The government has proposed changes to the current allowances for some employees who are required to live away from home for work related purposes.
From 1 July 2012, the living away from home allowance/reimbursement taxation rules will be amended and will mean that:
- temporary residents will only be able to access concessions if they maintain a home for their own use in Australia (and which they do not rent out or sub-let while living away from home); and
- in all cases, employees will be required to substantiate their living away from home (LAFH) expenses or (for food expenses) otherwise may be able to rely on Australian Taxation Office guidelines.
The tax implications of the changes mean that the living away from home allowance will now be included in an employee’s assessable income and they can claim a deduction against the allowance if they can provide receipts or substantiation for their expenses.
The reimbursement of expenses (ie re-payment of expenditure after it has been incurred by the employee) will be subject to fringe benefits tax unless the more limited concessions apply.
In relation to food, costs must be substantiated or employers can rely on guidelines to be published by the Australian Taxation Office. The current amount allowed for food costs will be reviewed to bring it into line with current food costs.
Where an employee is able to claim a deduction for LAFH food and accommodation costs, the employer will be able to reduce the amount they are required to withhold from any LAFH allowance under the PAYG rules.
Note that these changes do not affect all taxpayers!!!
Those who will not be affected by the changes are:
- permanent employees;
- employees operating under fly-in fly-out arrangements within Australia; and
- employees of community sector organisations (up to any applicable fringe benefits tax exemptions cap).