Guest Ryan T. Lion

Claiming LAFHA if selling UK home???

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    Guest Ryan T. Lion

    Hi all

     

    "I've got this friend..." no, really I have. :D

     

    He is hoping to come out to Oz (but not Adelaide) and whilst I intend to rent out my UK home, my buddy is planning on selling his.

     

    The industry in which we both work involves large companies that routinely factor in the LAFHA allowance to sweeten job offers etc......

     

    There are horror stories circulating that should you sell your permanent UK residence, you can no longer claim LAFHA. Which kind of seems reasonable......... I mean, it's payable if you intend to return, right? Can't return to a house you've sold!

     

    Anyone here have any experience of this? LAFHA is a decent chunk of our Oz salaries - can you still claim it if you've sold your UK house?

     

    Any help appreciated. It really isn't me. It's my friend.

     

    I've received my LAFHA forms, and I have only 2 options for my 'usual place of residence' which are 'house which I own' OR 'house I have rented for xx years'

     

    Clearly, my friend would be neither. Bit scary.

     

    I'm posting kinda on his behalf because whilst he isn't destined for Adelaide, I told him what a genuinely helpful lot the PIA gang is. :notworthy:

     

    Hope you can help!

     

    RTL

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    Hi all

     

    "I've got this friend..." no, really I have. :D

     

    He is hoping to come out to Oz (but not Adelaide) and whilst I intend to rent out my UK home, my buddy is planning on selling his.

     

    The industry in which we both work involves large companies that routinely factor in the LAFHA allowance to sweeten job offers etc......

     

    There are horror stories circulating that should you sell your permanent UK residence, you can no longer claim LAFHA. Which kind of seems reasonable......... I mean, it's payable if you intend to return, right? Can't return to a house you've sold!

     

    Anyone here have any experience of this? LAFHA is a decent chunk of our Oz salaries - can you still claim it if you've sold your UK house?

     

    Any help appreciated. It really isn't me. It's my friend.

     

    I've received my LAFHA forms, and I have only 2 options for my 'usual place of residence' which are 'house which I own' OR 'house I have rented for xx years'

     

    Clearly, my friend would be neither. Bit scary.

     

    I'm posting kinda on his behalf because whilst he isn't destined for Adelaide, I told him what a genuinely helpful lot the PIA gang is. :notworthy:

     

    Hope you can help!

     

    RTL

     

    Hi RTL

     

    I don't know the answer to your question - sorry about that.

     

    However I decided to reply to your post because I suspect that the ATO might well be having some sort of a review of their policies about LAFHA. Please click on the link below:

     

    http://www.gomatilda.com/news/article.cfm?articleid=702

     

    I'd recommend that both you and your friend should contact Alan Collett of Go Matilda to get his "take" about where the Aussie Govt is heading for with LAFHA. Alan is a chartered accountant in E&W and also in Australia. He is also first rate at what he does.

     

    Cheers

     

    Gill

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    Guest Ryan T. Lion
    Hi RTL

     

    I don't know the answer to your question - sorry about that.

     

    However I decided to reply to your post because I suspect that the ATO might well be having some sort of a review of their policies about LAFHA. Please click on the link below:

     

    http://www.gomatilda.com/news/article.cfm?articleid=702

     

    I'd recommend that both you and your friend should contact Alan Collett of Go Matilda to get his "take" about where the Aussie Govt is heading for with LAFHA. Alan is a chartered accountant in E&W and also in Australia. He is also first rate at what he does.

     

    Cheers

     

    Gill

     

    Hi - thanks for replying. I've since set someone in the business looking into it for me.

     

    BTW, I followed your link and it seems to suggest that the ATO were planning to 'clamp down' on some allowances and get proof etc. I'm all for that. The companies whom are looking to employ us are big multinationals - they factor in LAFHA to their offers - so eligibility is a biggie!

     

    Thanks again

     

    RTL

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    Guest Ian Lindgren

    Hi Ryan,

     

    I know it is a little late to post an answer to your question, but maybe it can assist someone else. Let me be quite clear in the issue...the ATO state in their primary LAFHA reference, MT 2030, that you will not lose LAFHA if you sell your house in the UK. In fact you do not need to continue to rent a property and sub-lease it. And furthermore, there is not requirement to have owned a property or leased a property in the first place. It's all clearly laid out, but the issue is finding that information and interpreting it properly...that is the difficulty, and that is why so many inconsistent and inaccurate rumours have spread to you and your friend.

     

    Let's look at the references, they are:

     

    The ATO's FBT minutes, November 2008 at http://www.ato.gov.au/taxprofessionals/content.aspx?menuid=0&doc=/content/00178371.htm&page=17&H17 ,and the reader must put this in context with

     

    MT 2030 at http://law.ato.gov.au/atolaw/view.htm?docid=MTR/MT2030/NAT/ATO/00001 because this is the document that the ATO always falls back on as it has in these FBT Minutes. I have bolded and underlined the key words, specifically:

     

    Tax Office response

     

    The Tax Office acknowledged the Tribunal's decision in The Compass Group (Vic) Pty Ltd as Trustee for White Roche and Associates Hybrid Trust v FC of T [2008] AATA was based on the facts before it.

     

    The Tax Office indicated that Miscellaneous Taxation Ruling MT 2030: Fringe benefits tax: living-away-from-home allowance benefits, provides the Tax Office views and broad guidance in relation to the interpretation and application of the FBTAA to living-away-from home allowance benefits.

