LAFHA and US Taxation

[JDiamond3D]

I'm currently talking with a company in Sydney to head down in June for several years. I haven't yet talked money with them, though I have gotten the job and they are going to offer a 457 Visa. Doing reading around the net, i've discovered the LAFHA and it sounds fantastic, which a few minor glitches i wanted to try and clarify. I understand the concept of the double taxation treaty as it entails to US tax law, however, where does LAFHA fit into that policy? If i make 85k but recieve a 25k LAFHA (overestimating, just an example) that takes my effective Oz salary down to 60k. Now, with double taxation in mind, does the US see my gross salary as 85k? or as 60K? If it is seen as the original 85k, that seems to negate the effects of LAFHA, right? I will probably have to contact an accountant who specializes in International tax law, but I thought someone here might have encountered this, and might have an answer. Thanks for your help, As things become more definite, i'll probably be around here more and more.

[kaz101]

Hi JDiamond3D,

Welcome to the forum.

I had to check google but I'm assuming that LAFHA is Living Away From Home Allowance? I don't know anything other than what I found in the net. I tried to find it on the Australian Tax Office website but couldn't find anything.

Hope you find someone who can help you, since most of us has moved here permanently so this may not apply to us.

Regards,
Karen

[JDiamond3D]

Thanks Karen, yes, it's a tax break for workers that isn't exactly well documented online. Once you declare your intention to stay in Australia, you are no longer eligible to receive the break. I guess once i've started negotiations I'll try and get a hold of an accountant to clarify the rules.

Still, if anyone here does know about my original question, any info is greatly appreciated, Thanks!

[Bevdeforges]

Hi, and welcome to the forum.

Now that we've clarified what LAFHA might be <g> I can assure you that it will be included in your US taxable income. As a US citizen, you are taxable on your worldwide income no matter where you are resident. HOWEVER (and it's a big however), there is the Overseas Earned Income Exclusion - for salary income, you are allowed to exclude the first $85,000 (or so) from US taxation if you are resident outside the US. There is also an exclusion for what the IRS called your "Housing Allowance" which more or less corresponds to this LAFHA thing.

The details of all this fun stuff are revealed in Publication 54, for Overseas Residents.

You may also want to check the website of the US Consulate in Australia. Very often they offer a list of US tax accountant or attorneys (and other professionals) in the area. Or, check with the website of the US Enrolled Agents for members in Australia.
Cheers,
Bev

[JDiamond3D]

not an easy read for an artist, but extremely helpful with what I did understand. I definitely will be having an accountant doing my taxes next year instead of TurboTax Looks like i'll be falling just inside the threshold of the exclusion, and with the housing exclusion thrown in, i'll be good.

Just for info, the LAFHA is the Living Away From Home Allowance and essentially allows for your rent (depending on negotiated amount) to be untaxed and if your employer is willing, food up to $162 a week (single) to be untaxed as well, though your employer pays that food tax.

For my situation, as far as I can determine, the LAFHA will reduce my Australian taxation and the US exclusion will reduce/eliminate my US taxation so it won't cancel one or the other out, simply act in concert. I'm sure some high-earners wouldn't be great with the amounts, but i'm in the under 100k bracket, so it works out pretty well.

Now to negotiate my actual salary, wish me luck