However, the Government is concerned by the rapid expansion in the number of claims made with a 457% increase in the value of LAFHA claims in six years (from $162 million in 2004/2005 to $740 million in 2010/2011).  Anticipated to take effect from 1 July:

Temporary residents will only be able to access LAFHA concessions where they maintain an Australian residence for their own use and are required to live away from this residence as part of their employment duties. This rule mainly targets expatriate employees who do not have a residence in Australia.

LAFHAs will be included in the taxable income of the employee rather than being taxed in the hands of the employer through the FBT system. The employee will be able to claim deductions for actual accommodation and food expenses incurred while living away from home, but these expenses must be substantiated under the normal operation of the rules. This means that employees will now need to hold invoices or receipts for rent, grocery and other outgoings in order to reduce their taxable allowance.

Reimbursements and payments of actual food and accommodation expenses by employers will still be exempt from FBT subject to new substantiation requirements.

The main practical issues are:

1. The after-tax salaries of expatriate employees are expected to drop significantly after the implementation of these changes. This may lead to an increase in the employer’s costs because they may need to increase these employees’ gross salaries in order to compensate for the extra tax payable. This will especially apply to expatriate employees working in Australia.
2. Employees receiving a LAFHA benefit will need to ensure they are keeping records to offset their LAFHA allowance.
3. The completion of the LAFHA declaration alone may no longer be sufficient for employers paying LAFHA benefits. Invoices evidencing the costs incurred for both accommodation and food expenses would need to be kept. Employers should start thinking about supplementing systems or processes to capture and record this information to avoid adverse tax consequences to employees (in the way of increased income tax) and employers (in the way of increased fringe benefits tax).

Trusts that are not eligible for the land tax threshold pay land tax on the entire land value. Trusts not eligible for the threshold are

• Discretionary trust
• Hybrid trust
• Unit trust
• Unit trust with the units held by a discretionary trust

If you have not registered for land tax in NSW then it is advisable that you do. The following link will allow you to download the registration form NSW Land Tax Registration Form

If you have a unit trust it is possible to convert it to a land tax unit trust that will allow your trust to receive the land tax threshold.

For example, a home in Sydney is purchased for investment and the land value is $350,000. If the property is purchased in a discretionary trust then the land tax levied is $5,700 p.a. If the same property were to be purchased in a land tax unit trust then the land tax levied is $0. A saving of $5,700 in this example.

If you are considering buying a property in NSW then it may be worthwhile considering a land tax unit trust. There are additional advantages to this structure although it does depends on individual circumstances and needs.

Speak to us if you require any advice in this area.

It is important that during this busy time you are vigilant with your information as scammers increase their activities, attempting to catch you off guard.

Scammers use a number of different methods including, phone calls, letters, emails, fake websites, text messages and even false job advertisements to obtain your personal tax information.

In the wrong hands, your Tax File Number and personal information can be used to access your bank accounts, take out loans and credit cards in your name, lodge false tax returns and claim benefits.

Your TFN is an important part of your identity and should always be kept safe.

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