A number of benefits are exempt from fringe benefits tax (FBT) under the FBT legislation. Providing certain work-related items to your employee is one of these exemptions. Your employee also does not have to pay income tax on the work-related item they receive from you.
In the 2008 budget, changes were announced to the work-related item exemption and these changes are now law. Depending on when the item was purchased or the contract was entered into, the previous law or the amended law may apply.
If…
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then…
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the item was purchased or the contract was entered into at or before 7.30pm on 13 May 2008
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the previous work-related items exemption applies.
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the item was purchased or the contract was entered into after 7.30pm on the 13 May 2008 onwards
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the amended work-related items exemption applies.
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If you provide the following items to employees, you do not have to pay FBT on them:
- mobile phone or a car phone (only if the phone is mainly used in the employee's employment)
- item of protective clothing required for the employee's employment
- briefcase
- calculator
- tool of trade
- item of computer software for use in the employee's employment
- electronic diary, a personal digital assistant (PDA) or similar item
- notebook computer, a laptop computer or a similar portable computer (limited to the purchase or reimbursement of one computer for each employee a year), and
- portable printer designed specifically for use with a notebook computer, a laptop computer or a similar portable computer.
An FBT exemption applies for the following work-related items:
- portable electronic device*
- item of computer software
- item of protective clothing
- briefcase, and
- tool of trade.
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Even if you provide your employee with these work-related items, you still need to consider the limitations on the exemption.
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*A portable electronic device is a device that:
- is easily portable and designed for use away from an office environment
- is small and light
- can operate without an external power supply, and
- is designed as a complete unit.
Examples of portable electronic devices include a mobile phone, calculator, personal digital assistant, laptop, portable printer and portable global positioning system (GPS) navigation receiver.
The exemption is limited to:
- items primarily for use in the employee's employment, and
- one item per FBT year for items that have a substantially identical function, unless the item is a replacement item.
An item is primarily for use in the employee's employment if it is provided principally to enable your employee to do their job.
When determining whether or not an item is primarily for use in the employee's employment, the decision is based on the employee's intended use at the time the benefit is provided to them. You do not have to look at the employee's actual usage over the FBT year to determine whether the item is used primarily in the employee's employment.
However, you must use a reasonable basis to determine whether an item is primarily for use in your employee's employment - for example, the employee's job description, duty statement or employment contract.
Alternatively, if you are aware that there may be private use of an item, you could document factors such as those listed below to determine whether the item is primarily for use in the employee's employment:
- the reason or reasons the item was provided to your employee
- the type of work your employee will be performing
- how the use of the item relates to your employee's employment duties, and
- your policy and any conditions relating to the use of the item.
An item is a replacement item if the previous item is lost or destroyed, or needed replacing because of developments in technology.
A financial planning company provides its employee with a laptop computer, which is a portable electronic device. The laptop is intended to be used at client visits to provide advice, and also between client visits to produce and update reports.
The employer does not have a policy restricting personal use, and expects that there may be incidental private use of the laptop by the employee. There have been no other laptops provided to the employee during the FBT year.
The employer does not have to pay FBT on the provision of the laptop to its employee as it is exempt from FBT under the work-related items exemption. That is:
- the laptop is provided to the employee principally to enable them to perform their employment duties, and
- there has been only one laptop provided to the employee during the FBT year.
Last Modified: Thursday, 16 October 2008