any form or documents to DIAC yet. With this condition am I still eligible to claim LAFHA ? I heard from my colleague I'm not eligible to do so.
Depress..."

YES - you most definitely are a temporary resident as you currently hold a 457 visa. You can only claim LAFHA if it was negotiated as part of your contract of employment. It has to be adminsitered by your employer - you cannot claim it back through your tax return.

"Beside I would like to further my degree study in local Uni's or colleges for part time.
Most Uni's admin told that I'm have to pay for international course fees which cost me sky high with 457 visa. Is that true ?"

YES - as a 457 visa holder you will be treated as an international student amd charged accordingly.

"Well if yes then I try to seek for bank advice to get a personel loan. But most bank not entertain a 457 visa holder if applying for this. My goodness.. I'm really felt constrained... and more depressing."

Some banks may give you a loan but probably only for the duration of your visa.

"Health Insurance, understand that Employer will given a standard package. I'm not sure if any medical fees or phamacy fees I have paid can be claim from employer ? As Last 2 weeks ago, almost my whole body grow with rashes. I've a day off and seek for public clinic doctor advice and bought some cream and tablets from phamacy which total cost $150."

Did your employer arrange health insurance for you ?? If they didn't then they probably stipulated in your contract of employment that it was your responsibility to arrange health insurance. What country are you from ? This is important as you may be eligible for Reciprocal Health Care cover from Medicare.

"If I'm can't claim from employer, which Health Insurance I'm eligible to have and affordable for 457 holder. Thank god I'm healthy now.. but health can't predict forever in good condition.
Felt unsecured with current situation. "

Health insurance for 457 visa holders is VERY expensive. You would be best to shop around the various companies and see who is offering the best deal.

Colin, you seem to be the authority on the amtter of the LAFHA. Would welcome some advice!
I arrived from the UK on a 457 in December 2008. My employer doesn't really understand LAFHA and is hesitant about it if it costs him any money. He currently doesn't pay FBT so we are trying to work out a way for me to still benefit from LAFHA without him needing to fork out for FBT.

Would I be better off paying FBT to ensure I get my fully entitled LAFHA or should we just put in for accommodation which doesn't fall under FBT?

Do you have any other tips?

Thanks so much.

Hmm - your employers accountant should be able to sort out the FBT issue - however they may not have come across LAFHA before !

I am not sure if the payment of FBT is something that he could write-off somewhere else - you would have to ask an accountant that question !

It depends how much effort your employer is willing to go to to help you - I am sure you aware that they are not obliged to give you LAFHA at all.

The accomodation aspect of it would obviously be the one to get so you could cut your losses and just get that then, as you say, your employer shouldn't need to worry about FBT.

Nothing much else I can suggest !

Please note that you cannot pay FBT - only employers pay this tax.

Your employer would not be required to pay any FBT if your LAFHA was based on a reasonable rent figure for the area in which you live and the food allowance was within the guidelines set down by the ATO.

Colin has however missed the most important point that you have been in employment on a 457 since December 2008. This means that you are not now entitled to LAFHA as it has to be negotiated and agreed prior to taking up employment.

Whoops - very true - that will teach me to post something just after I got out of bed !