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travel allowance vs living away from home

IRS Announces Special Per Diem Rates for Travel Away From Home Beginning October 1, 2022

EBIA

September 29, 2022 · 5 minute read

IRS Notice 2022-44 (Sept. 26, 2022)

Available at https://www.irs.gov/pub/irs-drop/n-22-44.pdf

The IRS has announced the special per diem rates that can be used to substantiate the amount of business expenses incurred for travel away from home on or after October 1, 2022. Employers using these rates to set per diem allowances can treat certain categories of travel expenses as substantiated without requiring that employees prove the actual amount they spent. (Employees must still substantiate the time, place, and business purpose of their travel expenses.) The amount deemed substantiated will be the lesser of the allowance actually paid or the applicable per diem rate for the same set of expenses. This notice, which replaces IRS Notice 2021-52 (see our Checkpoint article ), announces rates for use under the optional high-low substantiation method, special rates for transportation industry employers, and the rate for taxpayers taking a deduction only for incidental expenses. General guidance issued in 2019 regarding the use of per diems after the Tax Cuts and Jobs Act remains in effect (see our Checkpoint article ).

For travel within the continental United States, the optional high-low method designates one per diem rate for all high-cost locations and another for all other locations. Employers can use the high-low method for substantiating lodging, meals, and incidental expenses, or for substantiating meal and incidental expenses only (M&IE). Beginning October 1, 2022, the high-low per diem rate that can be used for lodging, meals, and incidental expenses increases to $297 (from $296) for travel to high-cost locations and increases to $204 (from $202) for travel to other locations. The high-low M&IE rates remain at $74 for travel to high-cost locations and $64 for travel to other locations. Many locations have been added to the list of high-cost locations, one has been removed, and many that remain on the list are now considered high-cost for a different portion of the calendar year.

While self-employed persons cannot use the high-low method, they may use other per diem rates to compute the amount of their business expense deduction for business meals and incidental expenses (but not lodging), or for incidental expenses alone. (Employees can no longer deduct their unreimbursed expenses due to the suspension of miscellaneous itemized deductions by the Tax Cuts and Jobs Act, so these other rates are effectively unavailable to them.) The special rate for the incidental expenses deduction is unchanged at $5 per day.

EBIA Comment: The per diem rules can greatly simplify the process of substantiating business travel expense amounts. If the amount of an allowance is deemed substantiated because it does not exceed the applicable limit, any unspent amounts do not have to be taxed or returned. If an employer pays per diem allowances that exceed what is deemed substantiated, however, the employer must either treat the excess as taxable wages or require actual substantiation. If substantiation is required, any unsubstantiated portion of the allowance must be returned or treated as taxable wages. For more information, see EBIA’s Fringe Benefits manual at Section XXI.G (“Travel Expense Reimbursements: Substantiation”).

Contributing Editors: EBIA Staff.

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What Are Travel Expenses?

Understanding travel expenses, the bottom line.

Deductions & Credits
Tax Deductions

Travel Expenses Definition and Tax Deductible Categories

Michelle P. Scott is a New York attorney with extensive experience in tax, corporate, financial, and nonprofit law, and public policy. As General Counsel, private practitioner, and Congressional counsel, she has advised financial institutions, businesses, charities, individuals, and public officials, and written and lectured extensively.

For tax purposes, travel expenses are costs associated with traveling to conduct business-related activities. Reasonable travel expenses can generally be deducted from taxable income by a company when its employees incur costs while traveling away from home specifically for business. That business can include conferences or meetings.

Key Takeaways

Travel expenses are tax-deductible only if they were incurred to conduct business-related activities.
Only ordinary and necessary travel expenses are deductible; expenses that are deemed unreasonable, lavish, or extravagant are not deductible.
The IRS considers employees to be traveling if their business obligations require them to be away from their "tax home” substantially longer than an ordinary day's work.
Examples of deductible travel expenses include airfare, lodging, transportation services, meals and tips, and the use of communications devices.

Travel expenses incurred while on an indefinite work assignment that lasts more than one year are not deductible for tax purposes.

The Internal Revenue Service (IRS) considers employees to be traveling if their business obligations require them to be away from their "tax home" (the area where their main place of business is located) for substantially longer than an ordinary workday, and they need to get sleep or rest to meet the demands of their work while away.

Well-organized records—such as receipts, canceled checks, and other documents that support a deduction—can help you get reimbursed by your employer and can help your employer prepare tax returns. Examples of travel expenses can include:

Airfare and lodging for the express purpose of conducting business away from home
Transportation services such as taxis, buses, or trains to the airport or to and around the travel destination
The cost of meals and tips, dry cleaning service for clothes, and the cost of business calls during business travel
The cost of computer rental and other communications devices while on the business trip

Travel expenses do not include regular commuting costs.

Individual wage earners can no longer deduct unreimbursed business expenses. That deduction was one of many eliminated by the Tax Cuts and Jobs Act of 2017.

While many travel expenses can be deducted by businesses, those that are deemed unreasonable, lavish, or extravagant, or expenditures for personal purposes, may be excluded.

Types of Travel Expenses

Types of travel expenses can include:

Personal vehicle expenses
Taxi or rideshare expenses
Airfare, train fare, or ferry fees
Laundry and dry cleaning
Business meals
Business calls
Shipment costs for work-related materials
Some equipment rentals, such as computers or trailers

The use of a personal vehicle in conjunction with a business trip, including actual mileage, tolls, and parking fees, can be included as a travel expense. The cost of using rental vehicles can also be counted as a travel expense, though only for the business-use portion of the trip. For instance, if in the course of a business trip, you visited a family member or acquaintance, the cost of driving from the hotel to visit them would not qualify for travel expense deductions .

The IRS allows other types of ordinary and necessary expenses to be treated as related to business travel for deduction purposes. Such expenses can include transport to and from a business meal, the hiring of a public stenographer, payment for computer rental fees related to the trip, and the shipment of luggage and display materials used for business presentations.

Travel expenses can also include operating and maintaining a house trailer as part of the business trip.

Can I Deduct My Business Travel Expenses?

Business travel expenses can no longer be deducted by individuals.

