A large draw card in the remuneration package for both international and domestic employees is the tax free living away from home allowance and benefits. The allowance is designed to help compensate for additional cost when living away from home for employment purposes and is tax free when received by the employee.

 

Canberra feel that this tax exemption is being increasingly misused, with the total amount of tax-free living away from home allowance reported by the employer to the Australian Taxation Office increasing from $162 million in the 2005 financial year to $740 million in the 2011 financial year.

 

Mr Swan’s statement notes that under reforms announced today:

 

·                    access to the tax exemption for temporary residents will be limited to those who maintain a residence for their own use in Australia, which they are living away from for work purposes, such as “fly-in fly-out” workers; and

 

·                    individuals will be required to substantiate their actual expenditure on accommodation and food beyond a statutory amount.

 

These proposed changes will undoubtedly raise the costs for business through wage increases, or paying the tax due on meals and accommodation etc. Overseas employees will also be more difficult to attract.