Updated November 12th 2013

The new LAFHA rules commenced on 1 October 2012 and the new rules differ to what as previously announced as part of the 2013 budget. The key aspects of new legislation include:

  • LAFHA will still continue to be taxed under the FBT regime rather than being included as taxable income to the individual employee
  • An individual must maintain a home in Australia for their personal use and enjoyment and then live away from that home in order to qualify for LAFHA
  • LAFHA will be limited to 12 months maximum in one location
  • Substantiation is required for all of the accommodation component of a LAFHA while no substantiation is required for the food component up to a reasonable limit

The impact of these LAFHA changes mean that it severely restricts LAFHA payments to overseas or temporary residents. There are transitional provisions in place for LAFHA arrangements entered into prior to 8 May 2012.