A recent case before the Administrative Appeals Tribunal has affirmed the Australian Tax Commissioner's decision regarding the treatment of a living away from home allowance (LAFHA) paid to a fly-in fly-out employee.
The taxpayer argued that the payment was actually a travel allowance and they should be entitled to claim work-related travel expenses against the allowance. However, the Commissioner successfully argued that the allowance was a LAFHA and taxable to the employer under the FBT regime.
The taxpayer's employer had determined that the amount was payable under an industrial sector collective agreement in lieu of providing food and lodging to the taxpayer. On the basis of the facts, the Tribunal agreed with the Commissioner and the employer and held that this was a LAFHA, which should be taxed under the FBT system.
As the payment was properly characterised as a LAFHA, the Tribunal held the allowance was exempt in the hands of the taxpayer and the taxpayer was not entitled to claim work-related deductions against this amount.
When employees receive allowances while away from home it is vital to ensure that the allowances are properly characterised as LAFHAs or travel allowances as this can have a significant impact on the tax treatment for both the employer and employee.
LAFHA is complex – we strongly recommend you contact a specialist for more information if you are unclear about the difference between what constitutes and allowance versus LAFHA. Contact us on 02 9957 4033 or via email for more information.
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Last updated March 2013. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.