A toilet flange is supposed to set on top of the finished floor (no gap or space). Then the flange must be screwed through the finished flooring and into the sub floor. You can get away with a flange being slightly recessed below the floor by using a thicker wax ring or the wax free seal you mention. You might be OK with the flange raised above the floor if, and only if, the plumbing was cast iron. PVC or ABS pipes would allow the flange to move, and that means the seal would be compromised. Your best course of action is to have a new flange installed.