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Relocations

Changes to Living Away From Home Allowances from 1 July 2012

The effect of the Mid Year Budget and May 8 Budget for Permanent and Temporary residents is as follows:

  • Treat living away from home allowances as assessable income to the employee rather than as a fringe benefit from 1 July 2012
  • To allow employees who maintain two homes in Australia an income tax deduction for reasonable costs incurred at the Living Away From Home location
  • To limit the concessional tax treatment of LAFHA to a maximum of 12 months

In the May 8 Budget the Treasurer announced transitional arrangements for permanent residents only, as follows:

  • Where the employee has an employment arrangement to receive a living away from home allowance in place prior to 8 May 2012, the employee can continue to receive a tax free LAFHA up to 30 June 2014
  • The requirement to maintain two homes in Australia is not required up to 30 June 2014
  • The 12 month limit on concessional tax treatment does not apply up to 30 June 2014
  • The usual living away from home requirements apply, including:
    • Temporary basis
    • Intention to return home

Guidance is required from the Government on how the “concessional tax treatment of LAFHA to a maximum of 12 months” will be applied from 1 July 2012 (or 1 July 2014 if the transition applies to a permanent resident). In particular:

  1. Is the 12 months a maximum limit per employee?
  2. Is the 12 months a maximum limit per employee per assignment?
  3. How will the 12 month maximum apply where an employee transfers within a group of related employers?

With 1 July 2012 fast approaching, draft law is expected soon.


With the demise of LAFHA, it is worth considering Permanent relocation as an option. Here are some of the available FBT concessions…

3 areas of FBT exemptions and concessions to consider:

Step 1 – Relocation costs

Storage and removal of goods

Relocation transport including familiarisation (or look see) trips

Connection of utilities

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 (that’s the biggie!) and incidental selling & acquisition costs


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.


3 areas of FBT exemptions and concessions to consider:

Step 1 – Relocation costs

Storage and removal of goods

Relocation transport including familiarisation trips

Connection of utilities

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


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