• Type 5: living-away-from-home or relocation related fringe benefits

    Danger

    The government has announced significant changes to the tax treatment of living-away-from-home allowances and benefits. If the proposed changes become law, they may impact on any current and/or future employment arrangements you have with your employees with effect from 1 October 2012. The following information about living-away-from-home allowances and benefits does not take these proposed changes into account.

    For more about the proposed changes, refer to FBT living-away-from-home allowance reform.

    End of danger

    Australian Government entities generally pay allowances and/or reimburse expenses for employees who are required to live away from home or relocate in order to perform employment duties. The table below shows the usual taxation treatment of such payments. The column headed LAFH relates to employees who are living-away-from-home in order to perform employment duties and the column headed Relocated relates to employees who have changed their usual place of residence in order to perform employment duties.

    The table has been prepared on the basis that the payments are not exempt under section 23AG or section 23AF of the Income Tax Assessment Act 1936. There are some specific exemptions for certain people on overseas deployments. Class Rulings CR 2005/53, CR 2005/62 and CR 2006/119W provide some examples of when such payments are exempt.

    The taxation of allowances will depend on their nature. Allowances paid to compensate an employee who is living-away-from-home for the additional costs of living-away-from-home are generally taxed as LAFHA fringe benefits. All other allowances, including allowances paid to employees who have relocated, are generally taxed under the PAYG regime.

    Payment type

    Income tax or FBT treatment
    PAYG/LAFHA/expense payment
    fringe benefit/loan fringe benefit

     

    LAFH

    Relocated

    LAFHA (or an allowance paid to an employee who has relocated)

    LAFHA

    PAYG

    Cost of living allowance

    LAFHA

    PAYG

    Cost of posting allowance

    LAFHA if cost related - PAYG if it is an incentive to live away from home or only related to disadvantages

    PAYG

    Allowances paid to employees to compensate them for additional costs of living-away-from-home or relocating

    LAFHA

    PAYG

    Additional food allowance

    LAFHA

    PAYG

    Accommodation allowance

    LAFHA

    PAYG

    Incidentals allowance

    LAFHA

    PAYG

    Child allowance

    LAFHA

    PAYG

    Disturbance allowance

    PAYG

    PAYG

    Payment/reimbursement of rental costs

    Expense payment*

    Expense payment*

    Provision of housing (owned or leased by employer)

    Residual*

    Housing*

    Utilities allowance

    PAYG unless it forms a part of a rent payment (not separately identified) and then it may be included as part of the exempt accommodation component of the LAFHA

    PAYG

    Payment/reimbursement of utility costs

    Expense payment*

    Expense payment*

    Allowance to cover excess commuting costs

    PAYG

    PAYG

    Outlay allowance - unvouched (and not required to be repaid)

    PAYG

    PAYG

    Outlay allowance - vouched (and not required to be repaid)

    Expense repayment

    Expense repayment

    Repayable outlay allowance/advance

    Loan

    Loan

    Cents per kilometre allowance for travel in an employee's car, including motor vehicle allowance that forms part of a remote localities assistance

    PAYG or Expense payment

    PAYG or Expense payment

    Payment/reimbursement for clothing for a change in climate at a new location

    Expense payment

    Expense payment

    Payment/reimbursement for clothing required as part of changed employment duties while living-away-from-home or as a result of relocation (for example, uniforms or formal clothing required for entertaining staff in a foreign location)

    Expense payment (may be otherwise deductible in very limited circumstances)

    Expense payment (may be otherwise deducible in very limited circumstances)

    Payment/reimbursement of the costs of removal and storage of household goods

    Expense payment*

    Expense payment*

    Payment/reimbursement for cost of leasing household goods

    Expense payment*

    Expense payment*

    Payment/reimbursement of the cost of connection or reconnection of certain utilities

    Expense payment*

    Expense payment*

    Payment/reimbursement of security deposits and bonds (not repayable)

    Expense payment*

    Expense payment*

    Payment/reimbursement of security deposits and bonds (repayable)

    Loan

    Loan

    Payment/reimbursement of temporary accommodation in a new location

    Expense payment*

    Expense payment*

    Payment/reimbursement of costs in relation to the sale or acquisition of a dwelling as a result of an employee having to relocate

    Expense payment

    Expense payment*

    Compensation payments (for example, compensation for damage to furniture in storage)

    PAYG if an allowance - Expense payment if it is a reimbursement of vouched expenses

    PAYG if an allowance - Expense payment if it is a reimbursement of vouched expenses

    Payment/reimbursement of costs for relocation transport

    Expense payment*

    Expense payment*

    Payment/reimbursement of costs to visit a new location prior to relocation

    Expense payment*

    Expense payment*

    Provision of relocation consultant

    Expense payment*

    Expense payment*

    Provision of remote area holiday transport and overseas employment holiday transport

    Expense payment*

    Expense payment*

    Payment/reimbursement of cost of full-time education of children of overseas employees

    Expense payment*

    Expense payment*

    *

    These benefit types may be exempt benefits or taxed concessionally, particularly if the employee is living in a remote area.

    Further Information

    For more on exemptions and concessions, refer to Fringe benefits tax exempt benefits.

    End of further information

    'PAYG' - assessable income of the employee and pay as you go withholding required.

    'LAFHA' - these allowances form part of a living-away-from-home allowance and are taxed under the LAFHA fringe benefit provisions. Some of these allowances will be exempt from FBT provided certain conditions are met.

    'Expense payment' - these payments will generally be taxed as an expense payment fringe benefit.

    'Loan' - these payments will be taxed as a loan fringe benefit. A loan includes any advance of money, the provision of credit or the payment of an amount where there is an obligation to repay. An exemption can apply in limited circumstances.

    Further Information

    For more on exemptions relating to loan fringe benefits, refer to Loan and debt waiver fringe benefits.

    End of further information
      Last modified: 17 Jul 2012QC 21998