An allowance you pay to an employee is a living-away-from-home allowance (LAFHA) fringe benefit if both the following apply:
- The employee's duties require them to live away from their normal residence.
- Some or all of the allowance is to compensate the employee for non-deductible additional expenses and other disadvantages caused by living away from their normal residence.
An allowance paid to an employee for travelling for work is a travel allowance. It is assessable to an employee and does not incur fringe benefits tax (FBT). To work out if you are paying your employee a LAFHA or a travel allowance, see FBT guide: 11.11 Difference between a living-away-from-home allowance and a travelling allowance.
You need to:
- work out the taxable value of the LAFHA fringe benefit
- calculate how much FBT to pay
- lodge your FBT return
- pay the FBT amount
- check if you should report the fringe benefit through Single Touch Payroll (or on your employee’s payment summary).
The taxable value of a LAFHA fringe benefit is the amount of LAFHA you pay your employee.
You can reduce the taxable value of the benefit by any amounts your employee spends on their accommodation and reasonable food expenses, if either:
- your employee maintains a home in Australia at which they usually reside, and
- they give you a declaration about living away from home
- the fringe benefit relates to the first 12 months at a particular work location
- your employee works on a fly-in-fly-out or drive-in-drive-out basis, and
- they give you a declaration about living away from home.
Example: taxable value of accommodation component of LAFHA
Steve has a residence in Melbourne and is seconded to work in Perth for 12 months. During this time his Melbourne home continues to be available for his own use.
Steve receives a LAFHA from his employer, which includes an accommodation component of $450 per week. He resides with his wife, Helen, who rents a house in Perth for 12 months at a cost of $450 per week. Steve gives his employer a declaration about living away from home.
Steve's employer does not have to pay FBT on the accommodation component of the LAFHA ($450 per week).End of example
For more information about LAFHA fringe benefits, including the extent to which the employee's accommodation and food expenses can be deducted from the taxable value of the benefit, see:
- FBT guide: 11 Living-away-from-home allowance fringe benefits
- TR 2021/4 Income tax and fringe benefit tax: accommodation and food and drink expenses, travel allowances and living-away-from-home allowances.