Legislation introducing the Living Away From Home (LAFH) reforms has been introduced to parliament, but won’t be passed until the August sitting. The biggest change from the previous draft is that the new rules won’t apply until 1 October 2012.
Some other changes have also been made. Here we outline the proposals as they stand now.
- Generally, LAFH cash allowances are to be treated as assessable income of the employee rather than as a fringe benefit, from 1 October 2012.
- However, FBT will remain on LAFH cash allowances to the extent they related to “ordinary weekly food and drink expenses” of employees who satisfy the requirements to claim an income tax deduction and have provided their employer with a declaration (this is a change from the earlier draft).
- Income tax deductions are to be allowed for reasonable expenses incurred for accommodation costs and food and drink costs above the ordinary weekly expenses amount.
- FBT is to remain on LAFH benefits (ie. the direct provision of accommodation and food or expense payments) provided to employees who would not be eligible to claim an income tax deduction had they incurred the expenses directly. Where employees would be entitled to the deduction, a declaration will be required to ensure no FBT applies.
- Employees will be required to own or rent another (usual) home in Australia that they are living away from – which cannot be rented out in their absence.
- The tax concessions are to be limited to a 12 month period for any employee in a particular work location. For arrangements entered into prior to 1 October 2012, the 12 months starts from October 2012, rather than the earlier date of the relocation (this is a change from the earlier draft)
- Fly-in/fly-out arrangements will be exempt from the 12 month rule and the changes will not impact employees travelling on business (generally up to 21 days, but possibly more).