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Will your Living Away From Home (LAFH) costs double in five months' time?

Tuesday, February 7, 2012 - 09:47 | Posted By: The Privately Held Business Team

Recently announced changes, if implemented as planned from 1 July 2012, could have a far reaching impact on existing living away from home (LAFH) arrangements and those written in the next five months.

Whilst the government is still consulting on its proposals, of particular concern is the current lack of any specific transitional rules. This means that, in only five months’ time, it is possible that large tax obligations for employers or their employees will arise in relation to existing employment contracts with LAFH benefits.

The main area of concern is for expatriate employees working in Australia. If they don't have permanent residency in Australia (including many New Zealanders and 457 visa holders) they will not qualify for LAFH concessions under the proposed changes (except for those who have a usual home in Australia that they are “living away from”). This could add a large tax burden to the cost of employing such individuals (either FBT or PAYG gross up for tax equalised arrangements). Alternatively, affected employees may suddenly find they have far less net income from which to meet their accommodation and living expenses.

Grant Thornton recommends reviewing all existing LAFH arrangements to determine the potential cost impact of the changes. In addition, the proposed changes should be taken into account when drafting new employment contacts, letters of offer and other documentation for all new LAFH arrangements.

For further details about the changes or to arrange a review of your current contracts, please contact your usual Grant Thornton advisor or:

Geoff Lloyd

Partner - Tax
T  +61 8 8372 6676

Paul Banister

Partner - Tax
T  +61 7 3222 0202

Elizabeth Lucas

Associate Director - Tax
T  +61 3 8663 6349

Peter Hills

Partner - Tax
T  +61 8 9480 2000

Peter Berg

Partner - Tax
T  +61 2 8297 2400

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