Living-away-from-home concessions to be tightened

Published on February 28, 2013 at 12:00 AM

The Government has proposed a raft of changes concerning living-away-from-home allowances (LAFHAs) and benefits. Essentially, the Government is restricting access to the concessions. Employers and employees who may be affected need to take note.

Broadly, the following will apply:

  • LAFHAs will no longer be available for international secondments to Australia;
  • LAFHAs will only be available to Australian taxpayers who maintain a second home and only then for a time limit of 12 months per location; and
  • Allowances will be taxable to employees with deductions for actual expenditure, rather than being taxable as fringe benefits that are subject to exemptions.

In order to obtain a deduction, the proposed new regime will also create requirements for employees to provide written evidence of their expenditure in some circumstances.

The proposed changes are set to take effect on 1 July 2012. However, there will be grandfathering provisions to preserve tax concessions for up to two years for some arrangements that were in place prior to Budget night (8 May 2012).

TIP: The proposed changes are complex and will raise significant issues for affected employers and employees.

Following these developments and before the enactment of the legislation, it will be critical to identify how the changes may apply to your circumstances. If you have any questions, please contact our office.

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