Archive for the 'Living Away From Home Allowance' Category

2013/14 Federal Budget: Video blog

This week Treasurer Wayne Swan delivered the 2013/14 Federal Budget in Canberra, and as always, here’s our annual post-budget review with Senior Tax Adviser Simon Ellis!

 

Additional Changes

In addition to the changes outlined in the above video it is worth noting that the 0.5% increase in the effective tax rate for all employees – i.e. the increase in the Medicare levy – will actually slightly increase the after-tax savings achieved through salary packaging.  For every $1,000 in benefit costs an employee salary packages (i.e. pays for with pre-tax salary) they will now save an additional $5.

As well as this the budget announced that the FBT rate will increase to 47% from 1 April 2014 and this will mean the FBT-gross up rates also change from that date as follows:

  • Type 1: moves from 2.0647 to 2.0802
  • Type 2: moves from 1.8692 to 1.8868

As a result of these changes employees in the not-for-profit and public hospital sectors will see a small reduction in their threshold (or “cap”) benefit as follows:

  • The annual amount a Public Hospital employee is able to package under this benefit will decrease from $9,095 to $9,010, and
  • The annual amount a PBI employee is able to package under this benefit will decrease from $16,050 to $15,900

The impact of the reduced limit will, however, be largely offset by the increase in salary packaging savings flowing from the higher Medicare rate

Timeframes

Employers and employees should note the following timetable for implementation of the salary packaging changes noted in this post:

Changes applying from 1 July 2013
  • Increase of the superannuation concessional cap to $35,000 p.a. for individuals aged 60 and over
  • Increase in the Superannuation Guarantee rate from 9% to 9.25%
Changes applying from 1 April 2014
  • Transition period for novated lease benefits ends: all salary packaging employees move to the flat 20% statutory rate (i.e. no more km travel)
  • Transition period for in-house fringe benefits ends: no more packaging of this benefit can occur
  • New FBT rate of 47% applies and threshold limits for NFP employers change
Changes applying from 1 July 2014
  • Increase of the superannuation concessional cap to $35,000 p.a. for individuals aged 50 and over
  • Cap of $2,000 will be applied to salary packaging of self-education expenses
  • Increase in the personal medicare levy from 1.5% to 2%.

Understanding the Living Away From Home Allowance Changes

There’s still a lot of buzz about recent changes to the Living Away from Home Allowance announced in this year’s budget – especially given the recent extension to the LAFHA benefit.

We thought it would be good to give customers a rundown of the facts so that everyone is clear about the new rules and when they are due to commence.

Under the current rules you can be eligible for LAFHA benefits if you’re living away from home (that is, living away from your usual place of residence) and:

  • The sole reason you are living away from home is in order to perform the duties of your employment; and
  • Your employment in the new work location is on a temporary basis only; and
  • You have not established permanent ties with the temporary work location such that it has become your ‘usual place of residence’.

After 1 October 2012, the following additional rules apply, depending on your employment circumstances.

Additional LAFHA Rules

Domestic Employees with LAFHA arrangements in place before 9 May 2012

The additional rules (see below) will not apply to you until you are due to reapply for the benefit or until 1 July 2014, whichever comes first.

All Other Employees (including Domestic Employees applying for LAFHA after 9 May 2012 and International Employees)

The following additional rules will apply from
1 October 2012:

  • Your usual place of residence (i.e. the home you are “living away from”) must be within Australia; and
  • Your usual place of residence (i.e. the home you are “living away from”) must remain available for your immediate use at all times during the period that you are living away from home – that is, it cannot be rented out or otherwise made unavailable for your use at any time during the LAFHA period; and
  • Your LAFHA eligibility period will be restricted to a maximum of 12 months from 1 October 2012

Leave a comment here.

2012-13 Federal Budget Analysis: Video

Watch our video analysis of the 2012-13 Federal Budget. Simon Ellis, our Senior Tax Specialist, outlines his thoughts on the budget and how they will impact salary packaging.  A written summary can also be found here.

Leave a comment here.

Potential changes to the LAFHA benefit

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July 2012 update: For the latest information on LAFHA changes, please click here.

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Hello all – it’s Simon here, Senior Tax Advisor at Smartsalary…

The Federal Government has released its proposed changes to Living Away from Home Allowance benefits.

Should these be endorsed, the two points that will most notably impact salary packaging can be summarised as follows:

1. Eligibility: eligibility for the living-away-from-home (LAFH) status is going to be severely limited for temporary resident employees (i.e., those on 457 visas) – in fact, most will no longer be able to claim LAFH status.

2Substantiation: All LAFH benefits will now need to be substantiated, although food reimbursements won’t be, as long as they are paid at “reasonable” levels.

These changes will not apply until 1 July 2012; however we expect that the number of customers who will qualify to salary package LAFH benefits will drop significantly.

So if you’re a visiting foreign worker, or a business employing visiting foreign workers, you might want to start thinking about some of the other salary packaging opportunities available to employees who move from one location to another.

For example, relocation exemptions can offer significant opportunities for savings around direct relocation costs PLUS some temporary accommodation benefits for eligible employees.  Equally, if you’re relocated to a remote area there are very generous concessions available for household rent and utilities.

Smartsalary currently offers these benefits to any business that elects to add them to the menu of benefits, so if you’re interested and these benefits are not already available then you should ask your employer to add them today!

Leave a comment here.


Deven Billimoria
Chief Executive Officer
Smartgroup

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