Salary Packaging LAFHA:

What You Can Claim and How to Qualify

temporarily relocating for work?

You may be eligible to reduce your taxable income through salary sacrifice for Living Away From Home Allowance (LAFHA). This arrangement can offer significant tax savings, provided you meet the eligibility criteria and follow the substantiation rules set by the Australian Taxation Office (ATO).

What Is LAFHA?

Living Away From Home Allowance (LAFHA) is a fringe benefit paid to employees or contractors who are required to live away from their usual residence for work. It compensates for additional non-deductible expenses such as accommodation, food, and incidentals incurred during the temporary relocation.

Unlike a travel allowance, which is assessable income, LAFHA can be exempt from Fringe Benefits Tax (FBT) when specific conditions are met.

Key Benefits of LAFHA

• Reduces taxable income through salary packaging
• Offers FBT exemptions for eligible accommodation and food components
• Covers expenses for accompanying spouses and children

Who Is Eligible?

LAFHA is available to employees who temporarily relocate for work and meet the ATO’s eligibility criteria. This includes permanent staff, fixed-term employees, and contractors who are directly employed by the organisation.

To qualify, the employee must:

• Maintain a home in Australia that they are living away from
• Relocate temporarily for work, with the intention to return
• Be away for at least 21 days
• Limit the claim to 12 months at a single location
• Provide the required declarations before the employer lodges their FBT return

Important Note for Labour-Hire Workers

Employees engaged under labour-hire arrangements are not eligible for the FBT exemption on LAFHA. In these cases, the allowance is treated as ordinary income, not a fringe benefit. This means:

• It is subject to PAYG withholding
• It cannot be salary packaged for tax savings
• The ATO does not consider the labour-hire firm to be the employer for LAFHA purposes

If you are unsure whether your arrangement qualifies, Whizdom’s Eligibility Checklist can help clarify your status and guide you through the next steps.

What Can Be Claimed?

Accommodation Component

• Covers rent or housing costs for you and eligible family members. The amount must be reasonable and substantiated with receipts or declarations.

Food Component

• The ATO publishes annual reasonable food expense thresholds. If your expenses fall below these limits, no substantiation is required. If they exceed the limits, you must retain receipts.

Relocation Expenses

FBT-exempt relocation costs may include:

• Packing and unpacking
• Storage and insurance
• Pet transport

Temporary Accommodation

You may claim temporary housing costs:

• Up to 21 days at your permanent location if your residence is unavailable
• Up to four weeks at the new location, starting seven days before your employment begins

Substantiating Your Claim

To access concessional FBT treatment, you must:

• Provide receipts or a declaration confirming you have retained them
• Submit the appropriate LAFHA declaration forms (e.g. for accommodation, food, or maintaining an Australian home)

How to Get Started

Whizdom offers an Eligibility Checklist to help determine if you qualify for LAFHA. Once completed, we will guide you through the next steps to set up your claim in payroll.

For more detailed information, visit the ATO’s official page on Living Away From Home Allowance or reach out to our finance team for a confidential chat.