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What's more, the tax exemption that came with LAHFA (the portion of your income that was your allowance was not taxed), will now be taxed. So, be prepared for this as well. As an example:
So, in other words, start adjusting your budget now!
The abolition of LAFHA has been formally announced in the 2012/2013 budget speech. The good news is that those expats on LAFHA before the announcement (before 8 May 2012) will have two years (until 1 July 2014) before the change affects them. So, GlobalNomad, you've got a little while to save up :)
As I understand it, the only way to qualify now is if you maintain a property in Australia, which you don't rent out to others, in addition to the place you live (also in Australia) in order to work. Even then, you only get the tax break for 12 months. Anyone applying after 8 May will need to meet these critieria to qualify for LAFHA.
Apologies GlobalNomad, seems there was a lot of confusion just after the changes were announced about the transitional period.
The transitional period only applies to permanent residents of Australia who maintain two homes in Australia. All 457 visa holders don't qualify for the transitional period at all. In other words, from 1 July 2012, you'll be paying tax on what was previously tax-free because of LAFHA.
Since many expats are in Australia on the 457 visa, there'll be a lot of you who are paying up to $1,000 extra a month in taxes - maybe more - to live and work in Australia!
For more info, take a look at this article on the changes to LAFHA.
Remember that none of this is final, as it still needs to be approved in Parliament. However, it certainly looks like it'll basically be done away with except for those meeting a few specific criteria; 457 visa holders will not qualify.
The main question is whether there'll be a transition period for those currently enjoying the benefit, as at the moment, it doesn't look like there will be. As it stands, expats on the 457 visa will need to start paying tax from 1st July.