In the realm of employee benefits, employers are always looking for ways to provide valuable perks that also make financial sense. One such avenue is the Work-Related Item Fringe Benefits Tax (FBT) exemption. Let’s delve into the basics and explore how employers can maximise this cost-efficient benefit.
What qualifies as a Work-Related Item?
A Work-Related Item, for FBT purposes, includes portable electronic devices, computer software, protective clothing, briefcases, and tools of trade. While most of these are self-explanatory, the term ‘portable electronic devices’ warrants a closer look.
Understanding Portable Electronic Devices:
Portable electronic devices are gadgets designed for easy transport, intended for use outside the office, lightweight, operable without external power, and constructed as a complete unit. Think mobile phones, calculators, laptops, and personal digital assistants. Even items like portable display monitors, GPS navigation receivers, and smartwatches can fall under this category.
Crucially, if an employer provides a mobile phone or laptop for work purposes, the FBT exemption can extend to cover phone and wireless internet charges related to their use. However, it doesn’t cover monthly use charges if the account is in the employee’s name.
Primarily for Work Use:
To be eligible for the FBT exemption, a work-related item must be provided “primarily for use in the employee’s employment.” This means if the employer gave a laptop to an employee’s family member, it wouldn’t qualify for the exemption. The key is the intention at the time of providing the item, not the subsequent use.
The ‘One Per Year’ Rule:
Employers cannot provide more than one exempt work-related item to the same employee in a single FBT year, except under specific circumstances. Exceptions include if the second item is a portable electronic device, a replacement item, or if it doesn’t serve a “substantially identical function” as the earlier item.
Navigating the Exceptions:
For instance, a small business (with a turnover under $50 million) can provide multiple portable electronic devices in the same year. Replacement items and those with different functions also fall under exceptions. Determining the substantially identical function may pose challenges, especially with smartphones and smartwatches.
Reminders for Employees:
Employees should be aware that they can’t claim a personal tax deduction for a work-related item provided as an exempt fringe benefit by their employer.
Can’t Meet Requirements? Explore Other FBT Concessions:
If an employer can’t meet all the requirements, there are alternative FBT concessions available, such as the “otherwise deductible rule” or the minor benefits exemption.
Understanding the nuances of the Work-Related Item FBT exemption can empower employers to provide valuable benefits while staying financially savvy. For more information or personalised advice, reaching out to expert teams can be a wise step. It’s about creating a win-win situation where both employers and employees reap the rewards of thoughtful and tax-efficient benefits.