The Fringe Benefits Tax Assessment Act 1986 (“FBTAA”) provides for substantial concessions where an employer pays for various costs associated with relocating an employee. These expenses can be met directly by the employer or passed on to the employee as part of a salary sacrifice arrangement. These concessions are available only if an employee relocates solely to perform employment duties i.e. if it weren’t for the employment duties, the employee would have continued to live in his or her previous place of residence.
From the employer’s point of view:
- All the costs incurred are tax deductible as if they were paid as salary and wages.
- GST input credits are available where the employer is registered for GST and a tax invoice is evident.
- NO Fringe Benefits Tax is payable at all.
From the employee’s point of view:
- If the employee met relocation costs out of his own income then NO amount would be tax deductible and he would be taxed on his full salary package.
- By structuring his salary to include a sacrifice or reimbursement for relocation expenses he receives these amounts TAX FREE.
Taxpayer has been asked to relocate in order to take up a new position with a new employer. He estimates that the costs associated with the relocation to be $60,000. His employer has indicated that they are willing to package the relocation costs as part of his salary. They offer:
- To structure his salary to include an allowance of $60,000 or
- To reimburse the taxpayer for actual costs on the basis of documentary proof
If the Taxpayer takes the allowance:
The full amount of $60,000 will be taxable and the taxpayer will not be entitled to any deductions for the costs associated with relocation as these will be fundamentally private, capital or domestic in nature.
If the taxpayer chooses to be reimbursed for expenses up to $60,000:
The employer will be able to fully deduct the amount of the reimbursement.
No tax will be payable by the taxpayer and no Fringe Benefit Tax will be payable in relation to this amount.
Relocation benefits which the taxpayer’s employer can offer are as follows:
- Removal costs
- Costs relating to selling and buying dwellings
- Relocation transport
- Temporary accommodation and meals
- Connection of telephone, gas, and electricity
- Fringe Benefits
- Tax Treatment of Living Away From Home Allowance (LAFHA)
- Salary packaging
- Computing the Value of LAFHA (Living Away From Home Allowance)
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