Tax Benefits of Relocating for Work Purposes
With an ever increasing mobile workforce, the opportunities to relocate for work can be both exciting and challenging. However, what many people don’t know is that the tax system actually provides assistance to employees relocating in the form of tax free or concessionally taxed benefits. Some can apply when relocating permanently and others when living away from home temporarily.
These types of benefits are generally provided through the Fringe Benefits Tax system and are accessed by an employer paying for or reimbursing an expense incurred by the employee (or future employee). This is usually achieved through a salary packaging arrangement. From an employer’s perspective, if structured correctly these arrangements do not result in any additional cost than would normally occur by paying an employee salary. However from an employee’s perspective, they can result in tax savings.
Some of the types of expenses that can be paid for by your employer include:
Engagement of relocation consultant
The cost of engaging a relocation consultant to help you move.
Removal and storage of household effects
The costs of removal and storage of household effects.
Sale or acquisition of dwelling
Relocation expenses that are incidental to the sale and/or purchase of a home by the employee.
Costs incidental to the sale and/or purchase of a house include stamp duty, advertising, legal fees, agent commission, discharge of a mortgage, expenses of borrowing, or any similar capital expenses.
This exemption can provide significant tax savings to an employee given the size of the costs.
Connection or reconnection of certain utilities
The costs of connecting or reconnecting gas, electricity and telephone services to the new home.
The cost of temporary accommodation at your new work location.
The costs of providing relocation transport (flights, meals and accommodation en route) to an employee (and family members). The exemption also applies where the employee is returning to their usual place of residence after working at another location.
In order to access these benefits, you need to come to an arrangement with your employer to essentially swap cash salary for benefits. This means instead of paying you salary, your employer will reimburse certain expenses you have incurred on relocating. This needs to happen before they reimburse you. If you employer was prepared to cover some of the relocation expenses anyway, then those costs can be excluded from such an arrangement. Only include the costs you would have had to fund yourself.
There are strict rules and timeframes associated with these types of benefits. We have seen people miss out on accessing benefits simply because they were not aware they could do so and were outside the relevant timeframes. So it is best to seek advice from a tax advisor to ensure you maximise your benefits.