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David Bradbury

Assistant Treasurer, Minister Assisting for Financial Services & Superannuation and Minister for Competition Policy & Consumer Affairs

5 March 2012 - 18 September 2013

Media Release of 15/05/2012

NO.029

Reform of Living-Away-From-Home Allowances and Benefits - Draft Legislation Released for Consultation

The Assistant Treasurer, David Bradbury MP, today released exposure draft legislation to implement reforms to the tax concession for living–away–from–home allowances and benefits as announced in the 2011-12 Mid-Year Economic and Fiscal Outlook (MYEFO) and the 2012-13 Budget.

One of the issues raised at last October's Tax Forum was the increasing exploitation and misuse of this tax concession by a narrow group of people, particularly highly-paid executives and foreign workers, at the expense of Australian taxpayers.

The Government is reforming the tax concession for living–away–from–home allowances and benefits, by better targeting it at people who are are legitimately living away from their actual home in Australia (which they continue to maintain) for an initial period.

As announced in the 2011-12 MYEFO, the following reforms will apply from 1 July 2012:

  • access to the tax concession for temporary residents will be limited to those who maintain a residence for their own use in Australia, that they are required to live away from for work (such as 'fly-in fly-out' workers); and
  • all individuals will be required to substantiate their actual expenditure on accommodation, and food beyond a statutory amount.

As announced in the 2012-13 Budget, the following reforms will apply from 1 July 2012 for arrangements entered into after 7.30pm (AEST) on 8 May 2012, and from 1 July 2014 for arrangements entered into prior to that time:

  • access to the tax concession for permanent residents will be limited to those who maintain a residence for their own use in Australia, that they are required to live away from for work; and
  • a 12 month time limit will be imposed on how long an employee can receive the tax concession at a particular work location.

These changes will ensure that Australian taxpayers are not funding the unfair exploitation of concessions by employers or employees.

The exposure draft bill and explanatory material are available at the Treasury website. Further details on the exposure draft bill are provided in the Attachment.

Submissions on the exposure draft close on 29 May 2012. This consultation follows the extensive consultation process that was undertaken in regards to the reforms announced in the 2011-12 MYEFO, to ensure that the reforms did not have any unintended consequences in specific regions or sectors.

These reforms:

  • will not affect the tax concession for 'fly-in fly-out' arrangements, as these employees will not be subject to the 12 month time limit;
  • will not affect the tax treatment of travel and meal allowances, which are provided to employees who have to travel from their usual place of work for short periods (generally up to 21 days).

15 May 2012


Attachment

The exposure draft bill gives effect to the 2011-12 MYEFO and 2012-13 Budget announcements to:

  • treat living–away–from–home allowances as assessable income of the employee rather than as fringe benefits from 1 July 2012;
  • better target the concessional treatment by allowing an income tax deduction:
    • for reasonable expenses incurred and substantiated for accommodation, and food beyond a statutory amount;
    • for employees who maintain a home in Australia for their personal use and enjoyment at all times that they are required to live away from for work. This condition will apply:
      • for permanent residents who had employment arrangements for living–away–from–home allowances and benefits in place prior to 7.30pm (AEST) on 8 May 2012 - from the earlier of 1 July 2014 or the date a new employment arrangement is entered into; and
      • for all other employees - from 1 July 2012; and
    • for a maximum period of 12 months in respect of an individual employee for any particular work location. This new condition will apply:
      • for permanent residents who had employment arrangements for living–away–from–home allowances and benefits in place prior to 7.30pm (AEST) on 8 May 2012 - from the earlier of 1 July 2014 or the date a new employment arrangement is entered into;
      • for temporary residents who had employment arrangements for living–away–from–home allowances and benefits in place prior to 7.30pm (AEST) on 8 May 2012 and are maintaining a home in Australia that they are required to live away from for work - from the earlier of 1 July 2014 or the date a new employment arrangement is entered into; and
      • for all other employees - from 1 July 2012; and
  • tax living–away–from–home fringe benefits (direct provision of accommodation and food) provided to employees who would not have been eligible to claim an income tax deduction had they incurred the expenses directly, in respect of the period commencing 1 July 2012.

The ATO proposes to put in place a class pay-as-you-go (PAYG) withholding variation so employers do not have to withhold tax from a living–away–from–home allowance where the employee is expected to incur deductible living–away–from–home expenses up to or in excess of the allowance paid.

  • A class variation will be subject to the other requirements of the new law being met.
  • Withholding will still be required where the employee is not expected to incur expenses up to the amount of the allowance provided.