My employer provides rent free housing for all employees (Karratha). There is an option to purchase your own home and receive approx $700/week housing allowance. Only myself and one other employee have purchased our own homes.
The other employee's accountant claims we should not be paying tax on this $700 housing allowance, as the other workers are receiving tax free accommodation.
Company management will not even discuss the issue with us……??
Do you think we should be receiving the housing allowance tax free? Apparently other companies have the housing allowance structured as "tax free". It is very expensive to purchase property here.
Thanks if anyone can enlighten me on the normal protocol.I think there are generally three types of arrangement around living expenses:
1. Allowances included as part of your salary package. This will be included in your income and is taxable.
2. Living Away from Home Allowances (LAFHA). This is a type of fringe benefit, so would be tax free to you, and the employer would pay Fringe Benefits Tax.
3. Salary sacrifices, where the employer pays expenses on your behalf – another fringe benefit so tax free to you.Option 2 and 3 are only really viable if you are on the top marginal tax rate (46.5%) because it makes no difference in terms of cost to your employer.
Might be worth checking out how your remuneration package is structured and having a chat to an accountant to get the best outcome.
pale ale wrote:Thanks if anyone can enlighten me on the normal protocol.It is up to you to get financial and taxation advice about the best combination of salary and benefits that your employer is prepared to offer as a salary package.
The LAFHA has a number of tax benefits that your employer might pass on.
However, it sounds like you chose a different option.
It is not up to your employer to provide advice nor compensate you for any choice you made that was not optimum for your circumstances.
Cheers,
Rob
You can check out the LAFHA section of the ATO website here.
http://www.ato.gov.au/businesses/content.aspx?menuid=0&doc=/content/52023.htm&page=1&H1
It is possible to structure a LAFHA accommodation benefit so that it does not attract FBT to the employer. This is done by only reimbursing the employee for their reasonable accommodation costs. Reasonable is determined based on a variety of factors such as the type of accommodation they are accustomed to, their position within the company and so on. Food costs can also be packaged as part of the LAFHA also free of FBT so long as you don't pay above the reasonable food component amount reduced by the statutory food amount.Both the accommodation and food allowances if structured correctly can be income tax exempt to the employee and FBT exempt to the employer.
You need to make sure that you meet the definitions for living away from home. Have a look on the ATO website but the main points are that you have moved to a new work site to enable you to carry out your job. The position is for a finite period, and you will be returning to your usual place of residence at the end of the contract. Generally if you have sold your home at the old location and brought your family with you and purchased a new home you will not be considered as living away from home. You will be considered to have moved permenantly.
Have a chat to your accountant to see what options are available to you then present your employer with your findings. You will find they will be more willing to listen if you have already done all the hard work in getting the advice!
Good luck
pale ale wrote:Only myself and one other employee have purchased our own homesIf this is your 'home' then you might not be able to access the LAFHA by definition.
Cheers,
Rob
Thanks for your input guys. It is quite complicated. Damn that ATO website is confusing.
I would also agree that LAFHA is unlikely to apply.
How does your employer report the housing allowance? Does it appear on your PAYG summary (group certificate)?
Also, do you know if your employer withholds PAYG tax from the housing allowance?
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