The Tax Laws Amendment (2012 Measures No 4) Bill 2012 was passed by the House of Reps late on Tue 21.8.2012, with 1 Government amendment that deleted the existing Sch 1 to the Bill and replaced it with a new Sch 1 concerning changes to the tax treatment of LAFHAs.
The other amendments contained in the Bill concern GST and representatives of incapacitated entities; and consolidation and penalties. The Bill now moves to the Senate.
The new Sch 1 was included in response to the recommendations made by the House of Reps Economics Committee. The Government amendments picked up on all of the key recommendations in the Committee’s report.
The Assistant Treasurer said the amendments are designed to:
- ensure LAFH allowances are taxed within the FBT system, rather than in the personal income tax system or a combination of both;
- expand the definition of fly-in fly-out workers and drive-in drive-out workers for the purposes of the reforms, so those workers who live at home with their parents, or whose home on “off” days is in a country other than Australia, do not lose the concessional tax treatment;
- expand the definition of drive-in drive-out workers for the purposes of the reforms, so it includes workers who use their own vehicle to travel to the workplace;
- amend the circumstances in which the 12 month time limit will pause, to provide certainty and simplicity; and
- ensure the provisions that prevent people accessing the transitional treatment if they “vary” an existing arrangement only apply to “material variations” and do not prevent minor changes such as normal salary increases.
The general start date of the LAFHA changes is 1 October 2012 (with the changes announced in the 2012-13 Federal Budget applying from 1 July 2014 for arrangements entered into prior to 7:30pm (AEST) on 8 May 2012).
[LTN 162, 22/8]
Living Away From Home Allowance (LAFHA) changes – Committee recommends passing them but with changes
The Chair of the House of Reps Standing Committee on Economics, Ms Julie Owens, on Wed 15.8.2012 tabled the Committee’s advisory report on Sch 1 of the Tax Laws Amendment (2012 Measures No 4) Bill 2012. The Schedule reforms the taxation treatment of living-away-from-home (LAFH) allowances and benefits and the associated tax concessions. The changes are intended to apply from 1 October 2012.
The Committee made a number of recommendations, including:
- that Treasury provide a clear definition of what constitutes an “ownership interest” and the satisfactory retention of an employee’s “usual place of residence”;
- supporting the introduction of tightened eligibility criteria ie the 12-month time limit per work location and the maintenance of a usual place of residence;
- exempting drive-in drive-out (DIDO) workers, who use their own transport from, the 12-month time limit per location, in line with other DIDO and fly-in fly-out (FIFO) workers;
- expanding the definition of FIFO and DIDO workers to include workers who do not meet the test of maintaining a usual place of residence within Australia;
- clarifying the circumstances in which the 12-month time limit will be paused;
- ensuring partners or spouses of eligible employees are able to access the tax concession and incur deductible expenses;
- implementing a single taxation treatment for LAFH allowances;
- supporting the retention of LAFH allowances wholly within the FBT regime; and
- that the Government, as a matter of urgency, provide a clear and inclusive definition of what constitutes a “material variation” to a worker’s contract.
It is understood the Coalition has indicted it will not oppose the Bill.
[LTN 158, 16/8]