The Fringe Benefits Tax (FBT) year for 2025 has ended, and it’s time for employers to review how they’ve treated employee travel expenses — especially with the new relaxed travel diary requirements now in place.
Correctly classifying business travel, living away from home (LAFHA), and relocation is crucial. Why? Because each category has different FBT consequences, and misclassifying them can lead to unexpected tax bills or missed exemptions.
1. Understanding the Differences: Why Classification Matters
When an employer pays or reimburses travel costs for an employee, they must first determine which type of travel it is:
- Business Travel – short-term work-related trips
- Living Away from Home (LAFHA) – temporary relocation for work
- Relocation – permanent move to a new work location
Each of these has different FBT treatments, exemptions, or reductions, so correct classification is the key to managing your tax obligations and avoiding unnecessary FBT.
2. Business Travel: “Travelling on Work”
Business travel applies when employees temporarily leave their usual workplace for work purposes. These trips are typically:
- Short-term (a few days or weeks)
- The employee’s regular home remains available
- Family does not usually travel with them
- Accommodation is temporary (like a hotel)
- No change to the employee’s contract
Good news: Most genuine business travel costs are FBT-exempt or qualify for FBT reduction under the “otherwise deductible” rule — provided they are well documented.
3. Living Away From Home (LAFHA)
LAFHA applies when employees are temporarily relocated to work in a different location, usually for longer periods. Key features include:
- A longer stay away from home
- The employee still maintains a home in Australia
- Expenses are considered living costs, not deductible
Employers can pay a Living Away from Home Allowance (LAFHA) to help employees cover extra costs (like food and accommodation). If structured properly, part of this allowance can be FBT-exempt, but:
- Employees must maintain their usual home
- Food and accommodation limits apply
- Records must be kept to claim exemptions
There’s also a 12-month limit for claiming LAFHA at a single work location (unless the employee is FIFO/DIDO).
4. Relocation: Permanent Moves
Relocation applies when an employee is permanently transferred to a new job location. Employers often help with:
- Relocation consultants
- Moving household items
- Buying or selling a home
- Connecting utilities
- Temporary housing
- Transport and some meals
These costs can be exempt or reduced for FBT, but careful planning and documentation are necessary. Not all relocation benefits are exempt, so having a clear relocation policy and knowing what qualifies is important for budgeting and compliance.
5. 2025: New Relaxed Record-Keeping Rules
One of the biggest changes this FBT year is the ATO’s new record-keeping flexibility:
Instead of collecting traditional travel diaries and declarations, employers can now rely on alternate documentation — such as:
- Employment contracts
- Emails or text messages
- Work rosters and timesheets
- Hotel receipts or itineraries
- Logbooks or internal travel systems
This makes compliance much easier, especially for businesses with frequent travellers or FIFO staff. However, you must still hold enough details (who, when, where, why) to justify the exemption or reduction.
6. FIFO Workers and the Bechtel Case
Employers using FIFO arrangements should be aware of the 2024 Bechtel case, which impacted how some travel expenses are classified for FBT. If you’ve previously relied on older rulings (e.g. John Holland case), now is the time to reassess your approach based on updated legal interpretations.
Key Takeaways for Employers
- Clearly classify employee travel: Business Travel, LAFHA, FIFO, or Relocation
- Maintain good records (traditional or alternative)
- Be aware of 12-month LAFHA limits
- Review your relocation policy and FBT budgeting
- Reassess FIFO travel deductions in light of the Bechtel decision
- Understand and document private vs. work-related travel portions
- Use alternative records where suitable, but confirm they meet ATO requirements
Need Help Managing FBT and Employee Travel Costs?
Boa & Co. Chartered Accountants can help your business correctly structure employee travel, LAFHA, and relocation benefits to:
- Minimise FBT liability
- Maximise available exemptions
- Reduce admin time with smarter record-keeping
- Avoid costly compliance issues
Whether you’re a large employer managing FIFO workforces, or a growing business offering relocation packages or LAFHA, we’ve got the technical expertise and practical solutions you need.
Let’s make the most of the FBT rules – together. Contact Boa & Co. Chartered Accountants at 1300 952 286, email [email protected], or visit our website at www.boanco.com.au.