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LAFHA

We are seeing a huge amount of discussion (and confusion) regarding the LAFHA transition rules announced in the 2012 Budget.

Whilst the Budget papers may not have been clear (or as clear as they could have been), we confirm that the intention is to have NO transition in respect of temporary visitors / foreign workers.

The LAFHA concession ends for temporary visitors / foreign workers on 30 June 2012.

 

 


The latest announcement on the changes to LAFHA in the 2012 Budget have created additional uncertainty.

Since the Treasurer’s announcement on 29 November 2011, there has been significant uncertainty around how the LAFHA provisions will apply from 1 July 2012. In the Budget, the Government clarified the circumstances in which the allowance will be available as well as the start date for the reforms and announced some transitional relief, although it is unclear who the transitional rule applies to.

The proposed changes are as follows:

  •  Limiting access to the tax concession to employees who maintain a home for their own use in Australia and they are living away from that home 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 are aimed at stopping employers from being able to give the tax concession to employees who aren’t maintaining a second home, or who are maintaining two homes indefinitely.

For employees who commenced receiving LAFHA prior to 8 May 2012, and who are not temporary residents, their employers may be able to continue claiming the LAFHA concessions until 30 June 2014 (subject to continuing to meet the requirements to be living away from home).

When transferring employees across states on a temporary basis, the changes will affect assignments that are longer than 12 months.

The Government has stated that the changes will not affect 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.

Still no word on the process for obtaining a variation.

We look forward to receiving some clear guidance soon.


Below we have the LAFHA Food Allowance for FBT Year Commencing 1 April 2012, including the Exempt Food Components calculated on a weekly, monthly and annual basis.

Note the changes to LAFHA from 1 July 2012 will need to be considered carefully.

ATO TD 2012/5:  Fringe benefits tax: for the purposes of   Division 7 of Part III of the Fringe Benefits Tax Assessment Act 1986, what   amount represents a reasonable food component of a living-away-from-home   allowance for expatriate employees for the fringe benefits tax year   commencing on 1 April 2012?
Living   Away From Home Allowance – food
FBT   year commencing 1 April 2012
————————-   Weekly     ————– Monthly Annual
Family groupings Reasonable food component Statutory food component Exempt food component Exempt food component Exempt food component
One adult *  $         250.00  $         42.00  $     208.00  $     901.33  $  10,816.00
Two adults  $         400.00  $         84.00  $     316.00  $  1,369.33  $  16,432.00
Three adults  $         450.00  $       126.00  $     324.00  $  1,404.00  $  16,848.00
One adult and one child  $         325.00  $         63.00  $     262.00  $  1,135.33  $  13,624.00
Two adults and one child  $         450.00  $       105.00  $     345.00  $  1,495.00  $  17,940.00
Two adults and two children  $         450.00  $       126.00  $     324.00  $  1,404.00  $  16,848.00
Two adults and three children  $         524.00  $       147.00  $     377.00  $  1,633.67  $  19,604.00
Three adults and one child  $         524.00  $       147.00  $     377.00  $  1,633.67  $  19,604.00
Three adults and two children  $         599.00  $       168.00  $     431.00  $  1,867.67  $  22,412.00
Four adults **  $         599.00  $       168.00  $     431.00  $  1,867.67  $  22,412.00
Notes:
*  Adults for this purpose are persons aged 12   years or more before 1 April 2012
** In   relation to larger family groupings, the ATO accepts a food component based   on the above
figures   plus $150 for each additional adult and $75 for each additional child

The ATO commenced a series of LAFHA FBT audits last year. Here are the types of questions they asked:

1.Do you have a Living Away From Home policy?
2.Who is responsible for the Living Away From Home policy in your organisation?
3.Who in your organisation decides if an employee is eligible for Living Away From Home Allowance?
4.Who in your organisation determines the amount of Living Away From Home Allowance?
5.Who in your organisation determines the accommodation and food components?
6.Who in your organisation calculates the exempt component?
7.What records are maintained to substantiate the Living Away From Home Allowance being paid?
8.What responsibility, if any, does the employee in receipt of the Living Away From Home Allowance have?
9.Do you undertake regular reviews of each employee’s Living Away From Home status?
How confidently could you, your HR manager, Payroll manager or Tax manager answer the above questions?

We have completed our 2012 FBT Return seminars series, finishing in Brisbane. Surprisingly, a good number of the attendees across all the seminars held (Sydney x2, Melbourne and Brisbane) were not aware of the changes and the significant business impact – well they certainly are aware now.
Whilst we can spend time arguing why the change and the massive upheaval it will undoubtedly cause, what is important is for businesses to really focus on the impact for them and their employees.
The time to act is now.