Changes affecting the Living-away-from-home-allowance (LAFHA)

Do you have any employees who claim the living-away-from-home-allowance (LAFHA)?

There have been significant changes made to LAFHA that you need to be aware of if so…

After releasing the 2011-12 Mid-Year Economic and Fiscal Outlook on 29 November 2011, the Government announced that GDP growth would not be as strong as was originally forecast and that estimated tax receipts had been written down by more than $20bn.

As a result of the downturn and the decrease in forecast tax receipts, the Government has announced a number of tax and superannuation changes. The changes announced in relation to LAFHA are quite significant and include the following:

• Access to the LAFHA tax exemption for temporary residents will be limited to those who maintain a residence for their own use in Australia, which they are living away from for work purposes, such as “fly-in fly-out” workers;
• Individuals will be required to substantiate their actual expenditure on accommodation and food beyond a statutory amount;
• Permanent residents will not be affected by these changes, unless they are receiving LAFHA in excess of their actual expenses. The changes will not prevent temporary residents who are “fly-in fly-out” workers in Australia from accessing the tax concession, and will not affect employees who receive allowances for having to travel from their usual place of work for short periods.

Any allowance paid by an employer to an employee as compensation for being required to live away from home will be included in the assessable income of the employee.

The proposed changes will apply from 1 July 2012 for both new and existing arrangements. All benefits and allowances provided in respect of the period commencing 1 July 2012 will be subject to the new arrangements.

If you have any LAFHA arrangements in place, you should make sure that you are aware of the new changes and determine whether they will have any impact on you so that you can minimise any problems at 1 July 2012 when the new rules come into action.

For more information about LAFHA, please refer to chapter F2 Fringe Benefits Tax in your Smart Tax Handbook. If you are not yet a subscriber, please click here for more information about how the Smart Tax Handbook can help you.

Tags: Fringe Benefit Tax, LAFHA