FBT Solutions

02 8079 2924

Month: May 2012


LAFHA Transition

Need a hand with the LAFHA transition? 1 July is not far away

It’s definitely a tax issue, but ultimately it’s an HR business issue and a payroll process issue.

Whilst the tax changes are not finalised and some of the detail requires better clarity, here are some immediate steps to be taking:

Residence Type

Separate your LAFHA receipients in to Temporary v Permanent

Temporary – time to deliver the tough news

Permanent – separate between pre & post Budget LAFH arrangements

Permanent – those with pre Budget LAFH arrangements

Determine if the LAFH tests are still met

Permanent – those with post Budget LAFH arrangements

Determine if they have are maintaining a usual place of residence

Contact us on 02 8079 2924 or visit us at www.fbtsolutions.com.au

 


With the changes in LAFHA being absorbed by employers, we have noticed that many employers do not have policies in relation to LAFHA. This is adding more frustration to an already difficult situation. It is leaving employee’s and employers uncertain of where each other stands and what their rights are (employee’s) and what their obligations are (employers).

This has highlighted other areas where employers are not well covered, including motor vehicle policies, salary packaging policies, employee expense and travel policies.

To help employers, we are running half day seminars on Managing Employee Expenses. This will include policies & procedures, as well as the all important tax (FBT, GST & Income Tax) treatment:

http://www.fbtseminars.com.au/managing-employee-expenses-entertainment-and-allowances-training.html

Call us on 02 8079 2924 if you would like to discuss your training needs or you would like us to help you with the LAFHA transition.


So with all this LAFHA reform – who’s issue is it?

It’s definitely a tax issue, but ultimately it’s an HR business issue and a payroll process issue.

Whilst the tax changes are not finalised and some of the detail requires better clarity, here are some immediate steps to be taking:

Residence Type

Separate your LAFHA receipients in to Temporary v Permanent

Temporary – time to deliver the tough news

Permanent – separate between pre & post Budget LAFH arrangements

Permanent – those with pre Budget LAFH arrangements

Determine if the LAFH tests are still met

Permanent – those with post Budget LAFH arrangements

Determine if they have are maintaining a usual place of residence

 


Getting over LAFHA

With the changes imminent, it is important that employers understand their obligations from 1 July 2012 and manage employee concerns. Employee contracts will require reviewing, negotiation may be required and payroll will need to be informed of the changes. Employees who decide that the change in net pay is too much to sustain may be forced to break their leases, incurring significant penalty costs – will the employer reimburse these? (note FBT may apply)

Policies will need to be rewritten (or created!) and procedures revised.

Importantly it will be necessary to establish what the future holds for employers and their employees. 3 areas of FBT exemptions and concessions to consider:

Step 1 – Relocation costs, including, Storage and removal of goods, Relocation transport including familiarisation trips, Connection of utilities and Relocation consultant

Step 2 – Temporary accommodation – up to 12 months free of FBT

Step 3 – Sale of former residence / purchase new residence – exemption for stamp duty and incidental selling & acquisition costs

In addition, for short term assignments it will be necessary to closely review the provisions in relation to travel allowances and reimbursement of expenses.