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  • Calculating the value of the exempt food component

    Calculating the value of the exempt food component depends on how you calculated the food component of the allowance.

    Allowance includes compensation for total food costs

    If the allowance includes compensation for the employee's total food costs – the value of the exempt food component is the amount of the LAFHA food component minus the statutory food amount.

    Example:

    An employee living away from their family is paid a LAFHA of $440 per week. Of that allowance:

    • $200 is reasonable compensation for the cost of accommodation
    • $160 is reasonable compensation for the total cost of food while away from home
    • the remaining $80 is compensation for disadvantages associated with having to live away from family and in a town without the facilities normally enjoyed at home.

    The taxable value is calculated as follows:

    Total allowance

    Minus:

     

    $440

    Exempt accommodation component

    $200

     

    Exempt food component*

    $118

    $318

    Taxable value

     

    $122

    *Food component less statutory food amount, that is $160 – $42 = $118.

    The taxable value is:

    • $80 paid for disadvantages suffered for living away from home
    • $42 statutory food amount.

     

    Allowance includes compensation for increased food costs

    The whole amount of the LAFHA food component is exempt from FBT where the amount of the:

    • food component has been reduced by the estimated home food costs before being paid to the employee
    • reduction is the same or more than the statutory food amount.

    The valuation rules mean we tax only the part of the food component that covers expenses for food that the employee would have incurred while living at home. This means there is no tax payable on the food component in this circumstance.

    Example:

    An employee living away from their family is paid a LAFHA of $398 per week. Of that allowance:

    • $200 is reasonable compensation for the cost of accommodation
    • $118 is reasonable compensation for the additional food costs only while away from home
    • the remaining $80 is compensation for disadvantages associated with having to live away from family and in a town without the facilities normally enjoyed at home.

    In this example, the allowance includes compensation for additional food costs. The employer calculated the $118 food component by deducting $42 (estimated normal home food consumption costs) from the total food costs of $160.

    The taxable value is calculated as follows:

    Total allowance

    Minus:

     

    $398

    Exempt accommodation component

    $200

     

    Exempt food component*

    $118

    $318

    Taxable value

     

    $80

    *In this case, the food component is the exempt food component.

    The taxable value is $80 paid for disadvantages suffered for living away from home.

    Food allowance is less than the statutory food amount

    You may estimate that the amount of your employee's normal home food costs is less than the statutory food amount when calculating the allowance. In this case, the exempt food component is the LAFHA food component minus the excess of the statutory food amount over (that is, more than) the estimated home food costs.

    Example:

    An employee living away from their family is paid a LAFHA of $325 per week. Of that allowance:

    • $150 is reasonable compensation for the cost of accommodation
    • $125 is reasonable compensation for the additional food costs while away from home
    • the remaining $50 is compensation for disadvantages associated with having to live away from family and in a town without the facilities normally enjoyed at home.

    In this example, the allowance includes compensation for additional food costs. The employer calculated the $125 food component by deducting from the total food costs of $160 an amount of $35 – which was estimated as the normal home food consumption costs.

    The taxable value is calculated as follows:

    Total allowance

    Minus:

     

    $325

    Exempt accommodation component

    $150

     

    Exempt food component*

    $118

    $268

    Taxable value

     

    $57

    *In this case, the exempt food component is $125 (food component) less the statutory food amount less $7 (estimated home food cost), that is, $42 – $35.

    The taxable value is:

    • $50 for disadvantages paid while living away from home
    • $7 difference between the estimated home food costs and the statutory food amount.

     

      Last modified: 23 Jun 2017QC 32577