If you are self-employed or operate your own business, you can deduct those "ordinary and necessary" business expenses from your return.

If you work for a company and are reimbursed for the costs of your business travel , your employer will deduct those costs at tax time.

Do I Need Receipts for Travel Expenses?

Yes. Whether you're an employee claiming reimbursement from an employer or a business owner claiming a tax deduction, you need to prepare to prove your expenditures. Keep a running log of your expenses and file away the receipts as backup.

What Are Reasonable Travel Expenses?

Reasonable travel expenses, from the viewpoint of an employer or the IRS, would include transportation to and from the business destination, accommodation costs, and meal costs. Certainly, business supplies and equipment necessary to do the job away from home are reasonable. Taxis or Ubers taken during the business trip are reasonable.

Unreasonable is a judgment call. The boss or the IRS might well frown upon a bill for a hotel suite instead of a room, or a sports car rental instead of a sedan.

Individual taxpayers need no longer fret over recordkeeping for unreimbursed travel expenses. They're no longer tax deductible by individuals, at least until 2025 when the provisions in the latest tax reform package are due to expire or be extended.

If you are self-employed or own your own business, you should keep records of your business travel expenses so that you can deduct them properly.

Internal Revenue Service. " Topic No. 511, Business Travel Expenses ."

Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ," Page 13.

Internal Revenue Service. " Publication 5307, Tax Reform Basics for Individuals and Families ," Page 7.

Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ," Pages 6-7, 13-14.

Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ," Page 4.

Internal Revenue Service. " Publication 5307, Tax Reform Basics for Individuals and Families ," Pages 5, 7.

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Tax Deductions for Business Travelers

When you are self-employed, you generally can deduct the ordinary and necessary expenses of traveling away from home for business from your income. But before you start listing travel deductions, make sure you understand what the Internal Revenue Service (IRS) means by "home," "business," and "ordinary and necessary expenses."

Ordinary vs. necessary expenses

Business home, not home sweet home, transportation expenses on a business trip are deductible, fees for getting around are deductible, lodging, meals and tips are deductible.

Key Takeaways

Typically, you can deduct travel expenses if they are ordinary (common and accepted in your industry) and necessary (helpful and appropriate for your business).
You can deduct business travel expenses when you are away from both your home and the location of your main place of business (tax home).
Deductible expenses include transportation, baggage fees, car rentals, taxis and shuttles, lodging, tips, and fees.
You can also deduct 50% of either the actual cost of meals or the standard meal allowance, which is based on the federal meals and incidental expense per diem rate.

The IRS defines expense ordinary and necessary expenses this way:

An expense is ordinary if it is common and accepted in your industry
An expense is necessary if it is helpful and appropriate for your business

You can claim business travel expenses when you're away from home but "home" doesn't always mean where your family lives. You also have a tax home—the city where your main place of business is located—which may not be the same as the location of your family home.

For example, if you live in Petaluma, California but your permanent work location is in San Jose where you stay in hotels and eat out during the work week, you typically can't deduct your expenses in San Jose or your transportation home on weekends.

In this situation San Jose is your tax home , so no deductions are permitted for ordinary and necessary expenses there.
Your trips to your home in Petaluma are not mandated by business.

Go by plane, train or bus—the actual cost of the ticket to ride is deductible, as well as any baggage fees. If you have to pay top dollar for a last-minute flight, the high-priced ticket is a business expense, but if you use frequent-flyer miles for a free ticket, the deduction is zero.

If you decide to rent a car to go on a business trip, the car rental is deductible. If you drive your own vehicle, you can usually take actual costs or the IRS standard mileage rate. For 2023 the rate is 65.5 cents per mile. You also can add tolls and parking costs onto your deduction. This amount increases to 67 cents per mile for 2024.

TurboTax Tip: Even if you use the federal meals and incidental expense per diem rates to calculate your deductions, be sure to keep receipts from all your meals and incidental expenses.

Fares for taxis or shuttles can be deducted as business travel expenses. For example, you can deduct the fare or other costs to go to:

Airport or train station
Hotel from the airport or train station
Between your hotel and the work location
Between clients in the area

If you rent a car when you arrive at your destination, the expense is deductible as long as the car is used exclusively for business. If you use it both for business and personal purposes, you can only deduct the portion of the rental used for business.

The IRS allows business travelers to deduct business-related meals and hotel costs, as long as they are reasonable considering the circumstances—not lavish or extravagant.

You would have to eat if you were home, so this might explain why the IRS limits meal deductions to 50% of either the:

Actual cost of the meal
Standard meal allowance

This allowance is based on the federal meals and incidental expense per diem rate that depends on where and when you travel.

Generally, you can deduct 50% of the cost of meals. Alternatively, if you do not incur any meal expenses nor claim the standard meal allowance, you can deduct the amount of $5 per day for incidental expenses. You can also deduct incidental expenses, such as:

Fees and tips given to hotel staff
Fees for porters and baggage carriers

But don't forget to keep track of the actual costs.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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Travel allowance or LAFHA? And how is each taxed?

Thanks to Tax & Super Australia for the article.

Being asked by the boss to travel for work purposes can be demanding on staff — financially, physically and also emotionally. Out of this has developed more than one way to compensate employees; these being a travel allowance and the living away from home allowance (LAFHA).

When both were developed, the difference between the two were often decided by an ATO-initiated rule-of-thumb in that travel of less than 21 days was deemed to be the former, while more than 21 days was considered to have a more LAFHA flavour. The 21-day “threshold” however no longer applies.

For travel allowances, typically employees are:

paid standard travel allowance for accommodation and food
working at the one location
visiting home on weekends
staying in accommodation provided by the supplier (which may be available for use by other customers when the employee is not there).

The ATO publishes guidelines each year on what it considers to be reasonable amounts for a travelling employee.

However it has also been found that some employees may be on a travel allowance for six weeks or more.

It is often asked whether these transactions should be looked at under the FBT rules (for LAFHA ) or the income tax rules (for travel allowances ). The tax treatment (and therefore the financial outcomes) of both can be different.

Deciding factors

The FBT framework would generally provide for a more concessional tax outcome where certain prescribed requirements for a LAFHA is met in comparison with the income tax effect of a travel allowance.

