Effective from 1st of October 2012, the new Living Away From Home Allowances (LAFHA) rules keep the "Living Away from Home Allowance" firmly in the FBT (Fringe Benefits Tax) system.

The final law is different from the change that was initially proposed in November 2011, which would have seen any LAFHA reported as assessable income on the employee’s payment summary.

Conditions for the Living Away From Home Allowance (LAFHA) 

In order for the employer to reduce the FBT on the amount paid to the employee, the following conditions will apply:

1. Employees must maintain a home in Australia (at which they usually reside) for their immediate use and enjoyment, at all times, while living away from home for their work. (i.e. the home cannot be rented out or sub-let while they are living away from it)

2. Concessional FBT treatment is only available for a maximum period of 12 months, per employee, per work location.

3. Employees must provide their employer with a declaration with the following details:

• the address of the place in Australia where you normally live
• the address of the place, or places, where you resided while living away from home
• a statement that you have satisfied the requirements of maintaining a home in Australia for that place in Australia and that it is reasonable to expect that you will resume living in your normal residence when your employment duties no longer require you to live away from home.

Where these rules are satisfied, the taxable value of the LAFHA will be able to be reduced by the employer by:

1. The amount of the employee’s actual substantiated accommodation expenditure while living away from home;
2. The amounts incurred by the employee for food or drink costs while living away from home, less a statutory amount if applicable.

*Note: As an employee, you will need to provide substantiation of these expenses to your employer.

Special Concessions for Fly-in Fly-Out’ or ‘Drive-in Drive-Out’

Please note that special rules will apply to employees who are working on a ‘Fly-in, Fly-out’ or ‘Drive-in, drive-out’ basis. These include:

• No requirement to maintain a home in Australia for their own use
• Concessional treatment of LAFHA, not being limited to a 12 month period.

Conditions for Concessional Rules 

In order for these concessional rules to apply, an employee must satisfy the following conditions:

1. They must on a regular and rotational basis:

• Work for a number of days and have a number of days off
• On completion of the working days, travel from their usual place of employment to their normal residence, and then back to their usual place of employment, upon completion of their days off

2. The basis of the rotational work must be customary for employees performing similar duties in that industry and it would be unreasonable to expect the employee to travel from their usual place of residence on a daily basis.

3. It must be reasonable to expect that the employee will resume living in their normal residence when the duties of that employment no longer require them to live away from it.

For ‘Fly-in, Fly-out’ or ‘Drive-in, drive-out’ employees a declaration must be provided to their employer that states:

• the address of the place in Australia where you normally live
• the address of the place, or places, where you resided while living away from home
• a statement that you have satisfied the requirement of it being reasonable to expect that you will resume living in your normal residence when your employment duties no longer require you to live away from home.

Transitional Rules

Below is an explanation of the transitional rules for permanent residents and temporary or foreign residents.

1. Permanent Residents

The requirement that permanent residents must be maintaining a home in Australia for their own personal use & enjoyment (Condition 1) and that the LAFHA must relate to the first 12 months in each location (Condition 2) will not apply to permanent residents with a pre-8th May 2012 arrangement in place until the earlier of:

• 1 July 2014; or
• The date that a new employment arrangement is entered into or a material variation is made to an existing arrangement.

Condition 3 (the provision of the declaration) & the substantiation requirements, will however apply to all arrangements from 1 October 2012.

2. Temporary or Foreign Residents

The requirement that the LAFHA must relate to the first 12 months of each location, will not apply to temporary or foreign residents with a pre-8th May 2012 arrangement in place until the earlier of:

• 1 July 2014; or
• The date that a new employment arrangement is entered into or a material variation is made to an existing arrangement.

The requirement to maintain a residence in Australia for their own personal use & enjoyment (Condition 1) will however apply to all temporary and foreign residents from 1 October 2012, irrespective of whether they had a pre 8th May 2012 arrangement in place (as will Condition 3, & the substantiation requirements).