Category: Travel Allowances

Travel Allowances – Domestic and Overseas

In TD 2017/19, the ATO has set what is considers ‘reasonable’ limits for allowances paid in connection with overnight travel (see the tables at the end of this spcial edition). In such cases, the employee must sleep away from their home. The amount of the allowance depends on both your destination and your annual salary. Unlike an overtime meal allowance reasonable domestic and overseas travel allowances do not have to be paid under an industrial award or agreement. Reasonable travel allowances are paid in respect of set travel components:

  • Domestic allowances include components for accommodation, meals and incidentals.
  • Overseas allowance include components for meals and incidentals only. They do not include a component for accommodation. Any claim for accommodation, regardless of the value, must be fully supported by written evidence.
The components of demestic travel allowances are set with reference to costs in spectific destinations and according to an employee’s annual slalary. Designated high cost contry centres also have specified accommodation rates.

LIkewise, overseas allowances for meals and incidentals are set with reference to costs in the various countries. Countries are grouped todgether according to the relative cost of living associated with each location.

For example, less expensive countries to travel in, susch as Bolivia and Paraguay, are grouped together (Group 2), while countries that are expensive to travel in, such as Denmark and Norway are grouped together at the other end of the scale (Group 6).

Travel allowances are comprised of the following components:

Accomodation (Domestic Travel Only)
The accommodation reates shown for domestic travel apply only for stays in commercial establishments, such as hotels, motels and serviced apartments. If a dfferent type of accommodation is used, the rates do not apply. Reasonable allowance amounts have not been set for overseas accommodation and written evidence is required for claims made for this time of expense.

Meals
The reasonable amount for meals depends on the period and time of travel. That is, the rates will only apply to meals (ie breakfast, lunch, dinner) that fall within the period from the commencement of travel by the employee to the end of travel covered by the allowance. Therefore, in determining the reasonable amount for meals, one must not only look at the reasonable amount per meal (ie the dollar figure provided in TD 2017/19), but also what meals (ie breakfast, lunch, dinner) it is reasonable to include from the time the travel commences to the end of the travel period covered by the allowance.

Incidentals
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Living Away From Home Allowance

Living Away From Home Allowances (LAFHAs) can be paid to employees who live away from home to conduct employment duties. An allowance is paid to an employee to compensate them for additional costs in living away from home. Importantly, the employee must be living away from home rather than having permanently relocated. There is also a clear distinction between someone who is living away from home, as opposed to travelling.

LAFHAs are compensatory in nature. The compensation is payable for additional expenses incurred becasue the employee is required to live away from his or her usual place of residence in order to perform their employment duties. LAFHAs are taxed under the Fringe Benefits Tax (FBT) rules.

From 1 October 2012, in order for an employer to reduce the FBT on the amount paid to the employee, the following conditions will apply:
  1. Employees must maintain a home in Australia (at which they usually reside) for thier immeditate use and enjoyment at all times while required to live away from that home for their work;
  2. Concessional FBT treatment is only available for a maximum period of 12 months, per employee, per work location: and
  3. Employees must provide their employer with a declatration containg (a) the place in Australia where the employee usually resides when in Australia (b) that the place is a unit of accommodationin which the employee or the employee’s spouse has an ownership interest (c) that the place continues to be available for the employee’s immediate use and enjoyment during the period that their duties require the employee to live away from it (d) the address of each place where the employee was actually residing during the period to which the LAFHA relates.
Where these conditions are satisfied, the taxable value of the LAFHA will be able to be reduced by the employer by:
  • The amount of the employee’s actual substantiated accommodation expenditure while loving away from home; and
  • The amounts incurred by the employee for food or drink cost while living away from home, less a statutory amount if applicable. (Taxation Determination TD 2017/5 sets out the ‘reasonable’ food components of a  LAFHA for the FBT year commencing 1 April 2017).

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