The reality is that you could have someone who is away from home but is still considered to be only travelling. Alternatively you could have someone that is away from home for two weeks only, but in those two weeks was actually living away from home.

When an employee is required to travel on business and overnight their food, drink and accommodation expenses become deductible expenses and are FBT free for the employer. The difference between LAFH rules and travelling on business is quite simply the employee on LAFH has to temporarily change their usual place of residence and therefore their food, drink and accommodation expenses become private and non-deductible. And that is why the employer needs the FBT concession for such employees. It is a question of fact as to whether or not the employee has temporarily changed their usual place of residence as opposed to travelling around on business.

So it is a test of substance whether someone is just travelling or is actually living away from home. It would have to be substantiated to be proven in fact as a LAFHA. Similarly, if away from home and treated as a travel allowance, the ATO will generally not challenge such treatment if substantiated as travel. Taxation ruling TR 2017/D6 deals with these factors.

Travel allowance or living away from home?

The following general principles may be of guidance:

When a person is living away from home, there will be a change in job location and a temporary residence will be taken up near the new work location. Often, but not always, the employee’s spouse and family will accompany the employee to the new location.
When a person is merely travelling, there will be no change in job location and there will be no establishment of a temporary residence – rather, the person will merely be accommodated while travelling. Usually the employee’s spouse and family will not accompany the employee.
However the issue of whether the family accompanies the employee is not determinative. The critical factor seems to be where the job is located. If it is temporarily located away from the employee’s usual place of residence, the employee will usually be living away from his or her usual place of residence. Where the job location does not change, but the employee must travel to undertake duties, he or she will be regarded as travelling.
While the length of period away from home is not determinative, the ATO will generally accept that shorter periods away will generally be deemed to be travelling. In addition, the Tax Commissioner has stated that employees attending short-term staff training courses will generally be treated as travelling in the course of their employment.
There is no minimum or maximum period of absence to qualify as living away from home, although the application of the FBT rules may be less concessional if someone lives away from their usual place of residence for more than 12 months. The period that a person is living away from home will end when the person returns to his or her usual place of residence, or changes his or her usual place of residence to the new location.

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Travel allowances or LAFHA: Which applies to you?

Travel Allowance or living-away-from-home allowance (LAFHA)? Understanding the difference between these two allowances can be difficult, particularly when there is the perception of an overlap. The allowances are in fact different and have different consequences for the person receiving them.

An amount paid by your employer to cover expenses such as accommodation, food, or drinks while you travel for business is typically know as a travel allowance. There is also another type of allowance, called the living-away-from-home allowance (LAFHA), which compensates you for additional expenses when you are required to live away from home due to work duties. So, what is the difference between the two?

Travel allowances are assessable income and PAYG withholding may apply. Any expenses incurred on meals and incidental expenses may be deductible against the allowance if certain criteria are met. Living-away-from-home allowance, however, is subject to Fringe Benefits Tax (FBT) and is non-assessable, non-exempt income. Costs of meals and incidental expenses will not be deductible since you are living away from home and not travelling.

There are no specific set criteria to know whether you are receiving a travel or a LAFHA allowance. The circumstances of each case will determine which one is more appropriate. However, there are several factors that the ATO uses to determine which allowance will apply.

If you receive a travel allowance, expenses can be deducted without documentary evidence where it is considered by the ATO to be “reasonable”. However, if you have a lot of expenses that may go over the reasonable amount set by the ATO, it would be wise to keep documentary evidence, such as receipts and supporting evidence (eg, bank or credit card statements).

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Living-away-from-home allowance fringe benefits

Find out about FBT when you pay an employee a living-away-from-home allowance (LAFHA).

Last updated 11 January 2023

What is a LAFHA fringe benefit?

An allowance you pay to an employee is a living-away-from-home allowance (LAFHA) fringe benefit if both the following apply:

The employee's duties require them to live away from their normal residence.
Some or all of the allowance is to compensate the employee for non-deductible additional expenses and other disadvantages caused by living away from their normal residence.

An allowance paid to an employee for travelling for work is a travel allowance. It is assessable to an employee and does not incur fringe benefits tax (FBT). To work out if you are paying your employee a LAFHA or a travel allowance, see FBT guide: 11.11 Difference between a living-away-from-home allowance and a travelling allowance .

What to do if you provide a LAFHA fringe benefit

You need to:

work out the taxable value of the LAFHA fringe benefit
calculate how much FBT to pay
lodge your FBT return
pay the FBT amount
check if you should report the fringe benefit through Single Touch Payroll (or on your employee’s payment summary).

Taxable value of a LAFHA fringe benefit

The taxable value of a LAFHA fringe benefit is the amount of LAFHA you pay your employee.

You can reduce the taxable value of the benefit by any amounts your employee spends on their accommodation and reasonable food expenses, if either:

they give you a declaration about living away from home
the fringe benefit relates to the first 12 months at a particular work location
they give you a declaration about living away from home .

Example: taxable value of accommodation component of LAFHA

Steve has a residence in Melbourne and is seconded to work in Perth for 12 months. During this time his Melbourne home continues to be available for his own use.

Steve receives a LAFHA from his employer, which includes an accommodation component of $450 per week. He resides with his wife, Helen, who rents a house in Perth for 12 months at a cost of $450 per week. Steve gives his employer a declaration about living away from home.

Steve's employer does not have to pay FBT on the accommodation component of the LAFHA ($450 per week).

For more information about LAFHA fringe benefits, including the extent to which the employee's accommodation and food expenses can be deducted from the taxable value of the benefit, see:

FBT guide: 11 Living-away-from-home allowance fringe benefits
TR 2021/4 Income tax and fringe benefit tax: accommodation and food and drink expenses, travel allowances and living-away-from-home allowances.

Is that a travel allowance or LAFHA?

November 1, 2017
Fringe Benefits Tax

Travel allowances are paid to employees where in some cases the period away from home is less than 21 days, and in others, more than 21 days.

Typically employees are:

– paid standard travel allowance for accommodation and food

– working at the one location

– visiting home on weekends

– staying in accommodation provided by the supplier (which may be available for use by other customers when the employee is not there).

Some employees may be on a travel allowance for six weeks or more.

