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Are Moving & Relocation Expenses Tax Deductible? What Can I Claim?

Last Updated: Thursday, March 5th, 2020

Whether you’re relocating for a new job opportunity or a change in your professional path, relocation expenses and moving costs can quickly add up. But can you claim relocation costs on tax? Are relocation expenses tax deductible? Can you claim these expenses to ease the financial burden? 

Navigating the maze of personal and employer-based deductions can be intricate, and understanding the landscape is essential. In this guide, we’ll demystify the relocation expenses you can claim under the Fringe Benefits Tax Act (FBT) and explore the guidelines provided by the Australian Taxation Office (ATO) to ensure a financially savvy move.

Personal Relocation Expenses

Unfortunately, for individuals, relocation expenses are generally not tax-deductible. But don’t worry; there are ways through your employer to make relocation costs tax deductible or have them fully covered.

How Employers Can Benefit Under the FBT Act

Under the FBT (Fringe Benefits Tax Act), there is an exemption for employers that pay or reimburse an employee’s relocation expenses. These relocation expenses with FBT can effectively reduce the annual gross wage of the employee, allowing the employer to pay or reimburse the costs while being tax-deductible.

How Employees Can Benefit Under the FBT Act

Employees relocating for work can often face substantial costs, but relocation expenses for FBT offer a way to alleviate these financial burdens. Through a salary sacrifice, employees can have their gross annual wage reduced by the amount of relocation expenses, making them effectively tax-deductible.

Understanding Relocation Expenses Under the Fringe Benefits Tax Act: A Practical Guide

Relocation expenses can range from $10,000 to $20,000, which makes understanding how to manage these costs crucial. Although employees cannot directly claim a tax deduction for relocation expenses, there is a way to make these relocation costs tax deductible through employer arrangements under the Fringe Benefits Tax Act.

The FBT Act Exemption 

Under the Fringe Benefits Tax Act, an employer who pays or reimburses an employee’s relocation expenses is exempt from fringe benefits tax. Plus, the employer can claim a tax deduction and GST input tax credits back on the payment.

Salary Sacrifice Strategy

To make the relocation expenses tax deductible, an employee can salary sacrifice these costs with the employer. This strategy involves reducing the employee’s gross annual wage by relocation expenses, and the employer then pays or reimburses the expenses.

A Real-Life Example

Meet Jill, who relocates from a suburb in Sydney to a rural area in NSW for a new job – her relocation expenses, including transporting furniture, total $11,000 – Jill and her employer agree to salary sacrifice the relocation expenses, allowing her to make a substantial tax saving.

Seek Expert Advice 

This process may vary depending on individual circumstances and employer policies. Consulting with an accountant or tax specialist about relocation expenses with the ATO ensures compliance and maximises benefits.

DISCLAIMER: Remember, not all employers offer this option, and rules may differ. Engage in clear communication with your employer and seek professional advice to make the most of this opportunity.

By understanding the tax laws and collaborating with your employer, you can significantly reduce the costs of your move.

Understanding Relocation Costs: What Can You Claim?

moving expenses calculation

Relocating for work involves various costs, many of which can be addressed through FBT provisions. Here’s a breakdown of what falls under relocation expenses, including details related to relocation expenses for FBT:

  1. Removal and Storage of Household Items: Including transport, packing, unpacking, and insurance for household effects and pets.
  1. Transportation and Accommodation: Relocation transport may include flights or car costs and accommodation for an employee and family members during the move.
  1. Incidental Costs of Property Transactions: Including stamp duty, legal services, agent’s services, discharge of a mortgage, and borrowing expenses when selling the old house and acquiring a new one.
  1. Utility Connections: Includes connecting or re-connecting telephone, gas, and electricity services to the dwelling.
  1. Temporary Living Arrangements: Includes accommodation & leasing of household goods at the new location, meals while searching for suitable long-term housing, and temporary accommodation at the old location (some restrictions may apply).

FBT Act Guidelines: What Should You Reference?

Relocation benefits are subject to specific guidelines and limitations. Consulting a tax accountant for tailored advice is crucial. For those looking to delve into the details, below are some essential FBT Act references related to relocation expenses for the ATO.

  • Removal and Storage: (Sec 58B) Includes transport, packing, unpacking, and insurance.
  • Dwelling Costs: (Sec 58C) Incidental costs to the sale or acquisition of a dwelling.
  • Utilities: (Sec 58D) Connection or re-connection of telephone service, gas, or electricity.
  • Short-term Loans: (Sec 17) Repayable within 12 months for security deposits.
  • Leasing of Household Goods: (Sec 58E) While living away from home.
  • Family Transport: (Sec 58F & 61B) Covering transport, meals, or accommodation.
  • Living Away From Home Accommodation: (Sec 21 & 47(5)).
  • Temporary Accommodation: (Sec 61C) Relating to relocation, (Sec 61D) meal fringe benefits.
  • Relocation Consultants: (Sec 58AA) Engaging professionals for relocation assistance.

(FBT Act Advice received from Steven J. Enticott)

By understanding these components and working with professional home removalists, you can optimise the financial aspects of your move. Smoothmoves offers specialised removalist services, including packing and unpacking, and a comprehensive insurance policy to ensure a smooth move every time.

Relocation Expenses and the Australian Taxation Office (ATO): Navigating Tax Deductions

While individuals may find that relocation expenses are generally not tax-deductible, certain exceptions apply when the move is directly related to your employment. Understanding these nuances with the ATO’s guidelines can lead to valuable relocation tax deductions.

Qualifying for a Work-Related Relocation Tax Deduction

Relocating specifically for work can open doors to a relocation for a work tax deduction. If your move is required by a new job or a change in your working location, some of your expenses may be tax-deductible under relocation expenses with the ATO.

Allowable Deductions and Limitations: A Guided Approach

Not all relocation expenses qualify for deductions, and understanding what you can and can’t claim is essential. Consulting with a tax accountant about relocation expenses tax deductible is critical.

Benefits of Using Smoothmoves for Tax-Deductible Moves 

Choosing Smoothmoves for your relocation needs ensures a seamless transition and supports your financial planning. Our customised home removalist services cater to every aspect of your move, including:

  • Comprehensive packing and unpacking assistance, handled with care.
  • High-quality removal insurance to protect your valuable possessions.
  • Expert guidance on identifying expenses that may qualify for tax deductions, keeping your best financial interests in mind.

With Smoothmoves, you gain more than just moving services; you have a partner who understands the financial implications of relocation and assists you in optimising tax benefits.

A Smooth Move Guaranteed 

Deciphering the intricate web of tax deductions for moving and relocation expenses doesn’t have to be daunting. Whether you’re an individual wanting to know what can be claimed or an employer seeking to provide optimal support for relocating employees, the insights and guidance of a tax professional are paramount.

Ready to embark on your next chapter? We’re here to guide you from understanding the nuances of the FBT to orchestrating a seamless, stress-free move. Your successful relocation starts here. Contact us today to receive a free quote for a smooth move guaranteed!

Disclaimer: Tax Deductions for Moving and Relocation Expenses

The information in this guide is intended as a general overview of tax deductions related to moving and relocation expenses. It does not cover all situations or complexities of tax law. Tax laws are subject to change, and individual circumstances can vary. 

We strongly encourage you to consult a certified tax professional to understand how these rules apply to your situation. This guide is not intended to be financial, legal, or tax advice.

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