• Living-away-from-home allowance fringe benefits

    Attention

    This information forms Chapter 11 of Fringe benefits tax - a guide for employers.

    Unlike most other types of fringe benefits, a living-away-from-home allowance fringe benefit can only be provided by the employer to the employee.

    The information provided relates to the application of the FBT law to living-away-from-home allowance fringe benefits as at 1 October 2012. For information about the application of the FBT law to such fringe benefits provided because the employee was living away from home (LAFH) before 1 October 2012, see Living-away-from-home-allowances - before 1 October 2012.

    End of attention

    11.1 Overview

    For fringe benefits tax (FBT) purposes, a living-away-from-home allowance (LAFHA) is an allowance you (the employer) pay to your employee to compensate for additional expenses incurred and any disadvantages suffered because the employee's duties of employment require them to live away from their normal residence.

    Instead of paying a cash LAFHA to an employee, you could provide other fringe benefits, either by:

    • reimbursing the employee's actual food costs and/or accommodation expenses incurred at the new location, or
    • providing the food or accommodation yourself.
    Further information

    For further information about these other fringe benefits, see section 11.13 of this document.

    End of further information

    Key differences between current and previous law

    Changes were made to the FBT law in relation to the concessional tax treatment of LAFH allowances and benefits.

    Current law Previous law

    Access to the tax concessions for living-away-from-home allowances and benefits is limited to a period of 12 months for an employee (other than employees working on a fly-in fly-out or drive-in drive-out basis) at a particular work location, and to cases where the employee:

    • maintains a home in Australia at which they usually reside and is available for their immediate use and enjoyment during that period that their duties of employment require them to live away from home and
    • can substantiate all expenses incurred on accommodation and
    • can substantiate all expenses incurred on food or drink (if the food or drink expenses incurred are more than the Commissioner of Taxation’s reasonable amounts) and
    • provides you with a declaration about living away from home and, where required, a declaration on substantiation.
     

    No 12-month limitation applies.

    No requirement to maintain a home in Australia before the LAFH tax concession can apply.

    No requirement to be able to substantiate expenses before the LAFH tax concessions can apply.

    Only needed to make a declaration about living away from home.

    Special rules apply to employees who are working on a fly-in fly-out (FIFO) and drive-in drive-out (DIDO) basis. These employees:

    • do not have to maintain a home in Australia for their own use and enjoyment for the concessional tax treatment to apply in relation to these living away from home fringe benefits and
    • are not limited to a 12-month period for the concessional tax treatment.

    However, these employees must still:

    • substantiate their expenses incurred on accommodation and
    • substantiate their expenses incurred on food or drink (if the food or drink expenses are more than the Commissioner’s reasonable amount) and
    • provide you with a declaration relating to living away from home and, where required, a declaration on substantiation.
     

    The concept of FIFO and DIDO was not strictly part of LAFH.

    You can reduce the taxable value of LAFH allowances provided to these employees by:

    • the amount of employee’s actual substantiated accommodation expenditure while living away from home, and
    • the amounts incurred by the employee for food or drink costs while living away from home less (minus) a statutory amount if applicable.
     

    The taxable value could be reduced by the exempt accommodation and exempt food components.

    Attention

    Transitional rules may affect the above requirements.

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    Does the current law or the previous law apply?

    If... Then...

    The LAFHA is paid because the employee is living away from home from 1 October 2012 onwards

    The current law applies (subject to transitional rules).

    The LAFHA is paid because the employee was living away from home before 1 October 2012

    The previous law applies.

    Example

    Michelle receives a LAFHA from her employer on the 30 June 2012. The LAFHA is paid to cover the additional accommodation and food or drink expenses Michelle is expected to incur over the next 12 months because Michelle’s job requires her to live away from home.

    The taxable value of that part of the LAFHA paid because Michelle was living away from home from 1 October 2012 onwards will be determined under the current law (subject to the transitional rules). The taxable value of that part of the LAFHA paid because Michelle was living away from home on or before 30 September 2012 is determined under the previous law.

    End of example
    Attention

    The information provided in this chapter relates to the current law.

    For information about the previous law, see Living-away-from-home-allowances - before 1 October 2012.

    End of attention
      Last modified: 23 Aug 2013QC 17825