Welcome To Workpaper.
Welcome To Workpaper.
Providing allowances to employees can be tricky β especially when it comes to Living Away From Home Allowance (LAFHA) and Fringe Benefits Tax (FBT).
π Many employers confuse LAFHA with travel allowances, leading to incorrect tax treatment and potential penalties.
This guide explains what LAFHA is, how it is taxed, and what employers must do to stay compliant with ATO rules.
π What Is a Living Away From Home Allowance (LAFHA)?
A Living Away From Home Allowance (LAFHA) is a payment made to an employee when:
βοΈ Their job requires them to live away from their usual residence
βοΈ The allowance compensates for additional living expenses and inconvenience
βοΈ These expenses are generally non-deductible for the employee
π LAFHA is treated as a fringe benefit and is subject to FBT (Fringe Benefits Tax).
Many businesses get this wrong π
| LAFHA | Travel Allowance |
|---|---|
| Employee lives away from home | Short-term work travel |
| Subject to FBT | Not subject to FBT |
| Not assessable income to employee | Assessable income |
| Covers ongoing living costs | Covers temporary travel costs |
π Taxable Value of LAFHA
The taxable value of a LAFHA fringe benefit is:
π The total allowance paid to the employee
However, you may be able to reduce the taxable value under certain conditions.
You can reduce the taxable value if:
βοΈ The employee spends money on reasonable food and accommodation
βοΈ The employee maintains a home in Australia
βοΈ The allowance relates to the first 12 months at a specific work location
βοΈ You keep proper records and documentation
π Concessions also apply to:
βοΈ FIFO (Fly-In Fly-Out) workers
βοΈ DIDO (Drive-In Drive-Out) workers
If you provide a LAFHA benefit, you must:
βοΈ Calculate the taxable value correctly
βοΈ Maintain proper supporting records
βοΈ Calculate the FBT payable
βοΈ Lodge your FBT return (if applicable)
βοΈ Pay FBT on time
βοΈ Check if reporting is required via Single Touch Payroll (STP)
π Missing any of these steps can lead to penalties and audit risks.
The ATO requires you to keep records that:
βοΈ Show how the taxable value was calculated
βοΈ Support any reductions or exemptions claimed
βοΈ Include evidence of employee expenses (food, accommodation)
π Poor record-keeping is one of the most common compliance mistakes.
To access concessional treatment, employees must provide a LAFHA declaration.
There are 3 types of declarations:
βοΈ FIFO / DIDO employees
βοΈ Accommodation & food expenses
βοΈ Employees maintaining a home in Australia
π Without this declaration, you may lose access to concessions.
β Treating LAFHA as a travel allowance
β Not keeping proper documentation
β Incorrect taxable value calculation
β Missing the 12-month concession rule
β Not lodging FBT returns on time
π These mistakes can result in unexpected FBT liabilities and ATO scrutiny.
π Incorrect handling of LAFHA can lead to:
β Higher tax costs
β FBT penalties
β ATO audits
π Correct setup ensures:
βοΈ Reduced tax liability
βοΈ Full compliance
βοΈ Better payroll accuracy
LAFHA is a valuable benefit β but only when managed correctly.
π The key is understanding:
βοΈ When LAFHA applies
βοΈ How to calculate taxable value
βοΈ What records are required
Getting it right from the start helps you avoid costly mistakes and stay compliant with ATO regulations.
Need help with LAFHA, FBT, or payroll compliance?
π Website: https://workpaper.com.au/
π§ Email: info@workpaper.com.cu
π Contact: 0485 825 915
π Address: 7 Bridge St, Werribee, Victoria 3030 Australia
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