Although not a new topic, but many businesses still seems to have difficulty distinguishing between “Travelling allowance” vs Living-away-from-home allowance (LAFHA) today.  Because they are subject to very different taxation treatments, it is really important for the business owners, payroll officers and bookkeepers to understand their differences.

In general, when paid at a level that is up to the reasonable amount determined by the ATO, it is tax deductible and does not attract any Fringe Benefits Tax (FBT).

However, LAFHA is potentially subject to FBT and a number of calculations are required to determine its taxable value (if any).

The old rule of thumb to distinguish the two was the number of days travelled.  For many years, the ATO believed for any travel less than 21 days was deemed to be “travel” while when it is more than 21 days it is more likely to be Living-away-from-home.  However, the ruling on this topic was removed in July 2017 as it has been found that some employees may still be considered as “travelling” for six weeks or more.  Nevertheless, the length of the period away from home is still one of the most important factors.

One of the other important determining factor is job location.  Travelling does not change the job location and there will be no establishment of a temporary residence.  The employee would be merely travel to undertake certain duties.  However, when living away from home, there will be change in job location a temporary residence will be taken up near the new work location.

Note under the living-away-from-home arrangement, any concession taxation treatment is only limited to 12 months.

Lastly, it should be noted employees that are under a fly-In, fly-out (or drive-in, drive-out) arrangement are covered by different rules.

Should you have any questions on this matter please do not hesitate to contact me or our team at CSCG.

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