A Living Away from Home Allowance (LAFHA) is paid to an employee that their employer requires to live and work away from their usual home for months at a time. But the allowance is often misunderstood. 
It is complicated. Of course it is, it involves tax legislation and the Australian Tax Office (ATO). If someone gets the process wrong or misses a step, the Fringe Benefits Tax (FBT) can wipe the benefit of the payment out.

Living Away From Home Allowance explained
People can mistake it as a travel allowance or extra pay but it is not taxed the same way as these. It is also not a perk or a bonus for relocating. The LAFHA is an additional payment the employer pays to an employee to cover their extra accommodation and food costs when they need to live away from their normal residence for work. 
So, it is important that employers and employees understand the LAFHA’s complexities to ensure they maximise its benefits and comply with tax laws. 

Two main parts to the allowance
There are two main parts to LAFHA:
1. Accommodation expenses. Because an employee is working away from home, they have additional expenses to pay for their accommodation because they are still paying for their usual residence. The additional expenses must be reasonable and the actual amount the employee pays, and it is exempt from FBT.
2. Food and drink expenses. This pays for the additional reasonable food and drink expenses incurred by the employee while working away from home. The ATO publishes what it considers to be reasonable food expenses every year. The following are examples from the ATO’s weekly amounts for 2026:
a. One adult - $341
b. Two adults - $512
c. One adult and one child - $427
For 2027 the equivalent example amounts are:
a.  One adult - $353
b. Two adults - $530
c. One adult and one child - $442
Note that because LAFHA is Covered by the Fringe Benefits Tax (FBT) regime, these years are FBT years. The 2026 year started on 1 April 2025 and finished on 31 March 2026 while the 2027 FBT year started on 1 April 2026 and finishes on 31 March 2027.

What makes an employee eligible?
To be eligible for LAFHA, an employee must meet the following criteria:
1. Must live away from normal residence. An employer may need an employee to work away from home from a place that is too far for an employee to commute from daily. The employer must require the employee to work away from home. It cannot be an employee’s personal choice. 
2. It must be temporary. The relocation must be temporary for up to 12 months. If it is not a temporary relocation, the LAFHA will not apply.
3.  Must still maintain usual residence. The employee must maintain their normal residence during the time they are working away from home. This means that the employee can return home at any time and on completion of their temporary work assignment. This also means the home is not rented out. It is either vacant or lived in by other family members as normal.
4. Provide employer with a declaration. An employee must provide their employer with a declaration that they will maintain their normal residence while working away from home and their intention to return home. This gives the employer the paperwork to establish they are paying a LAFHA and to apply to the ATO for the correct FBT treatment.
5. Provides evidence. The employee provides evidence of accommodation costs and food expenses while living away from home.
6. Know your tax obligations. While the accommodation and food and drink costs may be exempt from FBT, anything above the ATO’s published amounts may require tax paid on the excess amount. It would be wise to consult either your employer or your accountant to understand your tax obligations when receiving the LAFHA.
If workers are drive-in drive-out or fly-in fly-out, this is a different situation and does not qualify for the LAFHA. Always get advice about which tax rules apply. Do not make assumptions.

Difference between the living away from home and travel allowances
People often confuse the LAFHA with the travel allowance. They are certainly similar in that they both paid to employees working away from their normal workplace and home. But how each allowance is taxed is different:
1. An employee receives the LAFHA when they cannot live in their usual residence when working at a different workplace, usually for several months at a time. The ATO treats it as the employer paying a fringe benefit. However, there are parts of the payments that are exempt from FBT, and not considered part of an employee’s income. 
2. An employee receives a travel allowance when travelling for work purposes but is not living away from their normal residence. For example, an employee staying interstate for two nights to attend a conference and then returns home. It becomes part of an employee’s assessable income, PAYG withholding generally applies and the employer can claim a travel allowance as a tax deduction.
To decide whether an employee should receive a travel allowance or LAFHA, consider the following:
1. If an employee needs a short-term lease of a room or an apartment for up to several months in Port Augusta while they maintain their home base in Melbourne, then they need the LAFHA.
2. If the employee has to work away from home for several weeks but comes home on weekends, it is most likely a travel allowance they receive.