However it is often asked whether these transactions should be looked at under the FBT living away from home allowance (LAFHA) rules or the income tax travel allowance rules?

Deciding factors

The FBT framework would generally provide for a more concessional tax outcome where certain prescribed requirements for a LAFHA is met in comparison with the income tax effect of a travel allowance.

The 21-day standard is only a rule of thumb that the ATO uses as a default classification system. So you could have someone who is away from home for more than 21 days but is still considered to be only travelling. Alternatively you could have someone that is away from home for two weeks only, but in those two weeks was actually living away from home.

It is a test of substance whether someone is just travelling or is actually living away from home. If less than 21 days away from home, it would have to be substantiated to be proven in fact as a LAFHA. Similarly, if more than 21 days away from home and treated as a travel allowance, the ATO will generally not challenge such treatment if substantiated as travel.

The following general principles may be of guidance:

– When a person is living away from home, there will be a change in job location and a temporary residence will be taken up near the new work location. Often, but not always, the employee’s spouse and family will accompany the employee to the new location.

– When a person is merely travelling, there will be no change in job location and there will be no establishment of a temporary residence – rather, the person will merely be accommodated while travelling. Usually the employee’s spouse and family will not accompany the employee.

– However the issue of whether the family accompanies the employee is not determinative. The critical factor seems to be where the job is located. If it is temporarily located away from the employee’s usual place of residence, the employee will usually be living away from his or her usual place of residence. Where the job location does not change, but the employee must travel to undertake duties, he or she will be regarded as travelling.

– While the length of period away from home is not determinative, the ATO will generally accept that where the travel does not exceed 21 days, the person will be travelling. In addition, the Tax Commissioner has stated that employees attending short-term staff training courses will generally be treated as travelling in the course of their employment.

– There is no minimum or maximum period of absence to qualify as living away from home, although the application of the FBT rules may be less concessional if someone lives away from their usual place of residence for more than 12 months. There would be a requirement to sleep away from home for at least one night. The period that a person is living away from home will end when the person returns to his or her usual place of residence, or changes his or her usual place of residence to the new location.

On the road: How to treat work-related travel and living away from home costs

6 October 2021

The ATO has released new guidance to help clarify the tax treatment of costs and allowances incurred when an employee travels – or spends time living away from home – for work.

Certain conditions need to be met to ensure an allowance can be considered a travel allowance:

None of the individual absences from the employee’s usual place of residence exceed 21 days.
The employee is not present in the same work location for 90 or more days in an FBT year.
The employee returns to their usual residence once their period away ends.

See the table below for a breakdown of the characteristics of travel allowances versus living away from home allowances.

Where the applicable allowance type remains unclear, certain questions can be asked to discern further, such as:

Has there been a change in the employee’s regular place of work?
Is the duration of the employee’s period away from home relatively long?
Is the nature of the accommodation such that it becomes the employee’s usual place of residence?
Can the employee be visited by family and friends?

Of course, for a travel expense to be deductible, the employee must be able to demonstrate that it was incurred while travelling for work. Unless exceptions apply, the employee must maintain written evidence of the expenditures and keep travel records for work-related trips that involve an absence of six or more consecutive nights from their usual residence.

The ATO does allow for the not-uncommon scenario where an employee attending a conference, for example, is accompanied by their spouse and stays an extra few days for leisure purposes – although reasonable apportionment is required in these cases.

The ATO also recognises that where employees regularly travel to the same location they may choose to rent or even buy a property there rather than stay in a hotel, motel or AirBnB. The associated costs will be deductible provided they are not disproportionate to what would have been paid had the employee elected to use suitable commercial accommodation instead.

It’s important that allowances paid (or reimbursements made) to cover an employee’s accommodation, food and drink expenses do not form part of a salary packaging arrangement, and must be included in the employee’s payment summary with tax withheld where appropriate. The employer should also obtain and retain documentation establishing that all the circumstances have been met.

Travel allowance versus living away from home allowance

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Travel allowance or living away from home allowance (LAFHA)

Posted in Personal Tax .

Travel Allowance or living-away-from-home allowance ( LAFHA )? Understanding the difference between these two allowances can be complex, particularly when there is the perception of an overlap.

The allowances are in fact very different, and have different consequences for the person receiving them. Travel allowance or LAFHA, which applies to you? An amount paid by your employer to cover expenses such as accommodation, food, or drinks while you travel for business is typically know as a travel allowance. There is also another type of allowance, called the living-away-from-home allowance (LAFHA), which compensates you for additional expenses when you are required to live away from home due to work duties. So what is the difference between the two?

Travel allowances are considered to be assessable income and PAYG withholding may apply. Any expenses incurred on meals and incidental expenses may be deductible against the allowance if certain criteria are met. Living-away-from-home allowance, however, is subject to Fringe Benefits Tax (FBT) and is non-assessable, non-exempt income. Costs of meals and incidental expenses will not be deductible since you are considered to be living away from home and not travelling.

There are no specific set criteria to know whether you are receiving a travel or a LAFHA allowance. The circumstances of each case will determine which one is more appropriate.

The ATO considers the following factors, although not determinative on their own, to be important:

time spent working away from home – the longer you spend working away from home, the more likely that you are living away from home and not travelling;
whether you had a usual place of residence at a previous location – you would only be considered to be living away from home where it is reasonable to conclude that you will return to your previous residence when work at the new location ends;
the nature of accommodation – if you live in settled accommodation, such as a house, unit or apartment, it may indicate that you are living away from home. This is particularly true if the accommodation has the amenities common to a home, such as an equipped kitchen and laundry. On the other hand, if you are staying in a hotel or in transitory accommodation, then it is more likely that you are not living away from home and are merely travelling;
whether you are, or can be accompanied by family or visited by family or friends – if your family accompany you during the entirety of your stay at a new location then it is likely that you have relocated and are not living away from home or travelling. All meals, living and incidental expenses will be considered to be private and not deductible.
conversely, if your family members accompany you for a short stay at your new location and subsequently return to live at the family’s permanent home, while you continue to work at the new temporary location, then it is likely that you will be considered to be living away from home.

