The Living-Away-From-Home Allowance (LAFHA) is a significant benefit for many Australian employees who are required to live away from their usual place of residence for work purposes. As of 2025, understanding the intricacies of LAFHA is crucial for both employees and employers to ensure compliance with taxation laws and to maximise the benefits available. This comprehensive guide delves into the essential aspects of LAFHA, including eligibility criteria, tax implications, recent updates, and practical considerations for employees.

  1. What is LAFHA?

LAFHA is an allowance provided by employers to employees to compensate for additional expenses incurred when they are required to live away from their usual place of residence for work purposes. This allowance typically covers additional accommodation and food costs that the employee would not have otherwise incurred. Importantly, LAFHA is categorised as a fringe benefit and is subject to Fringe Benefits Tax (FBT) under Australian taxation law.

  1. Eligibility Criteria

To qualify for LAFHA, several conditions must be met:

  • Requirement to Live Away from Home: The employee must be required to live away from their usual place of residence to perform their work duties. This situation typically arises when the work location is sufficiently distant from the employee’s home, making daily commuting impractical. 
  • Temporary Relocation: The relocation should be temporary. If the employee relocates permanently or for an indefinite period, LAFHA may not apply. 
  • Maintenance of Usual Residence: The employee must maintain their usual place of residence in Australia, which they are living away from for work purposes. This means that the employee intends to return to their original home after the work assignment concludes. 
  • Provision of Declaration: Employees are required to provide their employer with a declaration stating that they are living away from home. This declaration is essential for the employer to substantiate the provision of LAFHA and to apply the appropriate FBT treatment.
     Australian Taxation Office 

  1. Components of LAFHA

LAFHA typically comprises two main components:

  • Accommodation Component: This covers the additional expenses incurred by the employee for accommodation while living away from home. The exempt accommodation component is the amount of the additional costs actually incurred, which need to be reasonable in the circumstances.
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  • Food Component: This covers additional food expenses. The exempt food component is equivalent to the amount of additional food costs incurred by reason of having to work away from home. The Australian Taxation Office (ATO) publishes guidelines on what constitutes reasonable food expenses, which are updated annually.
     atotaxrates.info 

  1. Tax Implications

LAFHA is considered a fringe benefit and is subject to FBT. However, certain components of LAFHA may be exempt from FBT:

  • Exempt Accommodation Component: The portion of the allowance that covers reasonable accommodation expenses incurred by the employee is exempt from FBT. 
  • Exempt Food Component: The portion of the allowance that covers reasonable additional food expenses is also exempt from FBT. The ATO provides annual guidelines on reasonable food amounts, which employers should reference to determine the exempt portion.
     Australian Taxation Office 

It’s important to note that any portion of the allowance that exceeds the reasonable amounts specified by the ATO may be subject to FBT. Employers are responsible for calculating and paying FBT on the taxable portion of LAFHA.

  1. Distinguishing Between LAFHA and Travel Allowances

It’s crucial to differentiate between LAFHA and travel allowances, as they have different tax treatments:

  • LAFHA: Applies when an employee is required to live away from their usual place of residence for work purposes on a temporary basis. The allowance compensates for additional living expenses, and certain components may be exempt from FBT. 
  • Travel Allowance: Applies when an employee is traveling for work but not living away from home. Travel allowances are generally taxable, and employees can claim deductions against them. Generally, an employee traveling for business for less than 21 days will receive a travel allowance, not a LAFHA.
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  1. Recent Updates and Changes in 2025

As of 2025, there have been several updates relevant to LAFHA:

  • Reasonable Food Amounts: The ATO has updated the reasonable food amounts for the FBT year ending 31 March 2025. For one adult, the reasonable food amount is $331 per week. These amounts vary based on the number of adults and children and are adjusted annually.
     Australian Taxation Office 
  • Alternative Record Keeping: From 1 April 2024 (the FBT year ending 31 March 2025), employers have the option to use existing business records instead of employee declarations for certain benefits, including LAFHA. This alternative record-keeping option is available if the Commissioner has made a determination by legislative instrument specifying the information required in the alternative records.
     Australian Taxation Office 

  1. Practical Considerations for Employees

Employees receiving LAFHA should consider the following:

  • Maintain Records: Keep detailed records of accommodation and food expenses incurred while living away from home. This documentation supports the calculation of exempt components and ensures compliance with tax obligations. 
  • Understand Tax Obligations: While certain components of LAFHA may be exempt from FBT, it’s essential to understand that any excess amounts could be subject to tax. Employees should consult with their employer or a tax professional to understand their specific tax obligations. 
  • Provide Necessary Declarations: Ensure that you provide your employer with the required declarations stating that you are living away from home. This is crucial for the correct tax treatment of the allowance.
     Australian Taxation Office 
  • Review Employment Contracts: Carefully review the terms of your employment contract regarding LAFHA to understand the allowance amounts, duration, and any conditions attached.

 

Conclusion

Understanding the Living-Away-From-Home Allowance (LAFHA) in 2025 is essential for both employees and employers to ensure compliance with Australian tax laws while maximising its benefits. LAFHA provides financial relief to employees who are required to live away from their usual residence for work, covering additional accommodation and food expenses. However, navigating its eligibility requirements, tax implications, and recent regulatory changes is crucial to avoid unexpected tax liabilities.

By staying informed about the latest Fringe Benefits Tax (FBT) regulations, maintaining proper documentation, and seeking professional advice when necessary, employees can make the most of their LAFHA entitlements. Employers, on the other hand, should ensure they correctly apply FBT exemptions and maintain accurate records to avoid compliance issues.

As tax laws continue to evolve, keeping up-to-date with Australian Taxation Office (ATO) guidelines will help employees and businesses remain compliant while benefiting from this valuable allowance.

 

Frequently Asked Questions (FAQs)

  1. Who is eligible for LAFHA?
     LAFHA is available to employees who are required by their employer to live away from their usual residence for work-related purposes. To be eligible, the relocation must be temporary, and the employee must maintain their usual home while away.
  2. Is LAFHA taxable?
     LAFHA is a fringe benefit, meaning it is subject to Fringe Benefits Tax (FBT). However, certain components, such as reasonable accommodation and additional food expenses, may be exempt from FBT if they meet ATO guidelines.
  3. How long can I receive LAFHA?
     LAFHA is intended for temporary relocations, typically lasting up to 12 months at a single work location. However, in some cases, extensions may apply depending on specific circumstances and ATO regulations.
  4. What is the difference between LAFHA and a travel allowance?
     LAFHA applies when an employee is living away from home for an extended period due to work and maintains their usual residence. A travel allowance is for short-term work-related travel (usually under 21 days) and is fully taxable, unlike the exempt portions of LAFHA.
  5. Do I need to provide evidence of my expenses?
     Yes, employees should keep detailed records of accommodation and food expenses to support their LAFHA claims. Employers also require an employee declaration confirming that they are living away from home to ensure the correct tax treatment.