A living away from home allowance is not taxable in your hands. Under Australian tax law it’s classified as a fringe benefit, so it doesn’t appear on your tax return and doesn’t get added to your assessable income. The tax obligation sits with your employer, who pays fringe benefits tax on the allowance at 47 percent through to the FBT year ending 31 March 2026.1Australian Taxation Office. Fringe Benefits Tax – Rates and Thresholds Whether any FBT actually gets paid depends on how much of the allowance can be treated as exempt, which in turn depends on your circumstances and paperwork.
Why You Don’t Pay Income Tax on It
LAFHA sits outside the PAYG income tax system entirely. Your employer pays you the allowance, then separately calculates and pays FBT on the grossed-up value. You don’t declare it, and you can’t be taxed twice on the same money. The 47 percent rate applies to the grossed-up taxable value rather than the raw dollars you receive, so the real cost to the employer is higher than the face amount of the allowance.2Australian Taxation Office. Calculating Your FBT
The important part for you is that this remains a fringe benefit and not salary. If the arrangement fails the FBT conditions, employers will usually restructure it as ordinary income, which is taxed at your marginal rate. So while the allowance itself is not taxable to you, the conditions still matter, because they determine whether the payment stays LAFHA or becomes something else.
How the Taxable Value Can Reduce to Zero
The taxable value of a LAFHA starts as the full allowance paid, then reduces by any exempt accommodation component and any exempt food component.3Australasian Legal Information Institute. Fringe Benefits Tax Assessment Act 1986 – Section 31 Where your actual accommodation and food expenses match the allowance, the taxable value can drop to nil and no FBT is payable at all. That’s the situation most employers and employees aim for.
The Accommodation Component
The exempt accommodation portion is based on what you actually spend on temporary housing at the work location. If the allowance pays $500 a week toward rent and your rent is $500, that full amount reduces the taxable value. Keep the evidence: rental receipts, a lease agreement, or the equivalent. This component is always tied to real, substantiated expenditure.
The Food Component
Food works differently. The ATO publishes “reasonable amounts” each year, and spending within those figures means the exemption can be claimed without itemising every grocery receipt. For the FBT year starting 1 April 2025, the weekly reasonable amounts are $341 for one adult, $512 for two adults, $598 for two adults and one child, $684 for two adults and two children, and $770 for two adults and three children. Add $171 for each additional adult and $86 for each additional child; an “adult” is anyone over 12 at the start of the FBT year.4Australian Taxation Office. TD 2025/2 – Fringe Benefits Tax: Reasonable Amounts for Food and Drink Expenses Spend more than the reasonable amount and you’ll need detailed records to justify the higher figure.
One point that trips people up: the exempt food component only covers the additional food cost created by living away, not your entire grocery spend. You would have eaten at home anyway, so the exemption targets the extra.
What You Have to Meet to Keep the Concession
A Home in Australia You Still Maintain
You must keep a home in Australia where you usually live, and it has to remain available for your immediate use and enjoyment while you’re away.5Australian Taxation Office. Fringe Benefits Tax – A Guide for Employers That means continuing to pay the ongoing costs, whether mortgage, rent, rates, or utilities. You can’t rent out the whole property while you’re gone, because then it’s no longer available for your immediate return. Renting out a spare bedroom or granny flat is generally fine, as long as you can still move back in and use the property.
The home also has to be somewhere you actually lived before the assignment, not a property you bought to satisfy the rule. If you sell up or terminate the lease while you’re away, the exemptions stop from that point on because you no longer maintain a qualifying residence.6Australian Taxation Office. Living-Away-From-Home Allowance Fringe Benefits
The 12-Month Limit
The concession only runs for the first 12 months at a particular work location.7Australian Taxation Office. Fringe Benefits Tax – A Guide for Employers – Living-Away-From-Home Accommodation Requirements After that, the exempt accommodation and food components no longer reduce the taxable value, and the full allowance becomes subject to FBT at face value. A change in job title or duties at the same location doesn’t reset the clock. Move to a genuinely different work location for a new project and a fresh 12-month period starts. The period can also be paused in some circumstances set out in the legislation, so time spent back at your usual home may not count against the limit.3Australasian Legal Information Institute. Fringe Benefits Tax Assessment Act 1986 – Section 31
A Signed Declaration
Your employer needs a signed declaration from you before they can claim the reduced taxable value. Without it, the full allowance is taxable to the employer at the grossed-up FBT rate, which usually means the arrangement stops being viable.8Australian Taxation Office. Living-Away-From-Home Declaration The declaration records the address of your maintained home, the address of your temporary accommodation, and the dates you lived away. Check those details against your lease and utility records before signing. Keep your own copies of the declaration along with the supporting evidence for accommodation and, where relevant, food expenses.
Where It Still Affects You: Reportable Fringe Benefits
Although LAFHA doesn’t form part of your taxable income, it can appear on your income statement as a reportable fringe benefits amount. That figure doesn’t increase your income tax, but it feeds into income tests used for some government benefits, child support, and certain tax offsets.5Australian Taxation Office. Fringe Benefits Tax – A Guide for Employers The reported amount is the grossed-up value, so it looks larger than the cash you actually received. If you’re near a threshold for a family payment, offset, or concession, factor this in when you plan.
FIFO and DIDO Workers
Fly-in fly-out and drive-in drive-out workers can still access the LAFHA concession, but the eligibility conditions and the declaration form differ from the standard arrangement.6Australian Taxation Office. Living-Away-From-Home Allowance Fringe Benefits One trap to know about: if you receive both free accommodation at the work site and employer-funded transport to and from your usual residence, the FIFO/DIDO declaration doesn’t apply, because that combination is treated differently under the legislation.8Australian Taxation Office. Living-Away-From-Home Declaration