How to claim the Living Away from Home Allowance?

What is LAFHA?

If you are the one who is relocating or travelling or planning to stay away from home for a work-related purpose, the Australian Taxation Office (ATO) offers you an allowance – “Living Away from Home Allowance.” With this approved allowance from ATO, an individual gets relief in the taxable income when living away from home with assistance in accommodation, food or drink, and other living costs.

LAFHA intends to provide enough compensation to individuals who work away from homes. The compensation includes accommodation, food, travel, and insurance-related expenses. The payment can be made in two parts/components – one is the Accommodation Component & the other is Food Component. However, there can be inclusion or exclusion of some extra costs or expenses like utilities, and others.

Who is Eligible?

To be eligible for LAFHA, individuals must complete their employment responsibilities. Also, they must be living away from their primary residence with the continuation of its use at any period of time while working on their timely work duties and receiving LAFHA.

Eligibility Considerations:

For an individual to be eligible for LAFHA, there are some eligibility considerations the employer needs to take care of:

  • He/She must be living in Australia away from home and should be there for any work-related purpose.
  • The person should be away from home for a period of more than 21 days.
  • An individual’s employment contract must be defined with a fixed term/tenure either by date or end of work contract.
  • The individual must plan to return home while you are applying for LAFHA or getting paid.

What can be Claimed Under LAFHA?

Individual living and working away from home can claim for expenses, food/drink, and accommodation. But there are certainly other expenses that can also be included as claimable expenses under the Living Away from Home Allowance.

Some expenses are listed below:

  • Accommodation: Accommodation at the permanent or primary location for up to 21 days.
  • Temporary Accommodation: Accommodation at your new location for about four weeks.
  • Travel Expenses: These expenses include flights, cab, transport, accommodation, meals, and drinks from your permanent location to your new residence. Keep a record of receipts to claim later.
  • Other Utilities: Connection of basic amenities and services such as gas, telephone, or electricity for your new place.
  • Extra Costs: Packing, unpacking, storage, logistics, packing & shifting, and insurance – all these extra costs are also claimable while moving from your permanent address to your new location for work.

Keeping Records Of All The Expenses

Now that you know which expenses you can claim as compensation for your living away from home allowance, you must also know that what records you need to maintain and why you should keep a record of all the expenses to give it to your employer or ATO.

Enlisted here are the records you should keep of all your expenses you can claim while living away from your home:

1. Entertainment – Food/Drink
Under LAFHA, you can claim all your meal expenses that include food and drinks. For this, you must provide evidence of the complete amount you are eligible for. There is no need to provide evidence if the food expenses equal or fall below the Commissioner’s reasonable food amount.

Reasonable Food and Drink Components (per week) within Australia*

Reasonable Food and Drink Components

Source

2. Accommodation
If your normal residence is in Australia, or outside, to claim the accommodation expenditure, you need to incur the full amount with evidence. Accommodation includes:

  • A house, or flat unit
  • Ship or any floating structure
  • A guesthouse, hotel, or other living units
  • A mobile home

For this, you can take guidance from the officers at the ATO or get the expert’s advice from professional tax accountants. You can also call us at 432 713 471.

You are liable to substantiate the full expense amount if your expenses exceed the calculated amount. If you are unclear or need expert guidance, you can consult the expert tax consultants or reach your nearest tax offices.

How Can You Keep Records Of Your To Be Claimed Expenses?

  • A Declaration:
    You must provide a declaration to ATO by 21st May or the date on which your employer’s Fringe Benefits Tax return is due. For this, you must keep a record of all your documents ready for substantiating all the expenses to be claimed. You do not need to provide any records for the documentary evidence to your employer.
  • Documentary Evidence:
    Documentary evidence such as bank statements, credit/debit card statements, and receipts are an important part of submissions to the ATO for the expenses incurred while living away from home.

Fringe Benefits Of LAFHA

These allowances are taxed as a fringe benefit, which means the employee does not need to pay the tax; instead, the employer needs to. For this, the employment policies should clearly state that the allowance the employee should be receiving will not be a travel allowance; it must be a LAFHA.

For the Fringe Benefits Tax, the Living Away From Home Allowance is a calculated allowance that an employer needs to pay to its employees for compensation.

Three conditions must be satisfied for a payment to an employee to be considered as a LAFHA:

  1. It must be an allowance an employer pays its employees in terms of the employment duties.
  2. The employee should live away from their primary or normal residence to be eligible for the payment of LAFHA.
  3. The allowance should be in the form of compensation for the additional expenses that are non-deductible.

The taxable value of the living away from home allowance fringe benefit may vary due to the expenses such as food, drinks, and accommodation where:

  • An employee provides a declaration to the employer about living away from normal residence.
  • An employee possesses a house in Australia already, and that is their normal residence.
  • Employees can leverage the fringe benefit which relates to a period of first one-year at their employment location.
  • Employees working on the go(flying or driving in and out) do not need to maintain a home in Australia and also do not need to have the year limitation.

If any of these conditions do not satisfy, the taxable value of the FBT equals the amount of the LAFHA paid to the employee.

Fringe Benefits That Are Excluded

  • Occasional Traveling costs
  • Secured concerns such as safety of employees, and related that majorly arises due to the employment activities
  • Remote area schemes such as homeownership or home repurchase
  • Housing assistance or residential fuel
  • Fringe benefits for car parking
  • Providing entertainment facilities on the lease or hiring the same

Conclusion

LAFHA fringe benefit arises if the employer considers paying an allowance to their employees to compensate for the additional expenses while living away from their normal residence due to their employment demands and duties. This also covers any disadvantage the employees suffer due to their employment duties.

If you are one of those who live away from your normal residence and are eligible for the LAFHA fringe benefits, hope we got every information covered for you.

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Taral Khandheriya

Taral Khandheriya is a Certified Practising Accountant (CPA) and author at Universal Taxation, who specializes in tax preparation, small/micro business accounting, business services, bookkeeping, business broking, etc. He is well versed in implementing new business strategies that enhance business processes and improves profitability. In his spare time, he reads books on finance, investment tips, and business development strategies.

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