Travelling for business and new relaxed travel diary requirements

Now that the 2025 Fringe Benefits Tax (FBT) year has ended, we revisit the nuances between business travel, living away from home, and relocation. It is important to have a sound understanding of the distinction between these terms as how you classify your employees' travel can result in differing FBT treatment for benefits provided.

In addition, the 2025 FBT year marks a significant shift with the introduction of alternative record-keeping methods designed to ease the administrative burden on employers. This represents a major change for employers which previously had to organise the collection of employee travel diaries and declarations. In this article, we explore these alternative record-keeping options and their application to employee travel.

We will firstly explore the differences between the three main types of employee travel:

• business travel

• living away from home, and

• relocation.

When an employer reimburses or pays for travel costs on behalf of an employee, it is imperative for the employer to first review the specifics of each trip to determine which of the above types of travel the arrangement falls into, as the FBT treatment for each category varies significantly. Due to the impracticality of reviewing every travel instance, it can be beneficial for employers to focus on developing robust processes and procedures to capture, collate and classify this data.

It is important to note that generally, no single factor will determine the travel type. Instead, a comprehensive review of the entire travel arrangement must be conducted to identify, on balance, whether business travel, living away from home, or relocation is the most appropriate classification. There is also no set prescriptive threshold or limit regarding expenditure, travel class, or duration that will dictate the category of employee travel, with the exception of certain short-term stays, where duration may assist with the determination process.

Business travel

Business travel, often referred to as ‘travelling on work’, refers to employees who are required to travel for work-related purposes. Expenses incurred for employees travelling on work are typically deductible when they have a direct connection to the performance of employment duties, therefore allowing employers to use the otherwise deductible-rule in reducing the FBT taxable value. Some of the key, more common, characteristics of business travel include:

• typically short term in nature

• the employee's residence remains available

• family members usually do not accompany the employee 

• accommodation is generally short-term, such as a hotel or serviced apartment, and 

• no changes to the employee's contract.

The Australian Taxation Office’s (ATO) guidance on distinguishing between the types of travel and the deductibility of expenses include TR 2021/4 and TR 2021/1, along with PCG 2021/3. These public guidance products help simplify the process of determining whether an employee is travelling on work or living at location. For further insight into the ATO guidance refer to our previous article.

Employees may choose to add a private portion of travel on to their business travel. In these cases it may be necessary to reassess the treatment of certain expenses and benefits associated with the trip, and apportion the expenses which are otherwise deductible versus those that are not.  

Living away from home 

Living away from home refers to arrangements where an employee is temporarily relocated for work purposes, necessitating an extended stay away from their home at a new location. Expenses incurred while an employee is living away from home are generally considered living expenses and not deductible to the employee. Some of the key characteristics commonly associated with a living away from home arrangement include:

• the stay is of an extended duration at a new location, 

• the employee is temporarily relocated for work, and 

• expenses are generally considered living expenses and not deductible.

Employers may pay a living away from home allowance (LAFHA), defined by the FBT legislation as being an allowance to compensate for additional expenses incurred and any disadvantages suffered because the employee’s duties of employment require them to live away from their normal residence, where the additional expenses are non-deductible. A LAFHA can be paid to the employee as a cash ‘allowance’, or alternatively, it could be provided by way of direct payment (or reimbursement) of the respective accommodation/food and drink expenses. 

The taxable value of a LAFHA fringe benefit depends on the circumstances of the employee. Where an employee receives a LAFHA which relates to the first 12-month period at a particular work location or the employee works on a fly-in fly-out (FIFO) or drive-in drive-out (DIDO) basis, the taxable value is the amount of the LAFHA paid less any exempt accommodation and food component. 

Where the LAFHA is paid as a cash allowance to the employee and the food component is paid to compensate the employee for additional food costs they are to incur, the taxable value of this component may be reduced to nil, subject to substantiation requirements (where the value of the LAFHA exceeds the Commissioner of Taxation’s reasonable amounts). However, where the allowance or expense paid/reimbursed by the employer is to compensate the employee for their total food costs whilst living away from home (which includes ‘home’ costs), that home-related component of the LAFHA will retain a taxable element referred to as the statutory food component (equivalent to $42 a week for each adult and $21 a week for each child (an adult is a person who had attained the age of 12 years before the beginning of the FBT year)). Employers should pay close attention to the structure of LAFHA related benefits provided to employees, and follow ATO guidance when determining the taxable and exempt components for FBT purposes. 

In addition, a further test of significance is that for the LAFHA concession to apply, the employee must maintain a home in Australia at which they usually reside, and which remains available for their use at all times. While historically employees have been required to provide the employer with the appropriate living away from home declaration annually, there are now alternative record keeping requirements, which in some circumstances, mean a declaration is no longer required. 

Lastly, some employers will have cause to consider whether components of travel (by employees) may in fact represent deductible expenditure (for example, certain legs of travel under FIFO arrangements). The 2024 decision of the Full Federal Court in Bechtel Australia Pty Ltd v Commissioner of Taxation [2024] FCAFC 33 has ramifications for employers in ascertaining if flights, particularly in a FIFO context, are eligible for reductions for FBT purposes. For further guidance around the Bechtel Full Federal Court decision, refer to our previous article.  

