Category: Travel Allowances

Living Away From Home Allowance

Living Away From Home Allowances (LAFHAs) can be paid to employees who live away from home to conduct employment duties. An allowance is paid to an employee to compensate them for additional costs in living away from home. Importantly, the employee must be living away from home rather than having permanently relocated. There is also a clear distinction between someone who is living away from home, as opposed to travelling.

LAFHAs are compensatory in nature. The compensation is payable for additional expenses incurred becasue the employee is required to live away from his or her usual place of residence in order to perform their employment duties. LAFHAs are taxed under the Fringe Benefits Tax (FBT) rules.

From 1 October 2012, in order for an employer to reduce the FBT on the amount paid to the employee, the following conditions will apply:
  1. Employees must maintain a home in Australia (at which they usually reside) for thier immeditate use and enjoyment at all times while required to live away from that home for their work;
  2. Concessional FBT treatment is only available for a maximum period of 12 months, per employee, per work location: and
  3. Employees must provide their employer with a declatration containg (a) the place in Australia where the employee usually resides when in Australia (b) that the place is a unit of accommodationin which the employee or the employee’s spouse has an ownership interest (c) that the place continues to be available for the employee’s immediate use and enjoyment during the period that their duties require the employee to live away from it (d) the address of each place where the employee was actually residing during the period to which the LAFHA relates.
Where these conditions are satisfied, the taxable value of the LAFHA will be able to be reduced by the employer by:
  • The amount of the employee’s actual substantiated accommodation expenditure while loving away from home; and
  • The amounts incurred by the employee for food or drink cost while living away from home, less a statutory amount if applicable. (Taxation Determination TD 2017/5 sets out the ‘reasonable’ food components of a  LAFHA for the FBT year commencing 1 April 2017).

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