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  • Exempt food component

    The exempt food component of a LAFHA is the amount you pay the employee for additional food costs because they must live away from their usual place of residence.

    To calculate the exempt food component, you must first calculate the food component of the LAFHA. The food component is the amount of the LAFHA that is compensation for expenses the employee could reasonably be expected to incur on food and drink.

    Where the allowance paid includes an amount for food which is not reasonable, that part of the allowance will be included in the taxable value of the LAFHA.

    Determining the food component

    The food component of the allowance must be calculated before the LAFHA is paid to your employee. The food component of the allowance can be calculated as compensation for any of the following:

    • total food costs
    • increased food costs where the estimated home food costs equals or exceeds the statutory food amount
    • increased food costs where the estimated home food costs are less than the statutory amount.

    There are no strict guidelines on how the food component is calculated, as long as the amount is reasonable. Factors you could take into account when determining the food component include:

    • the composition of the employee's family –the number of adults (12 years old or more) and the number of children (under 12 years old) at the start of the FBT year
    • the costs of food in the other location
    • the usual amount spent on food in the home location (statutory food amount).

    It's assumed that the amount spent on food at the employee's usual residence is normally $42 a week for each adult, and $21 a week for each child. An adult is a person who is 12 years old before the beginning of the FBT year. These rates make up the statutory food amount.

    Ways you can determine reasonable food costs for your employee in the alternate location include:

    • monitoring the food expenditure for a family in another location over a representative period – for example, 12 weeks
    • using indexes and guidelines provided by the Australian Bureau of Statistics or commercial organisations to estimate additional food costs in a particular location
    • using the rates we publish for expatriates – as long as they're reasonable in the employee's circumstances.

    Expatriate employees

    An expatriate employee is a foreign national employed in Australia.

    Each year (usually in April) we publish a tax determination which sets out acceptable amounts for the reasonable food component of a LAFHA for expatriate employees.

      Last modified: 23 Jun 2017QC 32577