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So I hear you like Home and Away. Well guess what? I think
you're going to be staying home a lot more than going away
thanks to the Federal Government's changes to tighten up
the Living Away from Home Allowance (LAFHA) and benefits.
Taxation
The LAFHA is currently a fringe benefit assessable to an
employer. From 1 July 2012, the LAFHA will be treated the same as
other allowances, that is, as part of the assessable income of the
employee (subject to the employee meeting the eligibility
criteria).
Eligibility
The LAFHA is currently available to employees who are living
away from their usual place of residence for work purposes.
Employees must have an intention of returning to their usual place
of residence. From 1 July 2012, the employee's usual place
of residence must be "in Australia".
Duration
The LAFHA is currently not subject to a maximum time period,
although it must expire at some point as eligibility is subject to
the employee having an intention to return to their usual place of
residence. From 1 July 2012, the LAFHA will only be available for a
period of 12 months.
Transitional arrangements
Transitional rules are in place for LAFHA arrangements entered
into before 8 May 2012 for permanent residents (whether or not
their usual place of residence is in Australia) and temporary
residents (who maintain a usual place of residence in Australia).
Pursuant to the transitional rules, the "12 month rule"
won't apply to their LAFHA arrangements until the earlier
of 1 July 2014 or the date a new employment arrangement is entered
into. Further, permanent residents on pre-8 May 2012 LAFHA
arrangements won't be required to maintain a usual place of
residence "in Australia" until 1 July 2014.
Exemptions
Fly in/fly out arrangements will be exempt from the "12
month" rule.
Impact
LAFHA arrangements are likely to be less desirable for both
employers and employees once the "12 month rule" takes
effect. However, the requirement to maintain a usual place of
residence "in Australia" will likely mean that temporary
residents are the ones who feel short changed. They may have to
settle for watching their favourite soap from their offshore
couches.
Employers should audit current LAFHA arrangements and consider
whether there is a sufficient fall-back position once current LAFHA
arrangements expire.
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