The House of Representatives Standing Committee on Economics released its report on the proposed changes to the Living Away From Home (LAFH) concessions on 15 August 2012.
The Committee's report supports the Federal's Government's policy intention and the tightened eligibility criteria for LAFH allowances. It has made nine recommendations. These are contained below.
Of these recommendations the following are the most critical:
- Supports the introduction of the tightened eligibility criteria for the tax concession for LAFH benefits as proposed (Recommendation 2)
- Expanding the definition of Fly-in Fly-Out (FIFO) and Drive-In Drive-Out (DIDO) workers to include workers who do not meet the test of maintaining a usual place of residence within Australia so that these workers can claim LAFH (Recommendation 4)
- The retention of the taxation treatment of LAFH wholly within the fringe benefits tax system (Recommendation 7).
- Clarification as to what constitutes a 'material variation' to a contract (Recommendation 9)
Equally important is the items that the Committee did not wish to change:
- No change to the proposed transitional rule
- No change to the 12 month rule
- No change to eligibility criteria (i.e. maintaining a home in Australia) apart the proposed modification in recommendation 2 in respect of FIFO and DIDO employees.
The proof will be in the pudding and we are yet to see if these recommendations will be implemented.
Stay tuned.
Background
As we are all aware, the Federal Government introduced into Parliament Tax Laws Amendment (2012 Measures No. 4) Bill 2012 ('the Bill') the bill in relation to the new rules for Living-Away-From-Home (LAFH) concessions. It contained a number of key changes from the initial draft legislation.
The bill was referred to the House of Representatives Standing Committee on Economics and the Committee invited submissions and held a public hearing in relation to the bill.
Recommendations
The Committee supports the introduction of the tightened eligibility criteria for the LAFH concessions and has made several recommendations in relation to the bill. A full copy of the Report can be found at http://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committees?url=economics/taxlawsno4/report.htm
Recommendation 1
The committee recommends that the Department of the Treasury provide a clear definition as to what constitutes an 'ownership interest' and the satisfactory retention of an employee's usual place of residence. The committee believes that the definition of 'ownership interest' should take into account the varied living arrangements that effectively constitute a person's 'primary residence'.
Recommendation 2
The committee supports the introduction of the tightened eligibility criteria for the tax concession for living-away-from-home allowances and benefits as proposed in Schedule 1 of the Tax Laws Amendment (2012 Measures No. 4) Bill 2012 which ensures that a 12 month limit applies per location and the maintenance of a 'usual place of residence'.
Recommendation 3
The committee recommends that the treatment of drive-in drive-out workers who use their own vehicles be brought into line with drive-in drive-out workers who use employer provided transport. In effect all drive-in drive-out workers should be exempt from the 12 month time limit proposed in Schedule 1 of the Tax Laws Amendment (2012 Measures No. 4) Bill 2012.
Recommendation 4
The committee recommends that the definition of fly-in fly-out (FIFO) workers and drive-in-drive-out (DIDO) workers should include FIFO and DIDO workers who do not meet the test of maintaining a usual place of residence within Australia, such as those who live with family members during off cycles or whose usual place of residence is in a country other than Australia.
Recommendation 5
The committee recommends that the Department of the Treasury clarifies the circumstances in which the 12 month time limit will be paused, with a view to providing the greatest level of simplicity and certainty while also achieving the policy intent of the time limit.
Recommendation 6
The Department of the Treasury should investigate whether there are any substantive impediments to allowing partners or spouses to incur deductible expenses on behalf of an employee where all other eligibility requirements are met.
Recommendation 7
The committee recommends that living-away-from-home allowances be treated within one taxation system. The committee supports retaining the taxation treatment of living-away-from-home allowances wholly within the fringe benefits tax system.
Recommendation 8
The committee recommends that prior to the implementation of any changes to living-away-from-home allowances and benefits the Government must provide clear and concise documentation outlining the new compliance obligations for employers and employees.
Recommendation 9
The committee recommends that the Government provide as a matter of urgency a clear and inclusive definition of what constitutes a 'material variation' to a contract, as it relates to Schedule 1 of the Tax Laws Amendment (2012 Measure No. 4) Bill 2012.
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