ATO Interpretative Decision

ATO ID 2008/159

Fringe Benefits Tax

• This ATO ID has been updated to take into account amendments enacted under the Tax Laws Amendment (Small Business Measures No. 3) Act 2015 that allows a small business (with an aggregated annual turnover of less than $2 million) an exemption for multiple work-related portable electronic devices with substantially identical functions that have been provided to an employee in the same FBT year from 1 April 2016.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

If an employer reimburses an employee over a period spanning two FBT years for the cost the employee incurred to purchase a laptop computer, can the employer provide another laptop computer to the employee in the second FBT year as an exempt benefit, under subsection 58X(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Decision

No. Where there has been either an expense payment or property benefit in relation to a laptop computer earlier in an FBT year, the provision of another laptop computer in that same year will not be an 'eligible work related item' and therefore will not be an exempt benefit under subsection 58X(1) of the FBTAA.

Facts

An employee purchases a laptop computer.

The laptop computer is a 'portable electronic device' and primarily for use in the employee's employment for the purposes of subsection 58X(2) of the FBTAA.

The employer agrees to reimburse the employee for the cost of the laptop computer. These reimbursements are made over a period of time which overlaps two FBT years.

Each of the employer's payments is an expense payment benefit for the purposes of paragraph 20(b) of the FBTAA. If provided, the second laptop computer will not be a replacement and will have substantially identical functions to the first computer.

The employer does not satisfy the definition of 'small business entity' in subsection 136(1) of the FBTAA for the income year starting after the start of the FBT year or the income year ending after the start of the FBT year.

Reasons for Decision

Section 58X of the FBTAA exempts from FBT the provision of certain work related items. Subsection 58X(1) of the FBTAA provides that the provision of an expense payment benefit, a property benefit or a residual benefit in respect of an eligible work related item will be an exempt benefit. Subsection 58X(2) of the FBTAA, which in turn is subject to subsection 58X(3) and subsection 58X(4) of the FBTAA, lists the items where if they are primarily for use in the employee's employment are 'eligible work related items' and thus subject to exemption.

Subsection 58X(3) of the FBTAA limits the exemption in relation to these items by providing that they are not exempt if, 'earlier in the FBT year, an expense payment benefit or a property benefit of the employee has arisen in relation to another item that has substantially identical functions to the later item'. The test under subsection 58X(3) does not simply limit the exemption to the provision of one eligible work related item per year. Subsection 58X(3) in fact limits the exemption to the provision of expense payments for one item or the provision of one item (property benefit) per year.

This means that if an employer provides multiple expense payments with respect to one item which spans more than one FBT year, then another item cannot be provided as an expense payment benefit or a property benefit in either the first or second year of payments. This is because there has already been expense payments made in relation to an item that has substantially identical functions as the later item. However, the test in subsection 58X(3) of the FBTAA is subject to subsection 58X(4) of the FBTAA.

Subsection 58X(4) of the FBTAA provides that the test does not apply to portable electronic devices provided by an employer that meets the definition of 'small business entity' in subsection 136(1) of the FBTAA for the income year starting after the start of the FBT year or the income year ending after the start of the FBT year. This means that an employer with an aggregate annual turnover less than $2 million can provide a portable electronic device to an employee that has substantially identical functions to a device provided to that employee in the same FBT year, and all of the devices will be exempt from FBT.

As the employer does not satisfy the definition of a 'small business entity' in subsection 136(1) of the FBTAA in the income year starting or ending after the start of the FBT year, subsection 58X(4) does not apply to the expense payment benefit in relation laptop computer.

Therefore, where there has been an expense payment benefit in relation to a laptop computer earlier in an FBT year, the provision of another laptop computer in that same year will not be an exempt benefit under subsection 58X(1) of the FBTAA.

Amendment History

Year of income:  Year ended 31 March 2009

Legislative References:
Fringe Benefits Tax Assessment Act 1986
   subsection 58X(1)
   subsection 58X(2)
   subsection 58X(3)
   subsection 58X(4)
   subsection 136(1)

ATO Interpretative Decisions overturned by this decision
ATO ID 2005/149

Keywords
Exempt benefits
Expense payment fringe benefits
FBT reimbursements
Fringe Benefits Tax

Siebel/TDMS Reference Number:  6099881; 1-7ZMVGBZ

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  5 December 2008
Date reviewed:  8 September 2014

ISSN: 1445-2782