What is a Living Away From Home Allowance Fringe Benefit?
An allowance you pay to an employee is considered a living-away-from-home allowance (LAFHA) fringe benefit if the following conditions apply:
- The employee’s responsibilities require them to live away from their normal residence.
- Some or all of the allowance is intended to cover extra non-deductible expenses and inconveniences an employee faces when living away from their usual home.
There is a difference between a travel allowance and a living-away-from-home allowance. An allowance paid to an employee for work travel is a travel allowance. It is assessable to an employee and won’t incur fringe benefits tax (FBT).
What Should You Do If You Provide a LAFHA Fringe Benefit?
You are required to:
- Check the taxable value of the LAFHA fringe benefit
- Make sure to maintain appropriate records
- Calculate how much FBT you need to pay
- File your FBT return (if you need help in lodgment, you can reach out to a tax return accountant)
- Pay the FBT amount on time
- Check if you need to report the fringe benefit through Single Touch Payroll.
Taxable Value of a LAFHA Fringe Benefit
The taxable value of a LAFHA fringe benefit is the LAFHA amount you pay your employee.
Reductions and concessions
You can reduce the taxable value of a LAFHA fringe benefit by the amount your employee actually spends on reasonable food expenses and accommodation. This reduction applies if the employee continues to maintain a home in Australia where they usually live, and the benefit relates to the first 12 months at a specific work location, provided you keep the required records.
Alternatively, the reduction can also apply if the employee is working on a fly-in-fly-out (FIFO) or drive-in-drive-out (DIDO) basis, again subject to maintaining the necessary records.
What Records Do You Need to Keep?
FBT record-keeping requirements mean that you are required to keep records that:
- Demonstrate how you calculated the taxable value of the living-away-from-home allowance fringe benefit
- Support any concession or exemption you used.
For any type of record-keeping that businesses need to keep, it would be worthwhile to choose bookkeeper services Melbourne.
Living-away-from-home declaration
To access the concessional treatment for LAFHA benefits, your employee will have to give you the relevant living away from home declaration. 3 types of forms for employees declaring the living-away-from-home allowance for different situations:
- Fly-in fly-out or drive-in drive-out employees
- Accommodation and food or drink expenses
- Employees who maintain an Australian home
Conclusion
Living-away-from-home allowance fringe benefits need to be correctly calculated and supported with proper records to meet FBT requirements. Employers may minimise the taxable value where conditions are met. Following the Australian Taxation Office guidelines helps ensure accurate reporting and compliance. For more information, you can reach out to Reliable Melbourne Accountants.