Are Moving & Relocation Expenses Tax Deductible? What Can I Claim?
Moving home for a job raises the question “are my moving costs tax-deductible” the short answer is No; you cannot claim them personally. However, when you are moving due to employment the employee is able to claim tax back through an employer.
Under the FBT (Fringe Benefits Tax Act) there is an exemption of fringe benefits tax for employers which pay or reimburse an employees relocation costs. The employer is also able to claim tax deductions for any expenses incurred along with the GST input tax back on the relocation expense.
The best result would be to negotiate any moving expenses as a relocation bonus with the employer during the interview stage, but as this is not always possible the next best alternative is to salary sacrifice the relocation costs occurred through the employer. This effectively means that the annual gross wage of the employee is reduced by the cost of the relocation, the employer is then able to pay or reimburse any costs occurred to the employer whilst being tax-deductible.
How does this work in real life?
For example, if you were to relocate for a new job and the cost incurred purchasing furniture and general relocation expenses will total $11,000.
Let’s assume you are a top tax bracket employee on the highest tax rate to pay $11,000 you would need to earn $22,000 (which will then have $11,000 tax taken out) to be able to pay the $11,000 moving costs in after-tax dollars.
However, if you were able to salary sacrifice the $11,000 with your employer the employer would likely be able to claim back the $1,000 GST included in the $11,000 reducing the real amount deducted from your packaging down to $10,000 with no fringe benefit tax to pay.
In this example you are able to save around $11,000 (all rounded for ease of example).
Not all employers will offer salary packaging and differing FBT rules apply to different employers and as this is a complex calculation speak with your accountant to ensure a maximised outcome.
What falls under relocation costs?
- Removal and storage of household items
- Relocation transport, Flights or car costs, accommodation for an employee and family members
- Incidental costs of selling the old house and acquiring new house, e.g. stamp duty, legal services, agent’s services, discharge of a mortgage, expenses of borrowing.
- Utilities (e.g. telephone, gas and electricity) connections
- Temporary accommodation & leasing of household goods at the new location
- Meals while searching for suitable long-term accommodation (some restrictions)
- Temporary accommodation at the old location (some restrictions)
What should I reference?
There are some limitations as to what you can or can’t claim, you need to speak with your tax accountant for specific advice surrounding this, you can also search for the specific FBT Act referenced bellow.
FBT Act Reference
- (Sec 58B) Removal and Storage of Household effects including Transport, packing, unpacking and insurance in connection with the removal or storage of household effects (including pets).
- (Sec 58C) Costs incidental to the sale or acquisition of a dwelling.
- (Sec 58D) Connecting or re-connecting a telephone service to the dwelling and connecting or re-connecting gas or electricity to the dwelling.
- (Sec 17) Short term loans repayable within 12 months to pay a security deposit (e.g. rental bond or service connection deposit) in connection with accommodation which is an exempt benefit under the living away from home accommodation rules.
- (Sec 58E) Leasing of household goods while living away from home.
- (Sec 58F & 61B) Relocation transport covering transport, meals or accommodation for family members.
- (Sec 21 & 47(5) Living away from home accommodation.
- (Sec 61C) Temporary accommodation relating to relocation.
- (Sec 61D) Temporary accommodation meal fringe benefits.
- (Sec 58AA) Engaging a relocation consultant.
Advice received from Steven J. Enticott