     

    As noted in the NIA submission, MT 2030 provides guidance in relation to the meaning of the phrase 'usual place of residence'. In particular, as is relevant to the query raised in the submission, the view expressed in MT 2030 is that it may not always be the case that an employee can make a declaration on the basis that they have an actual residence to return to; they may have an intention to return to the same city or district to live upon resuming residence in the home country which will suffice. The relevant extracts from MT 2030 are as follows:

     

    29. Another question that has been raised is the extent to which it is necessary, before an employer may treat an allowance as a living-away-from-home allowance, to establish whether the employee does in fact have a residence at a place other than the locality at which the employee is temporarily residing.

     

    30. The Act does not express a requirement, for a person to qualify as having a 'usual place of residence', that it be established that he or she actually have such a residence. If the employee is one of a class of employees, (for example, diplomats posted overseas, foreign experts employed in Australia, construction workers at a remote construction site, and so on) who could reasonably be expected by the employer to satisfy the tests set out in paragraphs 11-25 of living away from the usual place of residence, and the allowance is paid to compensate for additional costs (as explained in paragraph 28) that the employees could be expected to incur through having to live away from home, the allowance will constitute a living-away-from-home allowance in terms of section 30.

     

    31. As mentioned in paragraph 9, however, it is necessary in order that the taxable value of a living-away-from-home allowance may be reduced by the exempt accommodation component and the exempt food component, that the employer obtain from the employee a declaration, in an approved form, as to the particulars of the employee's usual place of residence and actual place of residence for the part of the fringe benefits tax year during which the living-away-from-home allowance was paid.

     

    33. While an employee eligible to make such a declaration would ordinarily be able to indicate that residential premises are being kept at the place where he or she usually resides, that may not always be the case. For example, for financial reasons an expatriate coming to Australia to work for a limited but substantial period may have terminated the lease on a house, flat or apartment where he or she lived in the home country intending to release it or lease another home on return. Similarly, a home could have been sold with the intention of acquiring another. Provided the tests set out in paragraphs 11-25 are satisfied and the expatriate intends to return to the same city or district to live upon resuming residence in the home country, he or she would be entitled to declare that his or her usual place of residence is that city or district.

     

    I hope that assists.

     

    Regards,

     

    Ian

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    Guest Ryan T. Lion

    Hi Ian

     

    That's actually very helpful and I'm sure many migrants reading this thread whom are yet to make the trip will find it very useful.

     

    I am actually in Australia now - and in the process of lodging my LAFHA application/declaration with my employer. They are saying I cannot qualify for the accommodation part of my LAFHA until I secure a long term rental here in Oz and can provide a copy of the lease agreement. I understand the accommodation element of LAFHA depends upon actual cost of renting/living here - but is this right? I would have thought you qualify for LAFHA as soon as you arrive or at least begin employment.

     

    I go into a long term rental on 5th September - I've been working for the company since the 15th Aug but been in various temporary accommodation since the 3rd Aug.

     

    Should the LAFHA kick in from when I started earning (hence paying tax) - i.e. 15th Aug?

     

    Hope you can help

     

    Thanks again

     

    Ryan

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    Guest Ian Lindgren
    Hi Ian

     

    That's actually very helpful and I'm sure many migrants reading this thread whom are yet to make the trip will find it very useful.

     

    I am actually in Australia now - and in the process of lodging my LAFHA application/declaration with my employer. They are saying I cannot qualify for the accommodation part of my LAFHA until I secure a long term rental here in Oz and can provide a copy of the lease agreement. I understand the accommodation element of LAFHA depends upon actual cost of renting/living here - but is this right? I would have thought you qualify for LAFHA as soon as you arrive or at least begin employment.

     

    I go into a long term rental on 5th September - I've been working for the company since the 15th Aug but been in various temporary accommodation since the 3rd Aug.

     

    Should the LAFHA kick in from when I started earning (hence paying tax) - i.e. 15th Aug?

     

    Hope you can help

     

    Thanks again

     

    Ryan

     

    Hi Ryan,

     

    The good thing is that you have an employer who is willing to pay you LAFHA, however because the facts on LAFHA are very hard to find, they are accidentally disadvantaging you because the costs of temporary accommodation in Australia and the full food component is available to you from the moment you arrive if that employer had you signed up on an employment contract before you left the UK.

     

    Now, that’s all nice to say, but you don’t want to rock the boat with your employer, so I will provide you with the facts of what is claimable so you can assess whether or not you might want to pursue it at a later date. One thing I do say is that with the knowledge below, your employer could become more competitive, because it can pay its eligible employees more than their competition who don’t know the facts on LAFHA.

     

    The major things that you must remember about LAFHA are that:

     

    Each case must be considered on its own merits

    • You must intend to return home
    • Your accommodation costs must be “reasonable”, ie not a penthouse unless you are on $300,000 per year and a senior employee, but also not a hovel!
    • Your meals costs are fixed by the ATO each year on 1 April.
    • Never let anyone tell you to claim anything that is blatantly illegal or double dipping; You've got to ask yourself, hand on heart, if I was questioned by the ATO, could I win because I was truthful?
    • Never let anyone contact your employer about providing you with LAFHA. That will get your employer off side, so always control the communications yourself.
    • LAFHA is usually worth about $10,000 to $15000/year to you additional cash in hand for accommodation and food components. It does not cost your employer any more money, and does not attract Fringe Benefits Tax is paid correctly.

    You can also claim things like:

    • Removal and insurance of household effects to Australia and back home
    • Temporary accommodation anf food at home before you leave, and in Australia, and the same on the way home
    • Storage of furniture at home
    • Telephone, gas and electricity connection
    • Return flights back home during your temporary stay in Australia.

    I hope I have helped in some way.

     

    Regards,

     

    Ian

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