In releasing the 2012 Mid-year Outlook recently, the Treasurer said that GDP would not grow as expected, cutting more than $20 billion from the forward estimates requiring some tax changes.

Those that will impact our SME clients are:

• Living-away-from-home allowance (LAFHA): 

  • access to the LAFHA tax exemption for temporary residents will be limited to those who maintain a residence for their own use in Australia, which they are living away from for work purposes, such as "fly-in fly-out" workers;
  • individuals will be required to substantiate their actual expenditure on accommodation and food beyond a statutory amount;
  • these changes will apply from 1 July 2012.

The risk here sits with the employer, given the LAFHA is subject to Fringe Benefits Tax if it does not meet the exemption requirements. Employers who pay LAFHA’s to their employees must therefore review those arrangements prior to 30 June 2012.

• Previously announced tax reforms will be deferred: 

  • the start date of the standard $500 deduction for work related expenses will be deferred until 1 July 2013;
  • the start date of the 50% tax discount for interest income will be deferred until 1 July 2013;
  • The Government will restrict the Dependent Spouse Tax Offset to those with spouses born before 1 July 1952.

 We will continue to keep you up to date with tax changes that may affect your business.