How the tax office treats the allowance
The LAFHA is part of the Fringe Benefits Tax Assessment Act and the following applies:
1. The employer pays the LAFHA—it does not go through payroll as wages. It is also not subjected to PAYG or part of an employee’s gross wages.
2. The taxable amount of the LAFHA is the total the employer pays less the exempt food and accommodation amounts.
3. The tax exempt accommodation part must be substantiated by the employee with either receipts or a lease.
4. The tax exempt food part of the allowance is the reasonable food and drink costs less the ATO’s statutory amount. The statutory amount is currently $42 for an adult and $21 for a child a week.
5. If there is any remaining amount that attracts the FBT, then the employer pays the tax which is currently 47%. Obviously, the idea is to keep the LAFHA under the level where FBT becomes payable.

Give Ben a call for advice before setting up a LAFHA. He can help structure it so the employee receives the maximum allowance without paying tax and the employer does not pay FBT. 
In conclusion
It is important for both employers and employees to understand the LAFHA to maximise its benefits and comply with the tax laws. The LAFHA gives employees who need to live away from their normal home for work financial relief. It covers accommodation and food and drink expenses. But you need to know what the tax implications are, the changes to the regulations, and the eligibility requirements so there are no surprise tax liabilities. 
Seek professional advice so you know what the latest FBT rules are and keep good records. If employees do this, they can maximise the entitlements of their LAFHA. Employers should apply exemptions correctly and ensure their recordkeeping is accurate so they comply with the relevant tax laws.
Australian tax laws continually change, so staying up to date with the ATO guidelines will help businesses stay compliant while they benefit from the LAFHA.

The recent High Court decision has an important impact on small business groups that use discretionary trusts with corporate beneficiaries. In that landmark case (Tax Commissioner v Bender) on 10 June 2026, the court denied the Australian Tax Office’s (ATO’s) belief that unpaid present entitlements (UPEs) a trust owes a corporate beneficiary automatically becomes a loan back to the trust.

This is important because if the ATO treats a UPE as a loan there could be a tax bill under the rules of Division 7A. These rules apply to private companies that pay benefits, such as payments or loans, or forgive debts, to their shareholders

Why the court ruling matters

A lot of discretionary trusts form part of the structure of private business groups. The trust may distribute income to the company (referred to as a bucket company) but the money stays in the trust to fund future investment or as working capital. When money is owed to a beneficiary, but not paid, it becomes a UPE.

For the past 15 years, the ATO treated a UPE as a loan back to the trust and taxed it if there was not a formal loan agreement and regular repayments. This can increase the cost of compliance and administration while reducing the flexibility of cash flow.

The crux of the Bendel case against the ATO was that he kept income aside for many years for a related company. The company never asked for the funds, so they stayed within the trust and the ATO treated the unpaid amounts as loans and wanted Bendel to pay tax on the amount.

High Court decision

The High Court ruled against the ATO saying it was not a loan if an entitlement remains unpaid. It decided there has to be an obligation to repay money received as an advance. UPEs are not an advance and the company had simply not asked for their entitlement.

According to the High Court, providing finance or a loan is not the same as merely doing nothing. So the company’s entitlement is exactly that—an entitlement. It does not become a debt the trust needs to pay until the company requires the trust to pay the entitlement. Basically, the ATO was found to be wrong in its assessment and tax requirements on UPEs.

What this means for taxpayers

While this is a good outcome, it does not mean you can simply ignore unpaid entitlements. The June 2026 outcome rested on the fact the company never asked for payment and the specific wording in the trust deed. There are other tax rules that may apply. Whether or not you owe the ATO tax depends on individual circumstances.

With the government about to start taxing discretionary trust income at a minimum of 30% from 1 July 2028, the appeal of receiving income may be reduced. Now may be the time to consider your options.

All this makes UPEs and discretionary trusts and taxation complex. Contact Ben for more information about how it affects your trust and what you can do.

It is an unfortunate fact that child support is a key financial responsibility when parents separate or divorce. Normally one parent has their children more often than the other one. It is only natural that parents want to know how child support will affect them at tax time.

