Travel Allowance & Living away from home (LAFH) Allowance for Construction Workers

(last updated26/06/2013)

See this post for the latest ATO Changes to LAFH Allowance and FBT

Related Posts:

TAX WARNING! See this post for the latest ATO views and case law relating to travel allowances and associated travel expenses - Travel Allowance Update 2014.

What is "Travel" Allowance and "Living Away From Home" (LAFH) Allowance

Many construction workers are missing out on large deductions for "Travel allowance" and "Living Away From Home Allowance" (LAFH).

In many cases, construction and other workers receive a travel allowance and or a LAFH allowance to cover the costs of accommodation, food and other costs while working away from home. But these allowances, although sounding similar, are different in both the way they are paid and the way a deduction is claimed. For a detailed explanation of both see our post Claiming Travel Allowance Expenses.

Receving "Travel" Allowance

Receipt of a "travel" allowance is a pre-requisite to claiming a travel allowance using the ATO's "reasonable" amount method that does not require substantiation. A "travel" allowance is assessable income (see our post What is Assessable Income) and must be included as income on your tax return.

Some employers show the allowance separately on the PAYG Payment Summary. Others don't. That is when we need to do some more investigation to confirm receipt of a "travel" allowance.

In some cases the allowance is folded into the "Gross Income" on the PAYG Payment Summary. In this case, you need to either check your paysips for the detail or obtain a letter from your employer confirming receipt of a "travel" allowance and the amount.

Claming against "Travel" Allowance

The ATO provides guidelines for "...what are the reasonable travel and meal allowance expense amounts..." that can be included in the tax return. Where a construction worker has received an "assessable" travel allowance than travel expense claims can be made under these guidelines. The benefit of using the "reasonable" expense method is the expense claims do not require substantiation.

Where workers wish to claim more than the guidelines the total expense must be substantiated (not just the amount in excess of the ATO guidelines).

For the 2013 tax return the "reasonable allowance" can be between $213 and $472 per day, depending on circumstances and locations. For example, If a construction worker receved an assessable "travel" allowance and spent 70 days of the year in a country area the allowabe deduction to be included in the tax return could be $14910

Living Away From Home (LAFH) Allowance

Some care needs to be taken when "Living Away From Home Allowance" (LAFH) is received from the employer as this allowance is paid under the Fringe Benefits Tax (FBT) guidelines. Fringe Benefits are not "assessable" income for the employee since tax has already been paid on the amount under the FBT rules. Accordingly, you can not claim a tax deduction against the allowance using the ATO's "reasonable" expense method.

LAFH allowances are usually made for longer term arrangements. A claim against this reimbursement can only be made where the actual expense incurred by workers is greater than the allowance received. In this case the total amount claimed must be substantiated (ie. receipts for all costs - not just the amount in excess of the allowance). An exception to this is where the number of days away is 21 days or less on each arrangement.

See this post for the latest ATO Changes to LAFH Allowance and FBT

Missed out on Claiming a Deduction for Travel Allowance?

Whether you are a construction worker, travelling sales person or for other reasons your employment requires you to travel away from home you may be entitled to a substantial allowable deduction. The LAFH allowance relates to both domestic and overseas work related travel.

If you haven't claimed the deduction in your current or previous tax returns you are able amend your tax return up to two years after the assessment was issued. There may be additional tax dollars you are currently entitled to?

If you believe you have missed out on this deduction you can contact our office on 07 3208 3888 and discuss it further. It doesn't matter if you are local or interstate - we can still do your tax returns by Internet, email or snail mail.

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