ATO warning over cash boost loved by FIFO workers: 'Must keep records'
Mark Chapman · Director Of Tax Communications, H&R Block
5 min read
There are certain allowances that you can claim depending on how your work is structured. (Source: Getty)
Generally, you can’t claim a deduction for any expenses that you incur when you are living away from home. These costs, like accommodation and food, are regarded as private in nature by the Australian Taxation Office (ATO).
However, in some cases, your employer may compensate you for expenses incurred whilst you are working away on secondment or on a contract. This relates to items such as accommodation and meals, or are payments to compensate you for other disadvantages such as isolation.
This is a Living Away From Home Allowance (LAFHA).
LAFHA’s are often payable to people who are forced, by the demands of their job, to work away from home.
You must work away from home for a sustained period (at least 90 days in the same year, and at least 21 days continuously) and maintain a usual residence within Australia.
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As such, many of the people who claim them are fly-in fly-out workers (FIFO), who spend a lengthy period working away from home and then come back home for a break before going off to work remotely again.
A LAFHA is payable in situations where you would have continued to live in your usual home but for the requirement to change residence in order to work temporarily in another location at your employer's bequest, with an expectation that you will return to your usual home at the end of the period of working away.
How does this work allowance operate?
A Living Away From Home Allowance can take several forms:
The payment of an allowance to you by your employer
The reimbursement of expenses which you incur by your employer
The direct provision of a benefit by your employer, for example, the provision of living accommodation for you whilst you are away
A LAFHA paid to you is income tax-free and should not be included as assessable income in your tax return.
If you're forced away from your home for your work, then you could be entitled to a living away from home allowance. (Source: Getty)·Gillianne Tedder via Getty Images
Conversely, you cannot claim a deduction for expenses that have been covered by a LAFHA.
However, your employer may be required to pay Fringe Benefits Tax on the value of the allowance or benefits provided.
LAFHA’s are often confused with travel allowances. These are taxable and you can usually claim deductions against them if the travel meets certain criteria, for example, you must travel and stay away from home overnight in the course of your job.
Travel allowances are paid to employees who are travelling on business but not living away from home. Generally, an employee travelling for business for less than 21 days continuously and less than 90 days in total to the same work location will receive a travel allowance, not a LAFHA.
What's the difference?
Here are key indicators that help distinguish between the two:
Living Away From Home Allowances
Paid when an employee temporarily resides away from their usual place of residence to perform duties at a new, but temporary, workplace.
Involves a change in job location related to the allowance.
Typically associated with employees who are accompanied by their spouse and family when living away from home.
Paid for extended periods (see above for time limits).
Travel Allowances
Paid when an employee is traveling as part of their job.
There is no change in job location in relation to the allowance.
Usually provided to employees who do not travel with their spouse and family.
Paid for shorter durations.
You can receive LAFHA or a benefit in respect of family members who also live away with you, including your spouse and your children.
If you maintain a home in Australia that your duties of employment require you to live away from, your employer can only receive the concessional treatment for any living-away-from-home benefits they provide to you for 12 months.
After that period, your employer will have to pay FBT on any benefits they provide to you.
Mark Chapman is a tax expert and he's revealed what you can and can't claim for a living away from home allowance. (Source: Supplied/Getty)·Belinda Grant-Geary
Keeping records of expenses
You must keep records of your expenses and will need to give your employer either:
documentary evidence of the expense, such as receipts, credit card or bank statements (copies are acceptable)
a declaration setting out information about the expense.
If you choose to provide a declaration to your employer, you must do so by the date on which your employer's FBT return is due to be lodged with the ATO or, if they don't have to lodge a return, by 21 May.
You must also keep your documents to substantiate the expenses incurred for a period of five years from the declaration date. However, you do not need to keep the documents if you provide documentary evidence of the expense to your employer.
Food or drink expenses
Any food or drink expenses you incur while living away from home only need to be substantiated where the expenses exceed an amount considered to be reasonable by the Commissioner.
If your food or drink expenses exceed the reasonable amount, you must be able to substantiate the full amount of these expenses, not just the excess amount.
Accommodation expenses
The full amount of accommodation expenses you incur must be substantiated.
If you’re uncertain about whether the allowances you are receiving are Living Away From Home Allowances or not, or if you need guidance on the records you need to keep, speak to your tax accountant.