Usually, your employer should tell you which allowance you’re getting, and a big clue is contained in your payment summary. Travel allowances are usually shown in the allowances section of the payment summary and contribute to your overall taxable income and affect the amount of Medicare levy payable. LAFHA is usually included in the reportable fringe benefits section and does not contribute to your overall taxable income or affect the amount of Medicare levy payable. It does, however, affect other things including the tax offset for eligible spouse superannuation contributions, HELP repayments, child support obligations, and entitlement to certain income-tested government benefits.

Travel allowance or living away from home allowance (LAFHA), want to find out more?

Do you want to know if your income or other government benefits will be affected by the allowance you receive? Ensure that you don’t get a big surprise when your tax is due. Talk to Hunter Partners about this today.

Hunter Partners are Accountants, Tax Agents and Financial Planners. We can assist you with all aspect of your accounting, tax and financial planning requirements, call Hunter Partners on (07) 4723-1223.

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Created on 08 December 2017 .

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Home » Blog » Living Away From Home Or Travel Allowances

Living Away From Home Or Travel Allowances

Working away from home for your role, or having employees that do, can result in entitlements such as the Living Away from Home (LAFH) or Travel Allowances having to be paid to assist with the costs and, at times, distress associated with travel or temporary relocation. Previously, there was an easy way to distinguish between which allowance would be allocated. It was once assumed that Travel Allowance was allocated for shorter trips whereas LAFH Allowance were for any trip longer than 21 days. However, this line has now been blurred.

This article will cover:

The differences between travel and LAFH allowances;
The tax implications each allowance can have for both employer and employee; and
Where to go if you’d like further information.

Travel Allowance

A Travel Allowance is a set amount that is paid to an employee to cover travel, accommodation, food and incidental costs when traveling overnight for business or work purposes. These payments are often recorded by an employer and included in an employee’s payment summary as allowances but this is not always the case. If you have incurred costs while travelling overnight for business purposes, we recommend that you record details of any travel, accommodation, food or incidental costs that you incur using a travel diary. The travel diary should show the date of your trip, where you were travelling and for what purpose and the costs incurred.

If on a travel allowance, according to Tax & Super Australia , this can look like:

Paid standard travel allowance for accommodation and food;
Working at the one location;
Visiting home on weekends; or
Staying in accommodation provided by the supplier (which may be available for use by other customers when the employee is not there).

The ATO also releases a Taxation Determination each year to outline what they consider to be reasonable travel and overtime meal allowances. The latest release for the 2018-19 Financial year can be found HERE .

LAFH Allowance

The LAFH Allowance is a set amount paid directly to an employee to assist with the additional, non-deductable expenses and disadvantages of moving to continue their employment. This allowance is usually granted for a period of between 21 days and 12 months (due to Fringe Benefit Tax (FBT) for an employer) and is a set amount based off a reasonable accommodation, food and drink amount.

As an employer, it’s important to keep in mind that the taxable value of the LAFH allowance can have an impact on FBT. This can be reduced by certain amounts relating to accommodation and food and drink expenses, providing that the below conditions are met:

This is often determined with what they are choosing to do with the property while they are working away (eg. Are they having a family member reside in the property, or renting it out?)
The employee provides you with a declaration about living away from home; and
The assignment is for a maximum of 12 months in total.

Providing the above conditions are met, an employer will be able to claim on the FBT section of the LAFH Allowance.

The exception to this, however, if an employee is working on a fly-in, fly-out or drive-in, drive-out basis. These types of employment are exempt from the FBT limitations regardless of the length of the assessment and do not need to abide by point one above.

Some examples on LAFH Allowance positions as listed by the Australian Taxation Office , are listed below:

Construction workers living in camps, barracks or huts;
Oil industry employees living on offshore oil rigs;
Marine industry employees living on board vessels; and
Trainee employees, such as trainee teachers, who are living away from home in order to undergo training courses of extended duration.

Where do I record my logbook?

Your logbook information can be recorded in a printed logbook (available from stationery suppliers), electronically in your own template (such as an excel document), or via the ATO app in the myDeductions tools section.

More Information?

You must record your journeys for 12 consecutive weeks for your logbook to be complete. Your logbook is then valid for a 5-year period.

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Allowances in building and construction

There are allowances for employees working in the building and construction industry. These come from an award or a registered agreement.

Find out about allowances in the Building and Construction Award.

Tip: Registered agreements

This page covers allowances under the Building and Construction Award.

Sometimes employees are covered by a registered agreement and not an award.

If you think you’re covered by a registered agreement, search the Fair Work Commission database for it: Find an agreement . Check to see what it says about allowances and what applies.

Under the award, there are separate allowances for those working in the:

general building and construction sector
civil and engineering sector
metal and engineering construction
residential building and construction sector.

An employee may get other allowances depending on where they work and the specific duties they perform. For more information, see Allowances .

Tip: Use our Pay and Conditions Tool

Calculate your allowances under an award by using our free Pay and Conditions Tool .

The tool can calculate all award allowances, including tools, meals and travel allowances. This includes under the Building and Construction Award.

There are 3 main expense-related allowances under the Building and Construction Award:

tool allowance
protective clothing and equipment allowance
reimbursement for damage or loss of personal items .

Tool allowance

An employee required to have standard tools of trade for work gets a tool allowance. The allowance is different depending on the type of trade.

When other tools must be used, the employer must:

provide the tools, or
reimburse an employee if the employee agrees to provide it.

Check and calculate tool allowances by using our Pay and Conditions Tool .

Example: Employee entitled to tool allowance

Tom employs different tradespersons including carpenters and painters to work at construction sites. Tom’s employees are required to have their own standard tools to complete work on-site.

Tom knows there are tool allowances in the building and construction industry, but he doesn’t know the rates that apply.

Tom uses the Pay and Conditions Tool to work out the allowances to pay his employees. He learns that there are different tool allowances in the Building and Construction Award, depending on the employees’ trade.

After using the tool, he understands that he will need to pay his carpenters a higher allowance than his painters.

Tom explains to his employees where the tool allowance comes from and why their pay may be different to their workmates.

Protective clothing and equipment allowance

An employer must provide necessary protective clothing and equipment, except for safety boots. An employer must reimburse an employee if the employee agrees to provide their own protective gear.

