Does your salary include LAFHA?
Some lenders will not know how to assess your income with LAFHA benefits.
Read on to find out how you can be ensured to receive a home loan that takes into account your full income.
Will the banks accept my LAFHA?
The credit assessors for many lenders do not understand how LAFHA actually works, and so they assess the deductions from your salary without taking the tax free income into account.
In addition to this they assume that you may return home, and so lose your LAFHA benefits.
The assessable income that they end up using in their serviceability calculator which works out how much you can borrow, is simply your taxable income which is well below your actual income.
How to get approved for a mortgage?
Each lender has their own policies for the way that they assess LAFHA and expenses paid pre-tax from your payslip.
- Permanent LAFHA: Some of our lenders will assess your taxable income and then will separately include your LAFHA as tax free income, allowing you to borrow more.
- Temporary LAFHA: For cases where LAFHA is temporary, the assessment will be based on your unique set of conditions.
If you have a good income and your LAFHA benefits are permanent and ongoing, you may be entitled to borrow between 90-95% of the purchase price!
We know which banks will take your LAFHA payments into account! Enquire online or call us on 1300 889 743 to talk to a qualified mortgage broker.
What is LAFHA?
Living Away From Home Allowance (LAFHA) is a government benefit that is offered to all persons who are living away from home.
The Australian Taxation Office (ATO) considers that the allowance is to pay for expenses incurred by you as an employee while being required to live away from your normal home. For taxation purposes it is considered to be a fringe benefit and may be subject to Fringe Benefits Tax (FBT).
Who receives LAFHA?
Your salary will include the Living Away From Home Allowance (LAFHA) if you are working away from your normal place of residence.
LAFHA recipients include:
- Australian citizens living overseas to work
- Australian citizens living in Australia who move interstate for work
- Overseas employees holding a 457 visa or a TSS visa who relocate to Australia to work
The LAFHA benefit generally comes as part of a packaged salary for those on the temporary working visa who move to Australia. LAFHA is 100% tax free making it an attractive incentive.
It is important to note that 457 business visa holders will no longer be receiving LAFHA benefits as of July 2012.
Which industries receive LAFHA?
In Australia, the most common industries and staff that receive LAFHA are:
- Construction workers
- Mining industry employees
- Airline employees
- Tour guides and hospitality staff
- Trainers and trainees
- Foreign citizens who have moved to Australia for work
The ATO has specific guidelines and examples for different industries to demonstrate when or if LAFHA would be applicable.
How do I claim LAFHA?
Australian citizens, permanent residents and non-residents who own homes that they use for their residence are also eligible for the tax-free LAFHA benefits when they have to move away from their homes for work purposes.
Most of the time the employer’s HR department will offer LAFHA in the salary package as an incentive to move workers for work purposes.
The majority of overseas workers in Australia, holding 457 visas, claimed their LAFHA through recruitment agencies and other employment services.
Two of the largest agencies that deal with LAFHA claims are Freespirit and Geoffrey Nathan. These agencies are well-known for providing payroll services for overseas employees working in Australia.
Who is eligible for LAFHA?
LAFHA will be evaluated by the tax office on a number of factors like distance of move, type of occupation, tax and or visa status, intent to return to original place of residence, family situation and length of relocation.
We can assist you with your home loan by making sure that the lenders can evaluate your LAFHA payments! Enquire online or call us on 1300 889 743 to talk to a qualified mortgage broker.
How is LAFHA calculated?
LAFHA is distributed in accordance with the period of time served away from home. If you are spending less than six months away from home, you will be allowed to claim more for reasonable accommodation costs.
Food costs and other costs are the same irrespective of the time spent away from home.
Note: there may also be deductions for statutory allowances.
Does LAFHA cover your home loan?
There are very specific guidelines that dictate LAFHA. LAFHA is specifically defined as compensation by the employer to the employee for any additional expenses and inconvenience incurred by the employee as a result of living away from the usual place of residence for employment-related duties.
As it stands, there is no way that LAFHA benefits can pay for a home loan taken out by the employee in his / her job-related relocation.
How can we help you with your loan application?
We are mortgage brokers with credit expertise who know how to get your LAFHA loans approved! We regularly help people with unusual employment situations who have LAFHA as part of their salary obtain home loans.
Call us on 1300 889 743 or enquire online and let us help you with your home loan!