Edited version of your written advice

Authorisation Number: 1051193279392

Date of advice: 6 March 2017

Ruling

Subject: FBT - Exempt benefits: work related items - portable electronic device

Question 1

In respect of an employee who enters into a salary sacrifice arrangement 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 Tablet satisfy the definition of a 'portable electronic device' for the purposes of paragraph 58X(2)(a) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

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 FBTAA?

Answer

Yes.

Question 5

If the answer to Question 4 is yes, will the provision of benefits under the Tablets Program be exempt for FBT purposes, subject to the application of subsection 58X(3) of the FBTAA, which limits each employee to one Tablet under the Tablets Program per FBT year (unless the relevant Tablet is being replaced due to damage or loss)?

Answer

Yes.

This ruling applies for the following periods:

1 April 2017 - 31 March 2018

1 April 2018 - 31 March 2019

1 April 2019 - 31 March 2020

1 April 2020 - 31 March 2021

The scheme commences on:

1 April 2017.

Relevant facts and circumstances

The employer has a Tablet Program available for employees.

Under the Tablet Program eligible employees enter into a salary sacrifice arrangement to acquire a Tablet of their choice which has been specifically identified by the employer to fit its business needs.

The employer reimburses the employee for the cost of the Tablet.

The employer will only reimburse an eligible employee for one Tablet per fringe benefits tax year, unless the Tablet is being replaced due to damage or loss.

The employer has provided details of the employment duties for which the Tablet will be used.

Eligible employees must provide a declaration stating that the Tablet is to be used primarily in their employment.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 20

Fringe Benefits Tax Assessment Act 1986 subsection 58X(1)

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 subsection 58X(3)

Fringe Benefits Tax Assessment Act 1986 subsection 58X(4)

Reasons for decision

All legislative references referred to below are in relation to the Fringe Benefits Tax Assessment Act 1986.

Question 1

Under the Tablets Program the employee and the employer enter into an effective salary sacrifice arrangement (SSA). As described in the facts, the employer makes the program available so that employees can acquire a Tablet to be used primarily in their employment.

In order to participate in the program, the employee provides a declaration to the employer stating that the tablet is primarily for use in their employment.

Therefore the benefit provided by the employer under the SSA is considered to be provided in respect of the employee's employment.

Question 2

Section 20 states:

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 Tablets Program the employee selects their preferred Tablet and purchases the Tablet from the Vendor. The employer then reimburses the expenditure incurred by the employee.

The reimbursement of the expenditure incurred by the employee is taken to constitute the provision of an expense payment benefit provided by the employer to the employee under section 20.

Question 3

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.

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

(a) a portable electronic device;

(b) an item of computer software;

(c) an item of protective clothing;

(d) a briefcase;

(e) a tool of trade.

The Commissioner 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 (FBT guide).

A portable electronic device is a device that is all of the following:

● easily portable and designed for use away from an office environment

● small and light

● can operate without an external power supply

● 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 core functionalities of eligible Tablets include:

● no mobile voice capability;

● portable and lightweight;

● operates without external power;

● touch screen enabled;

● no 'snap in keyboard' packaged with the device; and

● no hybrid capabilities.

Therefore the Tablets are considered to be portable electronic devices for the purposes of paragraph 58X(2)(a).

Question 4

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

The word 'primarily' is not defined in the FBTAA and therefore takes on its ordinary meaning.

The Macquarie Dictionary, [Multimedia], versions 5.0.0.1/10/01 defines 'primarily' as:

1. in the first place; chiefly; principally

In Chapter 20 of the FBT guide there is an explanation of how to determine whether an item is primarily for use in the employee's employment.

The determination is based on the employee's intended use at the time the benefit is provided to them. It is not necessary 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 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.

The employer will be providing Tablets to eligible employees under the Tablet Program with the intention that the use of the Tablets will support the employer's future ways of working strategy and will assist employees to perform their employment duties in a fully flexible work environment.

By providing the Tablets to its employees via a salary sacrifice arrangement, the employer intends for the Tablets to be used 'primarily' in the course of their employment. It is intended that any private use of the Tablet is merely incidental to business use.

Accordingly, the Tablets provided to employees under the Tablets Program will satisfy the requirement that they are primarily for use in the employee's employment as required by subsection 58X(2).

Question 5

As explained in the Reasons for decision under Questions 3 and 4:

● the employer will be providing expense payment benefits to employees in respect of their employment;

● the expenditure incurred by the employee will be in respect of a portable electronic device, being the Tablet available under the Tablet Program; and

● the Tablet is primarily for use in the employee's employment.

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

The Tablets Program limits each employee to one Tablet per FBT year (unless the relevant Tablet is being replaced due to damage or loss). Therefore the Tablets that employees receive under the Tablet Program will be eligible work related items and the expense payment benefits will be exempt benefits under section 58X.