An employee may wear steel cap safety boots because it’s required by their employer or by law. Where this happens, an employer must repay the employee for the cost of the boots. Subject to fair wear and tear, the employer must replace the boots every 6 months if required or sooner by agreement.

Example: Employer providing protective clothing

Amanda is a painter and employs other painters to work with her. They all usually work in the residential construction industry and there is no uniform requirement. There’s no need for the painters to wear protective clothing or equipment.

Amanda wins a commercial contract for work on a larger construction site that has plant, equipment, and cranes in operation. The law says that all workers must wear a hi-vis vest and hard hat when they work at a commercial worksite.

Amanda must supply her employees with the necessary protective gear when they work at the new worksite.

Reimbursement for damage or loss of personal items

An employer must reimburse an employee if their personal items get damaged at work by corrosive or harmful substances. These personal items can include:

hearing aids

Corrosive or harmful substances include:

molten metal.

Employees are also entitled to be reimbursed for tools that are stolen while stored on-site or at the employer’s premises.

Example: Tools stolen from a worksite

Jason is a carpenter working on a residential construction site. As part of this work, Jason is required to maintain many power tools. These tools are too bulky to transport home each day.

Jason’s employer, Stefano, directs him to store these tools overnight on-site. This is because the tools would take too long to set-up and dismantle at the beginning and end of each day’s work.

Overnight, the worksite is broken into and some of Jason’s tools are stolen. Jason provides Stefano with a list of what was taken and they file a police report.

Jason then replaces the tools that were stolen and is reimbursed by Stefano for the cost.

The replacement value also applies in the case of fire:

occurring on a worksite, or
at the employer’s premises where tools are stored.

Most employees get a meal allowance after working 1.5 hours of overtime.

An employee who is operating plant and equipment gets a meal allowance for each 4 hours of overtime worked.

Example: Meal allowance

Oscar and Sam work for a concreting company and are both covered by the Building and Construction Award. Oscar is a concrete paver and Sam operates a concrete pump.

The pair both work 2 hours overtime on Tuesday.

Oscar gets a meal allowance because he worked more than 1.5 hours of overtime.

As Sam is an operator employee, he doesn’t get a meal allowance because he’s worked less than 4 hours of overtime.

For more information on meal allowances while living away from home on distant work, see Living away from home .

Given the nature of the construction industry, where an employee’s work site changes during the stages or completion of construction, they may be entitled to several different travel allowances.

These include for:

travelling to and from work
fares and travel costs
distant work
travel during work times .

Tip: Check out our Library

Do you know we have a Library of technical workplace information?

It has more information on allowances and award entitlements for the building and construction industry.

Travelling to and from work

An employee may get the daily fares and travel pattern allowance if work starts and finishes at a construction site. It also applies if the employee does pre-fabricated work at a depot and then erects it on-site that same day.

An employee may get the distant work payment instead if the construction site is more than 50km from their home.

Fares and travel costs

An employee gets this daily allowance if work starts and finishes at a construction site.

An employee doesn’t get this allowance if the employer:

offers or arranges for someone else to pick up and drop off the employee, or
provides a fully maintained work vehicle free of charge.

An employee entitled to distant work pay won’t get this allowance.

Example: Daily fares and travel allowance

Sang is a painter. He starts and finishes work at building sites.

Sang is required to drive himself to work on Mondays. He gets picked up and dropped off by his employer for the rest of the week.

Sang gets the fares and travel pattern allowance on Mondays. He doesn’t get this allowance for the rest of the week because his employer drives him.

Distant work

Distant work in the Building and Construction Award occurs when:

a construction site is located outside the 50km radius of the GPO (the main general post office in a capital city) or principal post office where the employee lives
an employee is required to travel more than 50km by road to and from their home to the construction site.

This entitlement doesn’t apply to an employee if the first construction site was more than 50km from their home when they hired by their employer.

An employee performing distant work gets:

payment for reasonable time spent travelling outside ordinary working hours, rounded to the next quarter of an hour with a minimum payment of 30 minutes per day for each return trip
reimbursement for reasonable travel expenses incurred (if the employee uses their own vehicle, an allowance is paid for each kilometre travelled).

An employee getting distant work pay doesn’t get the daily fares and travel pattern allowance.

Example: Distant work pay

Zach is a roof tiler and employs several employees.

Zach and his employees all live in the same area. The roofing jobs are usually local, but his next contract is 75km away and it will take 60 minutes to drive there. The building site is also located outside the 50km radius of their local post office.

Zach will drive all employees to and from the worksite in the work truck. He picks them up from their homes.

Zach’s employees get their usual hourly rate for time spent travelling to the worksite. He doesn’t need to pay them for travel expenses.

Travelling during work

Travelling between work sites during work hours is paid work time.

If the employer doesn’t provide transport, the employee will get paid time and:

an allowance to cover the reasonable cost of public transport between the sites, or
a vehicle allowance if the employee uses their own vehicle.

To work out the allowance, use our Pay and Conditions Tool .

Example: Travelling between work sites

Cabe is a carpenter who works for a medium-sized building company with several different sites.

Cabe has been working at one site for most of the week. One afternoon, he is asked to help at another site.

Cabe’s boss, Mitch, asks him to drive his ute to the other site so Mitch can take the work trailer with him.

Cabe gets his usual hourly rate for time spent travelling between the worksites. He also gets a vehicle allowance because he uses his own car.

An employee gets living away from home allowance if the worksite is too far to return home each day.

An employee who qualifies for the living away from home distant work entitlement will:

the living away from home allowance, or
reimbursement for all reasonable accommodation and meal expenses
be provided with accommodation including 3 adequate meals a day, or
be provided with accommodation and reimbursement for all reasonable meal expenses.

If the employee is living in camp, they get all board and accommodation for free.

Example: Living away from home

Taylor is a road worker in Adelaide.

Taylor’s next worksite is part of major highway repairs on a stretch near Woomera in the state’s north.

Woomera is over 500km from his home. Taylor is unable to travel to and from his home to the new worksite each day.

Taylor’s employer, Jo, organises a short-term rental for him and some other employees to share in town while they are away.

