2012 Federal Budget: LAFHA Update

In today’s Federal Budget the Australian Government has announced more details of its reform to the Living Away From Home Allowance regime.

The announcement includes clarification that those who are already in receipt of the LAFHA can continue to receive the tax free benefit until 30th June, 2014 – so long as they maintain a home in Australia.

More specifically, the Budget Papers include the following commentary:

“The Government will further reform the tax concession for living-away-from-home allowances and benefits by better targeting it at people who are legitimately maintaining a second home in addition to their actual home for an initial period.

This measure builds on the reforms announced in the 2011-12 MYEFO measure Fringe benefits tax — reform of living-away-from-home allowances and benefits by:

• limiting access to the tax concession to employees who maintain a home for their own use in Australia, that they are living away from for work; and

• providing the tax concession for a maximum period of 12 months in respect of an individual employee for any particular work location.

These further reforms will stop employers from being able to give the tax concession to employees who aren’t maintaining a second home, or are maintaining two homes indefinitely.

This measure will not affect:

• the tax concession for ‘fly-in fly-out’ arrangements, as these employees will not be subject to the 12 month time limit; or

• the tax treatment of travel and meal allowances, which are provided to employees who have to travel away from their usual place of work for short periods (generally up to 21 days).

The reforms will apply from 1 July 2012 for arrangements entered into after 7.30pm (AEST) on 8 May 2012, and from 1 July 2014 for arrangements entered into prior to that time.

The Government will consult with tax experts and employers on the technical detail of the legislation.”