Working away from home for your role, or having employees that do, can result in entitlements such as the Living Away from Home (LAFH) or Travel Allowances having to be paid to assist with the costs and, at times, distress associated with travel or temporary relocation. Previously, there was an easy way to distinguish between which allowance would be allocated. It was once assumed that Travel Allowance was allocated for shorter trips whereas LAFH Allowance were for any trip longer than 21 days. However, this line has now been blurred.
This article will cover:
- The differences between travel and LAFH allowances;
- The tax implications each allowance can have for both employer and employee; and
- Where to go if you’d like further information.
A Travel Allowance is a set amount that is paid to an employee to cover travel, accommodation, food and incidental costs when traveling overnight for business or work purposes. These payments are often recorded by an employer and included in an employee’s payment summary as allowances but this is not always the case. If you have incurred costs while travelling overnight for business purposes, we recommend that you record details of any travel, accommodation, food or incidental costs that you incur using a travel diary. The travel diary should show the date of your trip, where you were travelling and for what purpose and the costs incurred.
If on a travel allowance, according to Tax & Super Australia, this can look like:
- Paid standard travel allowance for accommodation and food;
- Working at the one location;
- Visiting home on weekends; or
- Staying in accommodation provided by the supplier (which may be available for use by other customers when the employee is not there).
The ATO also releases a Taxation Determination each year to outline what they consider to be reasonable travel and overtime meal allowances. The latest release for the 2018-19 Financial year can be found HERE.
The LAFH Allowance is a set amount paid directly to an employee to assist with the additional, non-deductable expenses and disadvantages of moving to continue their employment. This allowance is usually granted for a period of between 21 days and 12 months (due to Fringe Benefit Tax (FBT) for an employer) and is a set amount based off a reasonable accommodation, food and drink amount.
As an employer, it’s important to keep in mind that the taxable value of the LAFH allowance can have an impact on FBT. This can be reduced by certain amounts relating to accommodation and food and drink expenses, providing that the below conditions are met:
- The employee working away maintains a home in Australia at which they usually reside;
- This is often determined with what they are choosing to do with the property while they are working away (eg. Are they having a family member reside in the property, or renting it out?)
- The employee provides you with a declaration about living away from home; and
- The assignment is for a maximum of 12 months in total.
Providing the above conditions are met, an employer will be able to claim on the FBT section of the LAFH Allowance.
The exception to this, however, if an employee is working on a fly-in, fly-out or drive-in, drive-out basis. These types of employment are exempt from the FBT limitations regardless of the length of the assessment and do not need to abide by point one above.
Some examples on LAFH Allowance positions as listed by the Australian Taxation Office, are listed below:
- Construction workers living in camps, barracks or huts;
- Oil industry employees living on offshore oil rigs;
- Marine industry employees living on board vessels; and
- Trainee employees, such as trainee teachers, who are living away from home in order to undergo training courses of extended duration.
Where do I record my logbook?
Your logbook information can be recorded in a printed logbook (available from stationery suppliers), electronically in your own template (such as an excel document), or via the ATO app in the myDeductions tools section.
You must record your journeys for 12 consecutive weeks for your logbook to be complete. Your logbook is then valid for a 5-year period.