The TIA submits that the ATO should formally recognise that internet access costs, which relate to an employee's use of a laptop that is provided primarily for use in the employee's employment, qualify as exempt benefits as they are 'in respect of' an eligible work related item (refer section 58X).
A laptop computer can qualify as an eligible work related item under paragraph 58X(2)(a). Similarly, a mobile phone can also be classified as an eligible work related item under paragraph 58X(2)(a). Where a mobile phone qualifies as exempt, the mobile phone call and rental charges are also accepted as exempt under section 58X(1) as being in respect of an eligible work related item (refer minutes of this meeting of March 1996). The TIA submits that internet access costs should be treated in the same manner, when paid for as a part of the provision of a laptop that qualifies as an eligible work related item.
Many employees require internet access in order to complete day to day activities associated with their work. In fact, the use of a laptop these days for work purposes would rarely occur without the need for internet access at some point. In fact, internet costs are really 'running costs' associated with using a laptop.
The TIA therefore considers that the costs associated with an employee's use of internet access are directly 'in respect of' the laptop. As such, provided that the reason for providing the laptop was primarily for work purposes then the internet access costs should also be exempt.
Internet access and other costs that may be 'in respect of' a laptop that is an eligible work related item include: broadband, ADSL and wireless internet access (rental and usage/download charges).
Meeting discussion
ATO provided background information and opened up discussion with members on how employers might treat internet access where employers provide the use of laptops to employees in today's environment.
The TIA mentioned the ATO treatment of the use of mobile phones provided primarily for use in the employee's employment. The ATO provided information in relation to the decision that had been taken on the use of mobile phones and why that is considered to be appropriate.
It was acknowledged by members that employers consider and recognise FBT on laptops due to the exemption provided by section 58X but perhaps do not always look at the internet access as being a separate benefit.
Similar to the treatment of mobile phones, the ATO indicated that where an employer provides an employee with the use of a laptop (that is a residual benefit as opposed to the case where there is a property benefit; ownership of the laptop has passed to the employee or expense payment benefit; where the employer reimburses the cost of the laptop), wireless broadband access to the internet provided as part of the use of the laptop could also be exempt under section 58X. For example it is common for employers to provide employees with the use of a laptop which includes a USB modem/ dongle that provides wireless broadband internet access. This use and access is generally subject to security requirements and policies are in place relating to private use. The ATO advised members that employer provided wireless internet access in this manner could satisfy the requirement in paragraph 58X(1)(c); residual benefit where the recipients benefit consists of the making available of the eligible work related item.
The TIA contended that if the employer provided USB modem that allows wireless broadband internet access in conjunction with the use of a laptop is accepted as being exempt, subject to other requirements in section 58X, the reimbursement for broadband internet connection at the home should also be accepted for possible exemption under section 58X. That is paragraph 58X(1)(a) should apply as the expense incurred by the employee on their home internet account and reimbursed by an employer would be 'in respect of an eligible work related item'. The TIA suggested that a laptop is dependent on access to the internet. For example, if a sales representative has a laptop provided by the employer which is used at home and the employee's home internet account has been reimbursed by the employer why is a declaration required? The employer should simply be able to consider the exemption provided by section 58X.
The ATO did not agree that home internet access would be within the intent or meaning of section 58X. An employer in such situations would need to consider the business use applicable by reference to the 'otherwise deductible rule' and any relevant declaration considerations.
ATO response
The ATO advised members that the application of the exemption provided by section 58X to the provision of a mobile phone was not affected by the amendments to section 58X as the 'primarily for use' test has applied to the provision of a mobile phone since the introduction of section 58X in 1995.
As noted in the TIA agenda, use of mobile phones was discussed at this forum on 14 March 1996. This was followed up on 13 June 1996. Broadly, it was confirmed that, where a mobile phone is provided to an employee primarily for use in the employee's employment, then the cost of the calls and access to network costs would also be exempt from FBT under section 58X.
The ATO noted that the wording used in sub-section 58X(1) when setting out the treatment of expense payment benefits, property benefits and residual benefits varies across the benefit types. The ATO suggested that the most common way an employer provides a laptop to employees, where the laptop is 'primarily for use in the employee's employment', is by way of the 'use' of a laptop, that is as a residual benefit.
Paragraph 58X(1)(c), which is the relevant provision relating to residual benefits, states that:
a residual benefit where the recipients benefit consists of the making available of an eligible work related item.
The ATO agreed that where an employer has provided an employee with the use of a laptop (residual benefit) inclusive of a USB modem/dongle that allows wireless broadband access to the internet, and the use of the laptop meets the requirements of section 58X such that the use is exempt, that use would include the wireless broadband internet access. It was noted that where an employer provides a USB modem/dongle to an employee, the internet use and access permitted is generally subject to security requirements and policies are in place relating to private use. The ATO advised members that employer provided wireless broadband internet access in this way would satisfy the requirement of the 'making available of the eligible work related item' as required under paragraph 58X(1)(c).
In other scenarios, for example where home internet accounts are in the name of the employee and are reimbursed, internet access would not fall within the exemption provided under section 58X. The ATO did not agree that paragraph 58X(1)(a) would apply to the reimbursement of home internet access incurred by an employee in the circumstances discussed. In such cases, the expenditure incurred by the employee is in respect of access to the internet provided by an internet service provider. It is not an expense payment benefit in respect of the eligible work related item (that is the laptop). An employer could of course consider the 'otherwise deductible rule' to reduce the taxable value of the expense payment fringe benefit in those situations.
Sections within Agenda items
Last Modified: Friday, 29 October 2010