What is a living away from home allowance in Australia?
A Living Away From Home Allowance (LAFHA) is a fringe benefit paid to an employee to compensate them for additional expenses and non-deductible costs incurred when working away from their usual residence in Australia. It covers extra costs like accommodation and food.
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How it works in practice
What is LAFHA?
A Living Away From Home Allowance (LAFHA) is a specific type of payment made by an employer to an employee who is required to temporarily live away from their usual residence to perform their employment duties. It is designed to cover the additional expenses, such as food, rent, or utilities, that the employee incurs because they are living away from home, not their usual living expenses. For the employer, LAFHA is generally subject to Fringe Benefits Tax (FBT), but certain concessions apply if specific conditions are met, and the employee provides a 'living away from home declaration'.
Tax Treatment
For an employee, a LAFHA payment may be treated as a tax-free benefit up to a certain amount, providing it meets strict ATO requirements. The allowance must genuinely compensate for additional expenses (e.g., accommodation, food) and not just be a disguised form of salary or wages. The employee must maintain their usual home and intend to return to it. Employers must substantiate the expenses and ensure the employee provides a declaration to claim the FBT exemption or reduction.
Important exceptions
LAFHA has strict eligibility criteria. It only applies if an employee is living away from their usual residence for work and incurring additional expenses, not merely relocating. The employee must genuinely maintain a home at their usual residence and intend to return there. It does not apply if the employee permanently relocates or if the allowance is excessive for the actual additional costs. If not structured correctly, the entire allowance can become taxable income for the employee, or fully subject to FBT for the employer, without concessions. It is also distinct from a travel allowance, which covers short-term travel.
What you should do now
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Understand if your work arrangement qualifies as living away from home rather than a permanent relocation.
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Ensure your employer clearly outlines the LAFHA terms in your employment agreement.
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Provide your employer with a valid 'living away from home declaration' to help them manage FBT.
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Keep detailed records of all your additional expenses for food and accommodation while living away from home.
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Seek advice from your employer or a tax professional regarding the specific tax implications for your situation.
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