The Fringe Benefits Tax Assessment Act contains concessions which recognise that if employees are required to live away from their usual place of residence, they will incur additional expenses which are fundamentally private or domestic in nature. The law permits employers to pay a tax free benefit, known as LAFHA, to cover these additional expenses. A LAFHA is usually made up of a reasonable accommodation component and a reasonable food component.

A living away from home allowance can be paid where the employee has moved and taken up temporary residence away from his or her usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace.

The employee must have a “usual place of residence”

In order for the allowance to be tax free, the employee must have a usual place of residence to begin with. Although “usual place of residence” is not defined, the legislation defines “place of residence” to mean:

The Australian Tax Office has stated that “the question whether an employee is living away from his or her usual place of residence normally involves a choice between two places of residence, i.e. the place where the employee is living at the time or some other place. A person is regarded as living away from a usual place of residence if, but for having to change residence in order to work temporarily for their employer at another locality, the employee would have continued to live at the former place.”

A relevant factor in determining this is whether there is an intention or expectation of the employee returning to live at the former place of residence on cessation of work at the temporary job locality.

The period that LAFHA can be paid

The legislation provides for NO maximum time for a LAFHA to be paid. In 1995 the Government proposed to amend the law to impose the following time limits:

These limits were NOT enacted. As such, a LAFHA can be paid for as long as the basic conditions for its existence are in place.

However, if it becomes clear that there is no real intention to return to the previous location, the facts could point to a conclusion that the employee has now changed their usual place of residence.

Changing jobs does not necessarily mean that LAFHA benefits stop. As long as the job is not open ended, a LAFHA can still be paid. Proof of this may be that one’s visa requires one to return home.

More information?

If you would like more information, please contact Catalyst Financial on +612 8064 5362. Catalyst Financial provides the following service in respect of Living Away From Home Benefits:

1. Meet or liaise with an employee to get an understanding of the facts and determine what benefits the employee is eligible for;
2. Advise the employee what documents to supply to us;
3. Calculate the employees benefits, tax saving, and salary package;
4. Meet with the employee to present a report on the benefits, the tax saving, and salary package calculation;
5. Provide and implementation procedure to the employer so that the employer understands exactly how to process the payroll for the employee;
6. Liaise with the employer and employee as required to ensure correct implementation.