Subclass 457 visa holders can gain some key tax benefits during their stay in Australia from a relatively recent government regulation change, which means they are not taxed for any overseas earnings as well as their LAFHA benefits (Living Away from Home Allowance). This article discusses these two important elements that every 457 visa holder should know.
The Living Away From Home Allowance (LAFHA) Is No Longer applicable to 457 Visa Holders
A benefit that 457 visa holders who work in Australia used to be eligible for was the “living away from home allowance” from their employer.
This allowance compensates workers who have moved temporarily from their usual residence for work purposes. In simple terms, if you have moved to a location (such as Sydney) from overseas (such as the UK) you could meet the criteria and be assisted with food and accommodation expenses.
The ATO (Australian Tax Office) had set allowance of $191 per week for food plus a “reasonable” rental allowance. It was unclear what is “reasonable” as the ATO does not provide a range, but does state that the rental standard should be the same as if the 457 visa holder was living in his/her home country. So if you were living in a 3 bedroom, 2 bathroom house in the USA then you could reasonably rent a house of the same size and make a claim for that amount. This is no longer applicable based on recent tax rules. A 457 Visa holder can only receive this now if you move to Australia and then need to move outside of Australia again for work, but still maintain their Australian residence at all times. It is strongly advised that you seek tax information advice from a registered accountant first before making this claim.
If an employer pays the amount that is set by the ATO guidelines, the LAFHA will not be taxed when transferred from the employer to the employee with no FTB implications for the employer either. So essentially, this means that you get paid an non-taxed amount regularly with no penalty for the business.
There are other LAFHA benefits including travel, hotel expenses, storage and even school fees in some circumstances. Once again, currently 457 visa holders are not automatically eligible for this LAFHA, so always speak to your accountant first before claiming this from an employer.
Recent change in Tax law that can benefit 457 visa holders
In recent years, the ATO made a ruling that 457 visa holders would no longer get taxed on investment income earned overseas. This means that 457 visa holders who have been renting their old home while working in Australia won’t need to pay tax on that income unlike before.
The catch is that you may still need to claim the investment in your home country, but those that have moved abroad know how difficult it can be to correctly file a tax return with both domestic and international earnings!
Talk To A Local Accountant
The best advice that I can provide is to talk to an Australian accountant who knows the ruling for expats such as LAFHA well, and can ensure that you meet your tax requirements during your stay in Australia. Don’t forget about other ways you could also save like selecting the best value 457 visa health insurance!