Originally Posted by BullcreekBob
G'day Michell
The issue of LAFHA confuses a number of people and you need to be careful that you don't get the wrong impression.
Firstly and perhaps most importantly, LAFHA is not an allowance from the tax man. It is something your employer may choose to give in return for lower wages. It is entirely at your employers discretion if he choses to do so because it can increase his paperwork and even potentially create a tax liability for your employer. As a general rule, it's more likely a larger company may agree to a LAFHA allowance than a smaller one. i.e. it's often easier when you're doing it for 30 people than for one.
Secondly, unless the LAFHA is negotiated and agreed before any employment contract is signed or your sponsorship application is submitted, you probably will not be able to get one.
Thirdly, a LAFHA does not mean that your employer pays you any more, rather the employer pays you LESS but then gives you the same amount back as a LAFHA. You end up better off because you don't pay tax on the LAFHA as long as it is below the tax thresholds you found on the ATO site.
So as an example, lets say that a potential employer would be happy to sponsor your hubby and pay him a salary of $55,000. If the employer and your hubby agree, the employer can reduce your hubby's wages to $50,000 plus pay him a LAFHA of $5,000. This will still cost the employer $55,000 but your hubby will be better off because he will not pay tax on the $5,000. He will be better off by 30% (his tax rate on $50,000) so a LAFHA of $5,000 means he will get an extra $1,500 per year or about $30/week in his pocket.
Paying superannuation is a legal requirement for all employers in Australia. This is paid on top of your hubbys salary, it is not part of it. Superannuation is paid at the rate of 9% of salary - this goes into a superannuation account (pension fund) and you can not get this till you leave the country or retire. If your hubby is on a salary of $55,000 his employer MUST pay $4,950/yr into an approved super fund. If your hubby agress to a LAFHA allowance of $5,000, hence reduces his salary to $50,000 then the employer MUST pay superannuation of $4,500 into an approved super fund.
So, in this example, the LAFHA will initially put an extra $1,500/yr into your hubby's pocket but $450/yr less will be paid into his super fund. Nevertheless, the LAFHA does mean you end up with more in your pocket.
So, the next question is, well why not reduce the salary to $30,000 and have a LAFHA of $25,000? The simple answer is, the immigration act specifies a minimum salary that must be paid (it varies a bit with type of job and if it's regional or city based).
The minimum salary that can be currently paid to IT people is $57,300 and to non IT people $41,850. In regional areas it's $51,570 or $37,665. These amounts are adjusted annually and usually around August.
So Michell, going back to your example, if your hubby works in IT he can not be employed for $55,000/yr. The sponsor will have to increase the offer to at least $57,300. If he doesn't work in IT then an offer of $55,000/yr is okay and by negotiation your hubby and employer could agree, before signing and paperwork to accept a salary of $41,850 and a LAFHA of $13,150. Doing so would mean about an extra $75 in his pocket each week but about $23 less paid into his super fund each week.
Just one final observation, $55,000 is not a particularly good salary to support a family of 6 people, especially as being temporary residents you have to pay more for many services. If you were permanent residents, you would be eligible for some fairly substantial assistance including family tax benefits, rent subsidies and low income support. I would suggest that you will probably need to be working close to full time to bring in enough money to supplement your hubby's income for a relatively comfortable lifestyle.
Still many of the best things in life are free and a couple of years in a "tight" situation may be a small price to pay for eventually getting Oz citizenship.
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