FBT: Eligible Work-Related Items

Find out what eligible work-related items are exempt from FBT and items to watch out for at work. How many portable electronic devices can be FBT exempt? 

Date published: 21 April 2022

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TRANSCRIPT

Eligible Work-Related Items: Portable Electronic Devices 

So the issue with eligible work related items as often being what is a tool of trade and the commissioner takes a really narrow view of a tool of trade. So he says the tool of trade is something if you like, mechanical, tactile, like a a hammer or a soul or a drill or something along those lines.

So then you say, well, what about computers? And the answer is when we get to the not tool of trade but portable electronic device head before chatting to today I moved one of my external screens that's not a portable electronic device because the screens to be similarly back in the days of the Apple Max when they first came out and they were enormous of the size of a traditional esky that was portable on them.

But having that discussion with the tax office at the time, even though barely but if you're looking for a rule of thumb, think to yourself notebooks, laptops, they're portable electronic devices, but desktop computers, particularly with external drives and whatnot, they're not portable. 

Now, the next little trap there is there was a broad misunderstanding in the community that you could only salary sacrifice one of those a year and that the law changed recently. So now you can have more than one a year. That is just not right. 

It was never a limit of one portable electronic device a year. The limit was only ever in relation to property or expense payment benefits, which means Hockridge advisory could only provide poll with ownership of one notebook computer a year. Or if it was a case of reimbursing my expenses and expense payment, I could only do that once a year.

But Hockridge could advisory could provide me with as many residual fringe benefits as it wanted. Always could, always can. So a residual fringe benefit might be Hockridge advisory buys a notebook, computer or two or three, and it could always have provided me with the ME use, not the ownership, not reimbursement of cost, not ownership, but the use of those.

Now, the reason I mention that is there was a lot made of this recent change in legislation, and it was just a nonsense because as I said before, the never was such a one on any limit to me. 

Used Primarily for Work

The other thing to watch out for is when we're determining whether this notebook or laptop or portable electronic device is used primarily for work. Watch out. Because I've never had an employee who needed a computer for work of a particular type who wasn't provided with it. The employees who want something usually whiz bang and faster and maybe a Mac rather than a Lenovo, whatever it might be. And usually because they wanted to do graphics at home for a part time job, or they wanted to play high end computer games, and that isn't providing a computer perhaps for primarily for work.

So if you do get those requests and you're an employee or indeed you're an adviser, ask yourself why is it being provided and is it really exempt because it's going to come a time when we do get a tap on the shoulder from the tax man, when he looks at the benefits provided and says, oh, I've heard about that. That's really great for playing Call of Duty, I think. I think we better impose some FBT here. And by the way, there's some penalties that go on top of the tax. So please be careful. This is a classic one where the devil is in the detail. And just because just because your mates have done it doesn't mean it's okay for you. 

Yeah. This depends on whether you read the legislation and analyze it or whether you simply pick up ATO fact sheet. that the test is and I've got it in front of me primarily for using it's got to be provided primarily for using. So it seems to me the test is why is it provided not why was it provided? So it's an intention at the time of provision. So the actual use of it becomes irrelevant and a change of use becomes irrelevant.

It was too hard even though between us and hundreds of thousands of people. And listen to this nugget it was too embarrassing for the government to go back and change. So they tried to fix it with a determination which still wasn't which still wasn't right. So the commissioner's view is look at actual use. In my view, the legislation is abundantly clear. You look at the purpose for which it was provided you ask, is it provided primarily for use? 

Is a $20,000 Birkin Laptop Bag FBT Exempt? 

One of my daughters ask me about a bag at one stage to carry her computer and and particularly for women. Some of the bags, they're expensive. They can carry a computer, but they can also be used for other purposes. And the commission's view there is if it's primarily for carrying an Apple computer, then that might qualify. And similarly, it might qualify for depreciation purposes.

If instead you buy it rather than salary sacrifice. It'll have it provided through work. So are we in a gray area there? Yes, because you're in a gray area. Might it cop a little bit of scrutiny? Yes, it might. I mean, it depends Right. the point really is we don't have a bright line test. So just be alert to the fact there's a degree of rubbery-ness And with rubberry-ness for uncertainty comes a degree of risk. (how to advise clients?) So what I've suggested are employers generally is if this one's come up, I'm suggested, let's not salary sacrifice. It allows the employer to claim a depreciation deduction.

They still get some tax advantage. And it means you don't have any exposure, particularly because the employee might leave the employer. The FBT review might happen after that left and then trying to recover the FBT, assuming the employer has that right under a salary sacrifice agreement after the employee has left and has gone, who knows where? Can be a little problematic.

So it's just prudent because I'm usually acting for the employer rather than the employee to say let him or her buy the bag, claim depreciation rather than salary sacrifice.