Are You Paying LAFHA Correctly? New ATO Rates Apply

Many businesses confuse Living Away From Home Allowance (LAFHA) with Travel Allowances – however they are in fact very different.  Getting it wrong can lead to payroll errors, unexpected tax bills for employees, Fringe Benefits Tax (FBT) issues, and ATO scrutiny. 

At Beam Bookkeeping, we support businesses in navigating ATO changes like this one and regularly help clients understand the key differences between LAFHA and Travel Allowances. 

To ensure you’re applying the correct approach, read our related post: 
👉 Difference Between Travel Allowance & Living Away From Home Allowance 

The ATO has recently issued TD 2025/2, which sets new reasonable food and drink amounts under the LAFHA framework. These rates came into effect on 1 April 2025, and they apply for the 2025–26 FBT year. 

What’s in TD 2025/2? 

The ruling provides updated reasonable amounts for food and drink for LAFHA purposes. These thresholds are used to determine the exempt portion of LAFHA without requiring substantiation. 

LAFHA Weekly Reasonable Amounts: 

If the amount paid exceeds these limits, the excess may be subject to FBT unless substantiated with receipts/proper records. 

📄 Full ATO guidance available here: TD 2025/2 – ATO Legal Database 

What steps can you take now? 

✅ Review Employee Arrangements 

• Do you have staff temporarily working away from home? 

• Are they receiving allowances? 

✅ Clarify Any Grey Areas 

• Check out our post on the differences here: 
  👉 Travel Allowance vs LAFHA – Know the Difference 

• If you are still unsure whether your payments fall under LAFHA or Travel Allowances, seek help from your bookkeeper or tax advisor 

✅ Assess whether you need to update Your Payroll 

• Cross check your LAFHA payments against ATO thresholds. Are they over or under the new ATO thresholds? 

• Ensure you understand the requirements and potential consequences of the LAFHA being paid exceeding the ATO thresholds.  

• Check your payroll setup is correct, we provide guidance on this here  
  👉 Travel Allowance vs LAFHA – Know the Difference 

✅ Ensure You Have Proper Declarations 

• If you are paying a LAFHA you must hold a valid LAFHA declaration from each impacted employee or acceptable alternate record keeping to access FBT concessions 

Beam Bookkeeping: Compliance Without the Confusion 

At Beam Bookkeeping, we make areas like this easier to navigate. We support small and growing businesses by: 

• Helping you to clarify the difference between allowance types 
• Helping you ensure your payroll software is setup correctly 
• Keeping you abreast of changes in applicable rates and thresholds 
• Supporting your payroll and compliance processes year-round 

Contact us today if you’d like help reviewing your allowance types and/or payroll setup.