Some common sense appears to have prevailed somewhat with the release of Taxation Determination TD 2013/4.
Moore Stephens amongst others made submissions highlighting the fundamental flaws associated with the salary-band model first proposed in draft Taxation Determination TD 2012/D8 in respect of the reasonable food component.
The Australian Taxation Office ('ATO') has reverted to a single set of rates for reasonable food and drink expenses incurred by an employee receiving a Living Away From Home Allowance ('LAFHA') under a domestic transfer for the 2013/14 fringe benefits tax ('FBT') year.
These new rates are effective 1 April 2013:
'Adults' for this purpose are persons who had attained the age of 12 years before the beginning of the FBT year.
In relation to larger family groupings, the Australian Taxation Office (ATO) accepts a food component based on the above figures plus $117 for each additional adult and $59 for each additional child.
Importantly, if food and drink expenses incurred by the employee do not exceed the reasonable amounts substantiation of these expenses are not required.
However, it is not all good news. The net food amounts for the 2013/14 FBT year are lower than those that applied in respect of 2012/13 FBT year for the vast majority of employees.
This means that a significant number of employees who still qualify for a LAFHA may still be facing a pay reduction as at 1 April 2013.
The new rates will apply unless the individual is caught by the transitional measure (see below).
By way of comparison, TD 2012/5 which detailed the reasonable food component for the 2012/13 FBT year commencing 1 April 2012 provided the following:
Overseas employees
The ATO has however instituted separate rates for employees who are living away from home at overseas locations. The applicable rates will be dependent on the location and the size of the accompanying family group.
For further details on the calculation of the reasonable food and drink expenses with respect to overseas employees please refer to the Determination, which can be found by clicking here.
Transitional measure
As a transitional measure for the FBT year commencing on 1 April 2013, where an employee and employer have an existing employment agreement in force as at 27 February 2013 that specifies a rate in Taxation Determination TD 2012/5 and that employment agreement is not varied in a material way or renewed, the rates in TD 2012/5 will continue to be accepted by the Commissioner as reasonable amounts for food and drink expenses incurred by an employee receiving a LAFHA fringe benefit for the 2013/14 FBT year.
These transitional rules are separate from that apply in respect of LAFHA eligibility.
Comments
Whilst the removal of the salary-band system in the final Determination is certainly welcomed, the establishment of separate rates for employees in overseas locations and the transitional measures will add further confusion in navigating through the LAFHA legislation as well as increasing the already burgeoning administrative burden in the year ahead, perhaps to the point where it becomes all too hard for the employers.
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