The Australian Treasurer, Wayne Swan, has today announced changes to the Living Away from Home Allowance (commonly referred to as LAFHA) as part of the Mid-year Economic and Fiscal Outlook 2011-12 (MYEFO).

The changes could spell the end of 457 visa holders claiming LAFHA in the vast majority of cases.

From 1 July 2012, LAFHA can only be claimed by people who maintain a home for their own use in Australia that they are living away from for work. For example, if your company sends you to Perth for work, you could only claim LAFHA if you have a home in, say, Sydney. In contrast, under the current LAFHA system, many 457 holders claim LAFHA on the basis that they ususally reside overseas and are working in Australia on a temporary basis.

In addition, individuals claiming LAFHA will need to demonstrate their actual expenditure on accommodation and food beyond a statutory amount. Currently, there is far wider scope to claim "reasonable" costs.

Many 457 holders delay applying for permanent visas, for example Employer Nomination Scheme visas, because of the tax benefits which currently apply. Generally, LAFHA cannot be claimed once a temporary visa holder applies for permanent residence.