Australia: Portable Electronic Devices And The Meaning Of ´Primarily For Use´ In Employee´s Employment

Last Updated: 5 January 2009
Article by Stephen O'Flynn and Michael van Schaik

Since the introduction of legislation following in the 2008 Federal Budget, the tightening of the FBT exemption to allow only eligible work-related items – portable electronic devices has caused confusion, particularly surrounding laptops and the meaning of 'primarily for use' in employee's employment. Some of the questions raised include:

  • Is there a specific minimum work-related percentage to be satisfied, e.g. 50%?
  • Can there be periods where the laptop falls in and out of meeting the 'primarily for work test (allowing an FBT pro-rata based on time)?
  • How long does the laptop need to be primarily for work (until the end of the current FBT year or income tax year)?
  • Can the laptop be salary sacrificed?
  • What are the employers' substantiation requirements to support that the laptop is 'primarily for work' (e.g. logbook, employee declaration)?

The NTLG FBT Subcommittee meeting minutes (14 August 2008) provide some welcomed clarification on this matter. According to the minutes, the basis for concluding that the laptop computer is primarily for work can be based on 'intended' or 'anticipated' use at the time the benefit is provided to the employee that is, why the laptop computer was provided to an employee 'in the first place'. This means that the actual future use of the laptop does not determine whether it will be primarily for work purposes.

As discussed in the NTLG meeting, ATO ID 2008/127 was released supporting the ATO's response in the meeting. It concludes that a laptop provided by an employer to employee for use in main employment duties (that is regularly visiting clients which requires ready access to a laptop computer for producing and updating work reports between client visits) is primarily for work. ATO ID 2008/127 further clarifies that any personal use of the laptop computer is considered to be incidental to business use.

Substantiation requirements

The NTLG minutes confirmed that there is no obligation to keep extra documentation beyond what is required by section 132 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). Under this section, employers are required to keep and preserve records to enable their FBT liability to be assessed.

The ATO did note however, that a declaration completed by an employee, in itself, would not be sufficient grounds to conclude that a laptop had been provided primarily for work purposes.

An employer will generally know whether a laptop is being provided 'chiefly' or 'principally' for the fulfilment of an employee's work duties. For instance, the employee's job description, the employment contract or duty statement can provide grounds to show that the laptop was primarily for work.

In some circumstances, particularly those where normal business practices do not clearly support a position that the exemption is available, an employer could document such factors as:

  • any policy or conditions relating to the use of the laptop;
  • reason the laptop was provided to the employee;
  • types of duties performed by the employee; and
  • how the use of the laptop relates to the employee's duties

in order to determine if the laptop is primarily for work purposes.

Salary sacrifice arrangements

According to the NTLG minutes, employees may continue to enter into salary sacrifice arrangements under the new rules. Furthermore, employees can, at a later time dispose of a salary sacrificed laptop in any manner (e.g. pass it onto a family member), if it had been in fact provided primarily for work.

The meaning of 'portable electronic device'

As the FBTAA does not define the meaning of 'portable electronic device', ATO ID 2008/133 was released to shed some light on the subject. According to the ATO ID, if a device has the characteristics listed below, it would be 'a portable electronic device':

  • small and light;
  • easily portable and designed for use away from an office environment;
  • designed as a complete unit; and
  • can operate without an external power supply.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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