On 21 August 2012, Tax Laws Amendment (2012 Measures No 4) Bill 2012 was passed by the House of Representatives with Government amendments. The amendments (which include a replacement of Schedule 1 to the Bill) relate to the changes that limit the concessional tax treatment of living-away-from-home (LAFH) allowances and benefits.
The Government issued a Supplementary Explanatory Memorandum in relation to the amendments.
In media release No 2012/088, issued 21 August 2012, the Assistant Treasurer and Minister Assisting for Deregulation, David Bradbury, commented on the passage of the Bill and noted that the amendments were made in response to the recommendations of the House of Representatives Economics Committee.
"The Government amendments introduced today pick up on all of the key recommendations in the Committee's report to ensure the reforms operate as intended," Mr Bradbury said.
These amendments will:
- Ensure LAFH allowances are taxed entirely within the fringe benefits tax system, rather than in the personal income tax system or a combination of both;
- Expand the definition of fly-in fly-out workers and drive-in drive-out workers for the purposes of the reforms, so those workers who live at home with their parents, or whose home on 'off' days is in a country other than Australia, do not lose the concessional tax treatment;
- Expand the definition of drive-in drive-out workers for the purposes of the reforms, so it includes workers who use their own vehicle to travel to the workplace;
- Amend the circumstances in which the 12 month time limit will pause, to provide certainty and simplicity; and
- Ensure that the provisions that prevent people accessing the transitional treatment if they 'vary' an existing arrangement only apply to 'material variations' and do not prevent minor changes such as normal salary increases.
In response to submissions received as part of earlier consultation processes, the Government announced in June 2012 that it was deferring the general start date of the reforms from 1 July 2012 to 1 October 2012 (with the reforms announced at Budget applying from 1 July 2014 for arrangements entered into prior to Budget night).
Mr Bradbury said that these reforms will not affect:
- the tax concession for fly-in fly-out and drive-in drive-out arrangements, as these employees will not be subject to the 12-month time limit;
- the tax treatment of travel and meal allowances, which are provided to employees who have to travel from their usual place of work for short periods (generally up to 21 days);
- the tax concessions that are provided for remote area fringe benefits.
The Bill also amends:
- A New Tax System (Goods and Services Tax) Act 1999 to clarify the goods and services tax consequences when a representative of an incapacitated entity is a creditor of that entity; and
- Tax Laws Amendment (2012 Measures No 2) Act 2012 in relation to consolidation events so that no interest is payable if an overpayment of income tax arises because of a deduction under the pre-rules and no shortfall interest or administrative penalty is payable if additional tax becomes payable under the pre-rules or interim rules.
The Bill now proceeds to the Senate.