LAFHA fringe benefits arise when an employer pays an allowance to an employee, as compensation for additional non-deductible expenses and other additional disadvantages incurred by the employee because the employee is required to live away from their usual place of residence to perform the duties of that employment.
The taxable value is reduced by the exempt food and exempt accommodation components. This can result is large tax savings for the employee.
From 1 July 2012, the Government is seeking to reform the rules by moving the current rules in the Fringe Benefits Tax (FBT) regime to the Income Tax regime. LAFH allowances will only be accessible where the amounts are substantiated and where the temporary resident is living away from a maintained Australian home that is for their own use. This is similar to the rules applying to Australian employees. From 1 July 2012, temporary residents will be subject to personal taxation on these LAFH payments where they do not maintain an Australian home, effectively reducing their take home pay.
Typical expenses that can be grouped under a LAFHA include:
- Accommodation
- Removal and storage of household effects
- Telephone, gas and electricity connection
- Leasing of household goods
- Relocation transport
- Overseas employment holiday transport
- LAFH meals
- Education costs for overseas employees
To find out more about how a living away from home allowance can save you tax dollars contact us on 02 8624 0755.