The Federal Government has announced that it intends to change
the law around living-away-from-home benefits from 1 July 2012, as
it believes the concessions are being used in ways that fall
outside of the original policy intent.
The changes aim to ensure taxation equality for workers doing
the same job in the same place. Here, special counsel Justin Byrne
outlines the changes to the system and how they will affect
employers whose workers benefit from living-away-from-home
Living-away-from-home fringe benefits under the Fringe
Benefits Tax Assessment Act 1986 (Cth) compensate employees
for additional costs incurred - generally, accommodation and food -
when they are temporarily relocated away from home in the course of
If the proposed changes to the benefits are implemented,
employers will need to undertake a full review of their
living-away-from-home arrangements. Where the arrangement does not
conform with the new rules, the employer may be liable for fringe
benefit tax (FBT) on the benefit, and may run the risk of
incorrectly calculating its PAYG withholding on the
Depending on the way employees' packages are currently
structured, from 1 July 2012, employers may find that they need to
pay employees significantly more. For example, a package could
provide that an employee receive a certain amount after tax. As a
result of the changes, some of the employee's package may
become subject to tax (either income tax in the employee's
hands, or FBT payable by the employer). Either way, the employer
will end up paying more in order to satisfy the terms of the
Employers will need to obtain an additional declaration from
employees who are temporary residents, which states that the
employee maintains a residence in Australia.
These changes effectively revert this particular part of the
income tax system to how it was before the introduction of the FBT
law in 1986. A living-away-from-home allowance will be taxed
through inclusion in an employee's assessable income (rather
than through the FBT system), and qualifying living-away-from-home
expenditure under the new rules will be an allowable
The changes to living-away-from-home
In broad terms, the FBT treatment of living-away-from-home
benefits will be reformed as follows:
Employees who are temporary residents of Australia must
maintain a home for their own use in Australia (which they are
living away from for the purposes of their work) to access the
All employees (both permanent and temporary Australian
residents) will be required to substantiate their
living-away-from-home expenses. Employers will need to obtain
documentary evidence from their employees to substantiate the
claimed expenses incurred on accommodation. This evidence could
include lease agreements, mortgage documents and receipts for
Living-away-from-home allowances will no longer be taxed
through the FBT system and will instead be included in an
employee's assessable income. Where an employee meets the
substantiation and other conditions for the concession, the
employee will be able to claim a tax deduction for the expenses
Living-away-from-home reimbursements will remain subject to FBT
unless the conditions for the concession are satisfied.
Who is affected by these reforms?
Permanent Australian residents receiving genuine
living-away-from-home allowances will not lose any existing
entitlements under the proposed changes, and the following classes
of taxpayer will not be affected by the reforms:
Permanent Australian residents receiving living-away-from-home
benefits that can be substantiated.
Employees operating under fly-in fly-out arrangement within
Employees of community sector organisations that are not
currently using their entire FBT exemptions cap.
In addition, the following allowances and concessions will not
Travel allowances provided to employees who are required to
travel from their usual place of work for short periods.
Employees receiving FBT remote area concessions.
Employees receiving FBT education expenses concessions for
their children when they are living away from home for work.
The Federal Treasury is currently seeking submissions on these
changes, with a view to the amending legislation being passed by
Parliament in the first part of the 2012 calendar year.
For more information about how living-away-from-home benefits
will be affected by the FBT reform, please contact
HopgoodGanim's Taxation and Revenue team.
Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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