Relocation expenses

‘Relocation’ generally refers to situations where an employee is required to permanently move to a new location to perform their employment duties. This often involves significant costs, and employers may provide various benefits to assist with these expenses. There are a number of reductions and exemptions available to employers who provide relocation benefits to their employees although employers should be aware that not all benefits provided in relation to relocation will be exempt. Some key exempt relocation benefits include:

• Engagement of relocation consultant: Costs associated with hiring a professional to assist with the logistics and planning of the move.

• Removals and storage of household effects: Expenses related to packing, transporting, and storing household goods and personal effects.

• Sale or acquisition of dwelling: Costs incurred in selling the employee's former home and purchasing a new one, including real estate agent fees and legal expenses.

• Connection or reconnection of certain utilities: Fees for connecting or reconnecting essential services such as electricity, gas, and water at the new residence.

• Relocation transport: Expenses for transporting the employee and their family to the new location.

In addition to the exempt benefits, there are also benefits which, whilst exempt, are eligible for reduction in their taxable value (and consequently, FBT liability) including:

• Relocation transport using own car: When an employee uses their own vehicle for the move, the associated costs can be concessionally taxed.

• Temporary accommodation: Costs for temporary housing while the employee is in the process of relocating.

• Temporary accommodation at former location: Expenses for temporary housing at the employee's previous location before the move.

• Temporary accommodation at new location: Costs for temporary housing at the new location until permanent accommodation is secured.

• Some relocation meals: Expenses for meals incurred during the relocation process.

If an employer is relocating employees at scale, or looking at offering relocation benefits as part of a salary sacrifice program, robust processes which leverage an understanding of applicable tax outcomes should be introduced to ensure all parties involved understand (and have budgeted for) applicable FBT. 

The 2025 FBT year marks a significant change for employers with the introduction of alternative record-keeping methods. This concessional approach aims to provide compliance relief, particularly for employers with a workforce who regularly travel and live away from home where travel diaries and declarations are administratively burdensome or are otherwise unavailable. 

The ATO released a number of legislative instruments outlining where alternative record keeping is available. Each legislative instrument has an accompanying explanatory memorandum which provides examples of the alternative record keeping documentation. 

The ATO released a total of eleven legislative instruments. For employers with a travelling workforce, specifically relevant are Legislative Instrument LI 2024/11, which provides alternative record keeping to travel diaries, and LI 2024/4 and LI 2024/5 which provide alternatives to the collection of declarations for employees living away from home. 

While the alternative record keeping provisions relax the documentation needed to claim FBT exemptions or reductions, there remains criteria for each respective legislative instrument. For example, if relying on alternate documentation in lieu of a travel diary, the data the employer must hold include the employee name, duration of travel and for each activity undertaken by the employee in the course of producing their assessable income while undertaking the the place, date, duration and nature of the activity must be provided.  The explanatory statement to LI 2024/11 provides that the required information could be contained in various types of documents such as employment contracts, payroll records, job descriptions, employer and employee correspondence (for example, emails or text messages), logbooks, employer policies, hotel receipts, employee itineraries, conference programs and calculations of private travel.

While employers may opt for the use of alternate records, as is hopefully illustrated above, it is recommended that employers understand the criteria underlying the use of such alternate records in advance of resolving to cease collecting the primary records specified in the FBT legislation. In addition, and particularly where an employee’s representation as to the usage of their benefit is key, employers may wish to consider carefully whether reliance on alternate records is to be used as the main point of corroboration for the exemption/concession, or if it is to be used a last resort (for example, where an employee has terminated). 

For employers with employees that have travelled during the 2025 FBT year, we summarise below some of the key takeaways: 

• Employers should ensure a process is in place to appropriately classify instances of travel as being business travel, LAFH, FIFO or a relocation.

• A good data collection process is advisable which allows ease of access to benefits provided to particular employees, and classes of employees (i.e. by travel type).

• For employees living away from home and receiving a LAFHA, employers should ensure records are kept to document and support eligibility for LAFHA reductions, having regard to the exempt food and accommodation components. Tracking should also be implemented to ensure concessions are not applied for employees who have been at a location for more than 12 months. 

• For employers which have previously relied on the decision in John Holland Group Pty Ltd v Commissioner of Taxation [2015] FCAFC 82 in relation to travel, be cognisant of the need to assess the deductibility of travel expenses in light of the Full Federal Court decision in Bechtel. 

• Where employers wish to provide relocation benefits, policies should be reviewed in line with the exemptions and reductions available for FBT, so that FBT costs are known and budgeted for in advance. 

• While alternative record keeping methods are available for the 2025 FBT year, there is still a criteria of information which needs to be met. Employers should review the ATO’s published legislative instruments and associated explanatory statements prior to relying on alternative records. 

• Lastly, where employees are travelling to/working in remote areas, or working under FIFO arrangements, consideration should be given to specific rules and considerations relevant to such travel.