Living Away From Home Allowances changes deferred to 1 October 2012
Reforms to living away from home allowances ('LAFHAs') and related benefits set to take effect from 1 July
have been deferred until 1 October 2012. The announcement was made by the Federal Government with the
introduction of the amendment Bill into Parliament on 28 June 2012, in an effort to give employers and
employees more time to prepare for the new arrangements.
From 1 October 2012 the effect of the amendments is to remove the treatment of LAFH benefits from the FBT
regime completely, and instead, include any LAFHA or the value of any LAFH benefit in the assessable income
of the employee.This means that a LAFH benefit will become taxable to the employee.
A limited concession is available for substantiated food and accommodation expenses (i.e. those for which the employee has kept the receipt). Employees will be able to deduct such expenses, provided:
o more than $110 per (7 day) week for each person 12 or over and $55 per week for each child under 12;
To relieve the compliance burden, substantiation for food expenses will not be required unless the
expenses exceed an amount specified by the Commissioner (amount yet to be specified); and
§ maintains a home in Australia for his or her own use; and
§ is required to live away from that home in order to perform their employment duties.
The deduction is subject to a 12 month limit – meaning that the employee will only be able to deduct
expenses for the first 12 months that their employer requires them to live away from home (starting on the first day that the employee moves away).
The changes mean that foreign residents working in Australia (such as those on "457 visas") will need to maintain a home in Australia, which they will need to live away from in order to do their work.
Further, to access the exemption the home must not be rented out while the employee is absent from it, but must remain available for the employee's own use.
The new rules apply from 1 October 2012 but there are transitional arrangements:
Permanent residents who had employment arrangements in place (including a LAFHA) before 7.30 pm (AEST) on 8 May 2012 will not be required to maintain a home in Australia, and will not be subject to the 12 month deduction limit, until the earlier of 1 July 2014 or the date that a new employment arrangement is entered into.
The 12 month deduction limit will also not apply to those employees who are temporary residents, or foreign residents who are maintaining a home in Australia, until the earlier of 1 July 2014 or the date that a new employment arrangement is entered into.
However, foreign and temporary residents will need to maintain a home in Australia (which they live away from) in order to deduct expenses, from the time that the new law commences (ie. 1 October 2012).
Who will be affected?
All employers currently providing remuneration which includes a LAFHA will be affected, along with the employees in receipt of the allowance.
Those particularly affected will be non-residents who do not maintain a permanent home in Australia. Currently, the practice is that foreign nationals employed in Australia are considered to be living away from home. From 1 October 2012, this will no longer be the case.
We advise client who currently provide or receive Living Away From Home Benefits to review their employment arrangements prior to 1 October 2012.