ATO Interpretative Decision
ATO ID 2008/160
Fringe Benefits Tax
Exempt benefits: work related items - loan arrangementsFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
If an employer pays an employee's loan repayments, where the loan was taken out by the employee to purchase an eligible work related item, will this be an exempt benefit under paragraph 58X(1)(a) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
Decision
No. The repayment of the employee's loan is not considered to be referable to the purchase of an eligible work related item and is therefore not exempt under paragraph 58X(1)(a) of the FBTAA.
Facts
The employee selects a laptop computer that they intend to acquire from a retailer.
The employee obtains a personal loan, in their own name, to buy the computer.
The employee uses the loan funds to purchase the laptop computer.
The laptop computer is 'a portable electronic device' for the purposes of paragraph 58X(2)(a) of the FBTAA.
The employee enters into a valid salary sacrifice arrangement (SSA) for the employer to make the loan repayments (principal and interest) on their behalf.
Reasons for Decision
Section 58X of the FBTAA exempts from fringe benefits tax (FBT) certain expense payment, property or residual benefits in respect of an eligible work related item. Subsection 58X(2) of the FBTAA lists the items that, if provided primarily for use in the employee's employment, are eligible work related items and includes at paragraph (a) 'a portable electronic device.'
Where the eligible work related item is provided by way of an expense payment, the requirement under paragraph 58X(1)(a) of the FBTAA is that the 'recipients expenditure' is in respect of an eligible work related item. The term 'recipients expenditure' is defined in subsection 136(1) of the FBTAA as 'in relation to an expense payment benefit, means the expenditure incurred by the recipient as mentioned in paragraph 20(a) or 20(b) of the FBTAA, as the case requires.'
Under a SSA, the employer's payments need to be referable to the reimbursement or payment of an expense where the recipients expenditure is in relation to the laptop computer, for the exemption under paragraph 58X(1)(a) of the FBTAA to apply. Where under the SSA the employer makes loan repayments it cannot be said that 'the recipients expenditure is in respect of an eligible work related item', because the employer is not making payments towards the purchase of the laptop by the employee. Rather, the employer is meeting the employee's personal loan obligations, which are not considered to be referable to the purchase of the laptop.
Therefore the expense payment is not an exempt benefit under paragraph 58X(1)(a) of the FBTAA and remains subject to FBT.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 5 December 2014 | Date of decision | Year to be changed from 2009 to 2008 |
Year of income: Year ended 31 March 2009
Legislative References:
Fringe Benefits Tax Assessment Act 1986
paragraph 20(a)
paragraph 20(b)
section 58X
paragraph 58X(1)(a)
subsection 136(1)
ATO ID 2005/68
Keywords
Exempt benefits
Expense payment fringe benefits
Fringe benefits tax
Date reviewed: 31 October 2017
ISSN: 1445-2782
| Date: | Version: | |
| 28 November 2009 | Original statement | |
| You are here | 5 December 2014 | Updated statement |