Edited version of private advice

Authorisation Number: 1051968519101

Date of advice: 2 June 2022

Ruling

Subject: FBT - exempt benefits

Question 1

In respect of an employee who enters into a salary sacrifice arrangement ("SSA") with the employer under the 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 (FBTAA)?

Answer

Yes.

Question 4

If the answer to Question 3 is 'yes', will the tablets acquired by 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 Tablets Program be exempt for fringe benefits tax (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 20XX - 31 March 20XX

1 April 20XX - 31 March 20XX

1 April 20XX - 31 March 20XX

1 April 20XX - 31 March 20XX

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

Under the employer's Tablets 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 FBT 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.

The employer's firm culture strategy supports a fully flexible work environment.

Tablets were increasingly being used in day-to-day employment activities in conjunction with a desktop or laptop to provide a more complete and productive mobile computing solution.

The Macquarie Dictionary defines a 'tablet computer' as a type of portable computer of a size and shape comparable to a notebook computer with a touch screen and an onscreen virtual keyboard. The core functionalities of eligible tablets under the Tablets Program are listed below:

•         no mobile voice capability;

•         portable and lightweight;

•         operates without external power;

•         touch screen enabled;

•         no hybrid capabilities;

•         no accessories or extras such as keyboards, covers and SD cards; and

•         not a device listed/classified as "convertible".

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

Question 1

Summary

There is a valid Salary Sacrifice Arrangement (SSA) where the employee has declared that they will use the tablets primarily for work. The benefit is therefore provided in respect of the employee's employment.

Detailed reasoning

Under the Tablets Program the employee and the employer enter into a valid SSA. The employer participates in the Program so 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 employee's employment.

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

Question 2

Summary

The payment made by the employer is for the reimbursement of the employee's expenditure. The payment is therefore an expense payment benefit.

Detailed reasoning

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.

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 of the FBTAA.

Question 3

Summary

A tablet has similar functionality to a laptop computer and is therefore considered to be a portable electronic device for the purposes of paragraph 58X(2)(a) of the FBTAA.

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 FBTAA.

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

a)    a portable electronic device;

b)    an item of computer software;

c)    an item of protective clothing;

d)    a briefcase; and

e)    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 employer's guide).

A portable electronic device is a device that:

•         easily portable and designed for use away from the office environment,

•         small and light,

•         can operate without an external power supply

•         designed as a complete unit.

The employer's guide gives the following examples of devices that satisfy this description: 'a mobile phone, calculator, personal digital assistant, laptop, portable printer, and portable global positioning system (GPS) navigation receiver'.

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

Summary

The decision is based on the employee's intended use at the time the benefit is provided. The employer is providing the tablets to its employees by way of salary sacrifice with the intent it be used 'primarily' in the course of their employment, and the employee provides a declaration to the employer stating that the tablet is to be used primarily in the employee's employment. The tablets acquired by the employees therefore satisfy the requirement of being primarily for use in the employee's employment.

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[1] defines 'primarily' as: 'In the first place; chiefly, principally.'

In Chapter 20 of the employer's guide 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.

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, 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 your employee will be performing

•       how the use of the item relates to your employee's employment duties

•       your policy and any conditions relating to the use of the item.

The employer is 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 to perform their employment duties in a fully flexible work environment. 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 FBTAA.

Question 5

Summary

The employer will only be providing employees with one portable electronic device per FBT year under the SSA, therefore the benefit that arises will be exempt under subsection 58X(3) of the FBTAA.

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 damage or loss).

The exemption under section 58X of the FBTAA applied to an 'eligible work related item' and is limited by subsection 58X(3) of the FBTAA to one item per FBT 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 course of an employee's employment with their employer.

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

[1] Macmillan Publishers Australia, The Macquarie Dictionary online, www.macquariedictionary.com.au, accessed 02 June 2022.