Taylor won’t receive an allowance for accommodation while on distant work as suitable accommodation was provided.

Because the short-term rental has cooking facilities, Jo gives Taylor and the other employees the option of cooking for themselves or eating out. Jo will then reimburse them at the end of the week for their expenses.

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Check out our Fixing a workplace problem section for practical information about:

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speaking with your employer or employee about fixing the problem
getting help from us if you can't fix the problem.

The Fair Work Ombudsman acknowledges the Traditional Custodians of Country throughout Australia and their continuing connection to land, waters, skies and communities. We pay our respects to them, their Cultures, and Elders past, present and future.

Thank you for your feedback. If you would like to tell us more about the information you’ve found today you can complete our feedback form .

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The Fair Work Ombudsman is committed to providing you with advice that you can rely on. The information contained in this fact sheet is general in nature. If you are unsure about how it applies to your situation you can call our Infoline on 13 13 94 or speak with a union, industry association or a workplace relations professional.

Supported by

Dubai’s Extraordinary Flooding: Here’s What to Know

Images of a saturated desert metropolis startled the world, prompting talk of cloud seeding, climate change and designing cities for intensified weather.

Share full article

A dozen or so cars, buses and trucks sit in axle-deep water on a wide, flooded highway.

By Raymond Zhong

Scenes of flood-ravaged neighborhoods in one of the planet’s driest regions have stunned the world this week. Heavy rains in the United Arab Emirates and Oman submerged cars, clogged highways and killed at least 21 people. Flights out of Dubai’s airport, a major global hub, were severely disrupted.

The downpours weren’t a freak event — forecasters anticipated the storms several days out and issued warnings. But they were certainly unusual. Here’s what to know.

Heavy rain there is rare, but not unheard-of.

On average, the Arabian Peninsula receives a scant few inches of rain a year, although scientists have found that a sizable chunk of that precipitation falls in infrequent but severe bursts, not as periodic showers.

U.A.E. officials said the 24-hour rain total on Tuesday was the country’s largest since records there began in 1949 . But parts of the nation had experienced an earlier round of thunderstorms just last month.

Oman, with its coastline on the Arabian Sea, is also vulnerable to tropical cyclones. Past storms there have brought torrential rain, powerful winds and mudslides, causing extensive damage.

Global warming is projected to intensify downpours.

Stronger storms are a key consequence of human-caused global warming. As the atmosphere gets hotter, it can hold more moisture, which can eventually make its way down to the earth as rain or snow.

But that doesn’t mean rainfall patterns are changing in precisely the same way across every corner of the globe.

In their latest assessment of climate research , scientists convened by the United Nations found there wasn’t enough data to have firm conclusions about rainfall trends in the Arabian Peninsula and how climate change was affecting them. The researchers said, however, that if global warming were to be allowed to continue worsening in the coming decades, extreme downpours in the region would quite likely become more intense and more frequent.

The role of cloud seeding isn’t clear.

The U.A.E. has for decades worked to increase rainfall and boost water supplies by seeding clouds. Essentially, this involves shooting particles into clouds to encourage the moisture to gather into larger, heavier droplets, ones that are more likely to fall as rain or snow.

Cloud seeding and other rain-enhancement methods have been tried across the world, including in Australia, China, India, Israel, South Africa and the United States. Studies have found that these operations can, at best, affect precipitation modestly — enough to turn a downpour into a bigger downpour, but probably not a drizzle into a deluge.

Still, experts said pinning down how much seeding might have contributed to this week’s storms would require detailed study.

“In general, it is quite a challenge to assess the impact of seeding,” said Luca Delle Monache, a climate scientist at the Scripps Institution of Oceanography in La Jolla, Calif. Dr. Delle Monache has been leading efforts to use artificial intelligence to improve the U.A.E.’s rain-enhancement program.

An official with the U.A.E.’s National Center of Meteorology, Omar Al Yazeedi, told news outlets this week that the agency didn’t conduct any seeding during the latest storms. His statements didn’t make clear, however, whether that was also true in the hours or days before.

Mr. Al Yazeedi didn’t respond to emailed questions from The New York Times on Thursday, and Adel Kamal, a spokesman for the center, didn’t immediately have further comment.

Cities in dry places just aren’t designed for floods.

Wherever it happens, flooding isn’t just a matter of how much rain comes down. It’s also about what happens to all that water once it’s on the ground — most critically, in the places people live.

Cities in arid regions often aren’t designed to drain very effectively. In these areas, paved surfaces block rain from seeping into the earth below, forcing it into drainage systems that can easily become overwhelmed.

One recent study of Sharjah , the capital of the third-largest emirate in the U.A.E., found that the city’s rapid growth over the past half century had made it vulnerable to flooding at far lower levels of rain than before.

Omnia Al Desoukie contributed reporting.

Raymond Zhong reports on climate and environmental issues for The Times. More about Raymond Zhong

IMAGES

Difference between Travel Allowance & Living Away From Home Allowance
The Facts -- Living Away From Home Allowance (LAFHA)
On the road... How to treat work-related travel and living away from
LAFHA Living Away From Home Allowance 2022
Leave Travel Allowance (LTA): Eligibility, claim rules, procedure and
How to claim the Living Away from Home Allowance?

