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  • Living-away-from-home allowances – before 1 October 2012

    Note: This information only applies where the LAFHA was paid because the employee was living away from home before 1 October 2012. If you paid a LAFHA to your employee because they were living away from home on or after 1 October 2012, refer to Chapter 11 of Fringe benefits tax – a guide for employers.

    Living-away-from-home allowance fringe benefits

    The payment of a living-away-from-home allowance (LAFHA) is a LAFHA fringe benefit.

    For fringe benefits tax (FBT) purposes, a LAFHA is an allowance you (the employer) pay to an employee. It compensates for additional expenses incurred and any disadvantages suffered because the employee is required to live away from their usual place of residence in order to perform their employment-related duties.

    The term 'additional expenses' doesn't include expenses the employee would be entitled to claim as an income tax deduction.

    Usual place of residence

    An employee is viewed as living away from their usual place of residence if they would have continued to live there if they didn't have to work temporarily, in a different location. The residence doesn't have to be the employee's permanent place of residence.

    Employees who move to a new location with an intention to return to their old location at the end of the appointment would generally be treated as living away from their usual place of residence.

    Example: Former home continues to be usual place of residence

    An employee is transferred by their employer from Sydney to Newcastle to help install a new item of plant. For the duration of this appointment, the employee's immediate family continues to live at the former address, where the employee returns every weekend.

    Example: Former home has ceased to be usual place of residence

    An employee is transferred by their employer from Sydney to Newcastle. Just before the transfer, the employee separated from their partner, who continues to reside at the former address with the employee's children. Apart from irregular visits to see the children, the employee won't be returning to their former residence.

    Practical guidelines

    For a LAFHA situation to arise in the first example, there would be some intention or expectation that you would provide some form of compensation to the employee. It would also be expected that there would have been discussions between you and the employee about the basis (monetary or otherwise) on which the allowance was to be calculated. In some cases, there may already be a basis under some pre-existing industrial award.

    The ways of determining whether an employee is living away from their usual place of residence have been established over the years by case law decisions. Whether or not an employee is living away from home will depend on the facts of each case. Factors that may be taken into consideration include:

    • the lifestyle of the employee
    • residency status
    • type of profession
    • type of industry.

    Other relevant details may include details, such as:

    • the employee's driver's licence or electoral enrolment have been changed
    • whether the former house was being looked after by relatives or friends for the time the employee was at the new location
    • whether the former residence was being rented out for the time they were at the new location.

    Some employees don't have a fixed usual place of residence because of the transitory nature of their lifestyle. This means that their usual place of residence is wherever they happen to sleep at night. An example of this would be employees who follow a job from construction site to construction site – having no permanent place of residence.

    Employees on appointments of finite duration who will generally be living away from their usual places of residence are foreign nationals employed in Australia (expatriate employees) and Australian residents stationed in foreign countries for a time. For example:

    • export consultants
    • diplomats and
    • immigration officials.

    In the case of expatriate employees having to reside in Australia for the term of their employment, each year we publish a tax determination outlining what we consider a reasonable food component.

    The same applies where an employee transfers to a new location within Australia on an appointment of fixed duration, provided the permanent job location doesn't change. An example would be an arrangement where an employee transfers to a branch office of the employer in another state for a two or three year term on the basis that they'll return to the permanent position at the end of that time. The employee would be regarded as living away from their usual place of residence provided that they intend to return there at the end of the term of the transfer.

    On the other hand, some occupations have a career structure that brings with it the necessity to accept regular transfers from one location to another. For example:

    • police officers
    • school teachers
    • defence force members.

    Employees in these situations are generally not treated as living away from home when they move or transfer to live near their current workplace – even if the employee owns a home elsewhere in which they eventually intend to reside.

    The general presumption is that a person's usual place of residence will be close to where they are permanently employed.

    Generally, employees in the following kinds of situations would be regarded as living away from a usual place of residence:

    • construction workers living in camps, barracks or huts
    • oil industry employees living on offshore oil rigs
    • marine industry employees living on board vessels
    • trainee employees, such as
      • trainee teachers who are living away from home in order to undergo training courses of extended duration
      • employees attending short-term staff training courses would generally be treated as travelling in the course of their employment.
       

    Employees who work on an oil rig or other petroleum or gas installation at sea, are generally provided with residential accommodation at or near the worksite. An allowance you pay in such circumstances to compensate employees for disadvantages suffered from living away from their usual places of residence is a LAFHA for FBT purposes, provided the allowance is expressly stated to be a LAFHA.

      Last modified: 23 Jun 2017QC 32577