Original reforms were to remove the Living Away From Home Allowance (LAFHA) from the FBT regime completely and bring LAFHA into the Income Tax Regime, but a back-flip has happened on this change.
The end result is that the current regime will continue but with significant changes, which are to ‘benefit people who are legitimately maintaining a home in Australia away from their actual home for an initial period’.
The two major differences in LAFHA from 1 October 2012 are:
- The employee must maintain a home in Australia for their own use at which they usually reside
- The concessional treatment is limited to a period of 12 months for an employee at a particular work location
This will result in huge losses to non-resident employees, temporary residents and 457 Visa employees in that a portion of their employment package cannot be paid to them under the hugely favourable LAFHA concessions. This essentially means that only Australian residents who maintain their own residence and provide a declaration of this fact to their employer will still be eligible for LAFHA for a period of 12 months at a particular work location. These changes do not apply to Fly-In / Fly-Out and Drive-In / Drive-Out employees.
Contact OBT if you have any concerns about your LAFHA allowance as an employee or a business owner.