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COMMENTS

Topic no. 511, Business travel expenses
Topic no. 511, Business travel expenses. Travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. You can't deduct expenses that are lavish or extravagant, or that are for personal purposes. You're traveling away from home if your duties require you to be away from the general ...
The difference between a Living Away From Home Allowance and Travel
When you work away from home, it's likely that you're entitled to extra compensation.The two most common forms of this are a Travel Allowance and a Living Away From Home Allowance (LAFHA). Although these cover similar situations, there are key differences between the two.Read on to see which of these allowances you might be entitled to.What is a Travel Allowance?When LAFHA and Travel ...
IRS Announces Special Per Diem Rates for Travel Away From Home
Beginning October 1, 2021, the high-low per diem rate that can be used for lodging, meals, and incidental expenses increases to $296 (from $292) for travel to high-cost locations and increases to $202 (from $198) for travel to other locations. The high-low M&IE rates increase to $74 (from $71) for travel to high-cost locations and to $64 (from ...
Understanding business travel deductions
Business travel deductions are available when employees must travel away from their tax home or main place of work for business reasons. A taxpayer is traveling away from home if they are away for longer than an ordinary day's work and they need to sleep to meet the demands of their work while away. Travel expenses must be ordinary and ...
The difference between a Living Away From Home Allowance and Travel
One of the major differences between the two allowance is the way they're taxed. Travel Allowances are categorised as assessable income and you may find that PAYG withholding applies. This can ...
IRS Announces Special Per Diem Rates for Travel Away From Home
Beginning October 1, 2022, the high-low per diem rate that can be used for lodging, meals, and incidental expenses increases to $297 (from $296) for travel to high-cost locations and increases to $204 (from $202) for travel to other locations. The high-low M&IE rates remain at $74 for travel to high-cost locations and $64 for travel to other ...
Travel Expenses Definition and Tax Deductible Categories
Travel expenses are costs associated with traveling for the purpose of conducting business-related activities. Travel expenses can generally be deducted by employees as non-reimbursed travel ...
Tax Deductions for Business Travelers
You can deduct business travel expenses when you are away from both your home and the location of your main place of business (tax home). Deductible expenses include transportation, baggage fees, car rentals, taxis and shuttles, lodging, tips, and fees. You can also deduct 50% of either the actual cost of meals or the standard meal allowance ...
Travel allowance or LAFHA? And how is each taxed?
Out of this has developed more than one way to compensate employees; these being a travel allowance and the living away from home allowance (LAFHA). When both were developed, the difference between the two were often decided by an ATO-initiated rule-of-thumb in that travel of less than 21 days was deemed to be the former, while more than 21 ...
Travel allowances or LAFHA: Which applies to you?
Living-away-from-home allowance, however, is subject to Fringe Benefits Tax (FBT) and is non-assessable, non-exempt income. Costs of meals and incidental expenses will not be deductible since you are living away from home and not travelling. There are no specific set criteria to know whether you are receiving a travel or a LAFHA allowance.
Living-away-from-home allowance fringe benefits
An allowance paid to an employee for travelling for work is a travel allowance. It is assessable to an employee and does not incur fringe benefits tax (FBT). To work out if you are paying your employee a LAFHA or a travel allowance, see FBT guide: 11.11 Difference between a living-away-from-home allowance and a travelling allowance.
Is that a travel allowance or LAFHA?
Similarly, if more than 21 days away from home and treated as a travel allowance, the ATO will generally not challenge such treatment if substantiated as travel. The following general principles may be of guidance: - When a person is living away from home, there will be a change in job location and a temporary residence will be taken up near ...
Working Away From Home: Tax Deductions & Allowances ...
Depending on which category you fall into, you may receive a Travel Allowance or Living Away From Home Allowance, and tax treatments of these two payments differ. Living away from home requires you to live in suitable accommodation on or near your workplace, away from your typical home. Live away from home arrangements are often long-term ...
How Does a Live Out Allowance Work?
Living out allowance. A living out allowance, also known as a subsistence expense, is a stipend a company pays to employees for time spent working away from home. This allowance remains tax-free as long as it is reasonable. A living out allowance can take various forms such as: being paid an allowance by your employer.
ATO guidance on costs of travelling
Draft Taxation Ruling TR 2021/D1: Income tax and fringe benefit tax: employees: accommodation and food and drinks expenses; travel allowances; and living-away-from-home allowances Draft Practical Compliance Guideline PCG 2021/D1: Determining if allowances or benefits provided to an employee relate to travelling on work or living at a location ...
PDF SECTION 1. PURPOSE
allowances for lodging, meal and incidental expenses, or for meal and incidental expenses only, that are paid to any employee on or after October 1, 2021, for travel away from home on or after October 1, 2021. For purposes of computing the amount allowable as a deduction for travel away from home, this notice is effective for meal and
On the road: How to treat work-related travel and living away from home
6 October 2021. The ATO has released new guidance to help clarify the tax treatment of costs and allowances incurred when an employee travels - or spends time living away from home - for work. Certain conditions need to be met to ensure an allowance can be considered a travel allowance:
Travel and Living Away from Home Allowance
Living away from home allowance is an allowance paid to an employee to cover the extra costs they incur while they're travelling on a work-related business. The rule of thumb is that the employee must be away from their home base of work for a period longer than a normal day's work. It includes any overnight travel, accommodation, and meals.
Travel allowance or living away from home allowance (LAFHA)
An amount paid by your employer to cover expenses such as accommodation, food, or drinks while you travel for business is typically know as a travel allowance. There is also another type of allowance, called the living-away-from-home allowance (LAFHA), which compensates you for additional expenses when you are required to live away from home ...
Living Away From Home Or Travel Allowances
Working away from home for your role, or having employees that do, can result in entitlements such as the Living Away from Home (LAFH) or Travel Allowances having to be paid to assist with the costs and, at times, distress associated with travel or temporary relocation. Previously, there was an easy way to distinguish between which allowance ...
Is That a Travel Allowance or a Living Away From Home Allowance
Is That a Travel Allowance or Living Away From Home Allowance? Travel allowances are paid to employees where in some cases the period away from home is less than 21 days, and in others, more than 21 days. With travel allowances, typically employees are: stay in accommodation provided by the supplier (which may be available for use by other ...
Allowances in building and construction
For more information on meal allowances while living away from home on distant work, see Living away from home. Vehicle and travel allowances. Given the nature of the construction industry, where an employee's work site changes during the stages or completion of construction, they may be entitled to several different travel allowances.
Dubai's Extraordinary Flooding: Here's What to Know
April 18, 2024. Leer en español. Scenes of flood-ravaged neighborhoods in one of the planet's driest regions have stunned the world this week. Heavy rains in the United Arab Emirates and Oman ...

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IRS Announces Special Per Diem Rates for Travel Away From Home Beginning October 1, 2022

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Allowances in building and construction

On this page:

Tip: Registered agreements

Tip: Use our Pay and Conditions Tool

Tool allowance

Example: Employee entitled to tool allowance

Protective clothing and equipment allowance

Example: Employer providing protective clothing

Reimbursement for damage or loss of personal items

Example: Tools stolen from a worksite