What child support is

Child support is what one parent pays to the other parent to contribute financially to their children’s needs. Services Australia (Child Support) manages it under the Child Support (Assessment) Act 1989. However, you can manage support payments without involving Services Australia but it is wise to keep good records.

The formula used to base child support payments on is as follows:

1.      The taxable income of both parents.

2.      How many and how old the children are.

3.      How often each parent cares for the children.

Is it taxable or a tax deduction?

It is neither taxable or claimable as a tax deduction.

If you receive child support, you do not need to declare it as taxable income. This means there is no reduction in the amount of money you receive for your children.

When you pay child support, you cannot claim it as a tax deduction as the tax office considers it a personal obligation unrelated to work.

But child support can indirectly affect your tax.

What are the tax implications?

Paying or receiving child support has other tax implications, including:

1.      Adjusted Taxable Income. The tax office uses Adjusted Taxable Income (ATI) to evaluate whether you qualify for government offsets and benefits. So if you pay child support, it reduces your ATI and this may affect whether you get the parenting payment, Family Tax Benefit (FTB) Part A or other government benefits.

2.      Family Tax Benefits. If you receive child support, it may reduce your FTB. However, this depends on how much child support you receive. The more you get, the less government support you may be eligible for.

3.      Making private arrangements. If you make private child support arrangements for your children when you separate from your partner, this can affect how the government assesses any benefits to which you are entitled. But it is still not taxable or claimable as a tax deduction.

Keep good records

It is important to keep good records if you receive or pay child support. Keep payment records such as receipts, payment transfers and statements from Services Australia. This will help if you receive a legal challenge and gives you accurate information for government departments assessing your eligibility for benefits.

No longer can holiday home owners claim lucrative tax deductions (such as rates, interest and insurance) if they block out peak holiday periods for personal use. The Australian Tax Office (ATO) tightened the tax deduction rules for holiday homes. It withdrew the previous rules on 12 November 2025, so you now have to prove the property is commercially available for rent as its primary use. This affects you if you own a rental that doubles as a holiday home.

What is the primary use of your rental property?

Previously you could claim deductions for expenses during the time you made the property available in the rental market even if you never rented it out. But you had to prove you made legitimate efforts to tenant the property. Those days are over.

The core question is – Do you use the property mainly to earn income?

The new ATO guidelines overturn a 40-year ruling and replace it with two Practical Compliance Guidelines, PCG 2026/2 and PCG 2026/3, and a new Taxation Ruling, TR 2026/1. These control when the tax office stops treating your holiday home as an income earning investment and flags it as a private investment. For example:

1.      Primary role is a rental investment. When you genuinely rent your holiday home out for most of the year, you can claim ownership costs like expenses, interest, rates, etc. But if you, your family and friends use it in the off season for a few weeks when there are no bookings, you cannot claim the expenses during those periods. You have to apportion your claim to exclude private use from what you claim as a tax deduction.

2.      Primary role is as a holiday home. If the primary use of your holiday home is for recreation for you, your family and friends, there is a significant tightening of the rules. You cannot claim ownership costs such as the decline in value, rates or interest. You can now only claim deductions for the costs associated directly with the rental of the property. These include advertising, platform commissions and cleaning fees for guest stays.

The new rules apply to short-term and long-term rentals, so this means the ATO is scrutinising online sharing and booking platforms, and includes the following:

·         Properties rented over the long term.

·         Leasing out whole recreational properties or holiday homes.

·         Leasing a spare bedroom in your house using an online sharing app.

Keeping records

The ATO is not going to spend compliance resources on meeting the new requirements for the year ending 30 June 2026 or earlier. However, if you own a holiday home you should keep good records that include:

·         Details of private and rental use.

·         Confirmation that you priced the rent at market value.

·         Proof of accepting and rejecting rental bookings.

·         Evidence that you did not block out times for personal use during peak holiday periods.

Do not let the new tax rules dictate the decisions you make about the use of your holiday home. If you bought it to enjoy, then concentrate on making priceless memories with your family rather than worrying about how much you can claim as tax deductions.

Talk to Ben about the new ATO guidelines for holiday homes and how you can financially maximise your investment.