Budget 2012 Announcement – More Living-Away-From-Home-Allowance (LAFHA) Changes

We previously highlighted (EA Newsletter April 2012) proposed changes to the fringe benefits tax treatment of Living-Away-From-Home-Allowance (LAFHA) benefits. The Government has announced further restrictions on the availability of the concession.

It is proposed the LAFHA concession will broadly now, only be provided for a maximum period of 12 months in respect of an individual employee for any particular work location. This is a significant restriction given the complexity of executive employment arrangements and the reality of modern life and commercial arrangements. In particular, the changes are likely to have substantial implications for the commencement or continuation of ongoing secondment arrangements, with Australia losing its attractiveness to skilled migrants and temporary residents.

As a result of extensive industry feedback following the government’s initially proposed changes to the LAFHA benefits, the Government has resolved to provide transitional relief through to 1 July 2014 for arrangements entered into before 7.30pm, 8 May 2012 (the Budget date). The above changes will however apply (from 1 July 2012) to arrangements entered into after the Budget date.

Source: Page 24, Budget Paper No 2 2012-2013.

Note: Our comments are based on Budget proposals as announced on 8 May 2012. The changes to superannuation outlined here should not be regarded as final until the relevant legislation has been passed.

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