Living Away From Home Allowance (LAFHA): Legislation clears Lower House

Legislation introducing amendments to the LAFHA discussed on earlier postings has cleared the House of Representatives, and now moves to the Senate, where we anticipate little opposition.

The introduction of these changes has been deferred by 3 months, meaning that those generally in receipt of the LAFHA (typically subclass 457 employer sponsored visaholders) can continue to receive it until 1st October, 2012.

The Australian Government advises that ” … these amendments will:

  • Ensure LAFH allowances are taxed entirely within the fringe benefits tax system, rather than in the personal income tax system or a combination of both.
  • Expand the definition of fly-in fly-out workers and drive-in drive-out workers for the purposes of the reforms, so those workers who live at home with their parents, or whose home on ‘off’ days is in a country other than Australia, do not lose the concessional tax treatment;
  • Expand the definition of drive-in drive-out workers for the purposes of the reforms, so it includes workers who use their own vehicle to travel to the workplace;
  • Amend the circumstances in which the 12‑month time limit will pause, to provide certainty and simplicity; and
  • Ensure that the provisions that prevent people accessing the transitional treatment if they ‘vary’ an existing arrangement only apply to ‘material variations’ and do not prevent minor changes such as normal salary increases.”

These reforms will not affect:

  • The tax concession for fly-in fly-out and drive-in drive-out arrangements, as these employees will not be subject to the 12-month time limit;
  • The tax treatment of travel and meal allowances, which are provided to employees who have to travel from their usual place of work for short periods (generally up to 21 days);
  • The tax concessions that are provided for remote area fringe benefits.