Edited version of your private ruling

Authorisation Number: 1012551831484

Ruling

Subject: Capital gains

Question 1

In respect of an employee who enters into a salary sacrifice arrangement ("SSA") with their employer under the employer's Tablets Program is the employer considered to be providing a benefit in respect of the employee's employment?

Answer

Yes

Question 2

If the answer to question 1 is yes, is the benefit an expense payment benefit?

Answer

Yes

Question 3

If the answer to question 2 is yes, will the Tablets satisfy the definition of a "portable electronic device" for the purposes of paragraph 58X(2)(a) of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

Question 4

If the answer to Question 3 is yes, will the Tablets acquired by eligible employees under the Tablets Program satisfy the requirement of being "primarily for use in the employee's employment" pursuant to subsection 58X(2) of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

Question 5

If the answer to Question 4 is yes, will the Tablets Program be exempt for fringe benefits purposes, subject to the application of subsection 58X(3) of the Fringe Benefits Tax Assessment Act 1986, which limits each employee to one Tablet under the Tablets program per fringe benefits tax year (unless the relevant Tablet is being replaced due to damager or loss)?

Answer

Yes

This ruling applies for the following periods:

1 April 2013 to 31 March 2014

1 April 2014 to 31 March 2015

1 April 2015 to 31 March 2016

1 April 2016 to 31 March 2017

The scheme commences on:

1 April 2013

Relevant facts and circumstances

The employer is introducing a Tablet Program.

Under the Tablet Program eligible employees can enter into a salary sacrifice arrangement to acquire one of a number of tablets.

The employer will reimburse the employee the cost of the tablet.

An eligible employee will only be eligible for one tablet per fringe benefits tax year, unless the tablet is being replaced due to damage or loss.

Eligible employees will provide a declaration stating the tablet is to be used primarily in the employee's employment.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 20

Fringe Benefits Tax Assessment Act 1986 section 58X

Fringe Benefits Tax Assessment Act 1986 subsection 58X(2)

Fringe Benefits Tax Assessment Act 1986 paragraph 58X(2)(a)

Fringe Benefits Tax Assessment Act 1986 section 58X(3)

Reasons for decision

Question 1

Detailed reasoning:

Under the Program the employee and the employer enter into a valid SSA. As described in the Common conditions, described in the private ruling application, under the heading Background facts - conditions of the tablet program' the employer participates in the program in order that the employees can acquire a tablet to be used primarily in the employee's employment.

The employee provides a declaration to the employer stating that the tablet is to be used primarily in the employer's employment.

Therefore the benefit provided under the SSA is provided in respect of the employee's employment.

Question 2

Detailed reasoning:

Section 20 of the FBTAA provides:

Section 20 of the FBTAA provides:

Where a person (in this section referred to as the 'provider'):

(a) makes a payment in discharge in whole or in part of an obligation of another person (in this section referred to as the 'recipient') to pay an amount to a third person in respect of expenditure incurred by the recipient, or

(b) reimburses another person (in this section also referred to as the 'recipient') in whole or in part, in respect of an amount of expenditure incurred by the recipient:

the making of the payment referred to in paragraph (a), or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient.

Under the Program the employee selects their preferred Tablet and purchases the Tablet from the Vendor.

The employer reimburses the employee expenditure.

The payment to be made by the employer, by re-imbursement to the employee, will be taken to constitute the provision of an expense payment benefit provided by the employer to the employee under section 20.

Question 3

Detailed reasoning:

Certain work related items that are provided by an employer to an employee in respect of the employee's employment may be exempt benefits under section 58X of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

The exemption applies for work related items listed in subsection 58X(2) of the FBTAA as follows:

a portable electronic device

an item of computer software

an item of protective clothing

a briefcase, and

a tool of trade.

The ATO has considered the meaning of 'a portable electronic device' and provided an explanation of the phrase in Chapter 20 of the publication Fringe benefits tax: a guide for employers (the employers guide).

A portable electronic device is a device that:

is easily transportable and designed for use away from the office environment

is small and light

can operate without an external power supply, and

is designed as a complete unit.

The employers guide gives the following examples of devices that satisfy this description: mobile phones, calculators, personal digital assistants, laptop computers, tablets, portable printers and global positioning system (GPS) navigation receivers.

A tablet is a one piece mobile computer and has similar functions to a laptop computer. Therefore, tablets are portable electronic devices for the purposes of paragraph 58X(2)(a) of the FBTAA.

Question 4

Detailed reasoning:

The exemption under section 58X of the FBTAA applies for work related items listed in subsection 58X(2) of the FBTAA which are primarily for use in the employee's employment.

The word 'primarily' is not defined in the FBTAA, therefore it takes on its ordinary meaning, The Macquarie Dictionary, [Multimedia], versions 5.0.0.1/10/01 defines 'primarily' as:

In the first place; Chiefly, principally

In Chapter 20 of the publication Fringe benefits tax: a guide for employers there is an explanation of how to determine whether 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.

The employee's job description, duty statement or employment contract it can be used as a basis for concluding that the tablet is to be provided chiefly or principally to enable the employee to undertake their employment duties.

Alternatively, where there may be private use of an item, factors such as those listed below can be used to determine whether the item is primarily for use in the employee's employment:

The reason or reasons the item was provided to the employee

The type of work the employee performs

How the use of the item relates to the employee's employment duties

The employer's policy and any conditions relating to the use of the item.

Telstra in providing the Tablets to its employees by way of salary sacrifice, and intends it be used 'primarily' in the course of their employment, by assisting them perform their employment duties in a fully flexible work environment, and any private use of the tablet is incidental to business use.

Accordingly, the Tablet provided to employees under a SSA will be primarily

for use in the employee's employment as required by subsection 58X(2) of the

FBTAA1986.

Question 5

Detailed reasoning:

The scheme limits each employee to one Tablet under the Tablets program per FBT year (unless the relevant Tablet is being replaced due to damager or loss).

The exemption under section 58X of the FBTAA applies to an 'eligible work related item' and is limited by subsection 58X(3) of the FBTAA to one item per fringe benefits tax year, unless the item is a replacement item as allowed by subsection 58X(4) of the FBTAA.

A 'portable electronic device' is an eligible work related item under subsection 58X(2) of the FBTAA if it is primarily for use in the employee's employment.

As explained in the reasons for the answers to Q3 and Q4, a Tablet is a 'portable electronic device' and the Tablet will be primarily for use in the course of their employment with Telstra.

This means that the Tablet provided to Telstra employees are 'eligible work related items', and as Telstra will only provide an employee with one tablet device, unless replaced or damaged, per FBT year under the SSA, and the benefits that arise from the provision of the Tablets will be exempt benefits under section 58X of the FBTAA.

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