Hopes that expats would have a two-year reprieve before their access to a living away from home allowance (LAFHA) was cut have now been dashed.

The Treasurer Wayne Swan announced in the budget that reforms to the tax concession will allow those who have entered into arrangements prior to 7.30pm on May 8, 2012, to continue claiming the tax concession until July 1, 2014.

However, a well-informed source within the treasury has now told the Irish Echo that this transitional rule will only apply to those who legitimately maintain a second home in Australia, in addition to their actual home.

Effectively, the clarification means that all temporary residents will no longer have access to LAFHA from July 1, this year.

The clarification comes after expats and a number of recruitment agencies were left confused by the reforms announced in the budget, the second suite of measures to rein in access to LAFHA, the first being announced as part of the Mid-Year Economic and Fiscal Outlook in October 2011.

Irish and other temporary workers in Australia had been benefiting from the lucrative tax break, using it to boost their take-home pay.

Many recruitment agencies had offered the allowance as part of their salary packaging.

Some employers have paid their foreign workers a LAFHA, which comes off their gross wage, allowing them to pay income tax on the lesser amount.