FBT Q&A ‘ Application of s. 58X (provision of certain work related items) where supplemental warranty purchased

Question:

For each of the following scenarios, can you please advise if FBT would be attracted:

1. A Council pays for electronic portable devices and provides to employees for use at home. Can the exemption of 58X FBTAA be used and can this be extended to include warranties?
2. If, for example, the electronic portable devices cost an employee $1,000 with warranties an additional $100. Would FBT be attracted if the Council was to reimburse the employee $1,100 via an allowance through payroll?
3. Same as scenario (2), however, the Council reimburses an employee via the accounts payable department. Could section 58X FBTAA still be used or the otherwise deductible rule?

Answer:

Item (1):

Section 58X of the FBTAA exempts from FBT the following items where the item is primarily for use in the employee’s employment:

• a portable electronic device;
• an item of computer software;
• an item of protective clothing;
• a briefcase;
• a calculator; and
• a tool of trade.

The ability to use the portable electronic device at home does not preclude the exemption from applying, provided the primary employment related usage test is met.

The exemption under s. 58X covers a warranty included in the cost of the device but not an additional/extended warranty that incurs an additional cost.

Item (2):

If the allowance paid via payroll is in effect a reimbursement then no FBT will be payable for the $1,000 device cost under s. 58X. The additional warranty cost of $100 will not be exempted under s. 58X but could possibly be an exempt benefit under s. 58P, provided it is not part of a salary sacrifice arrangement.

Refer to TR 92/15 for a discussion on the distinction between an allowance and a reimbursement. Note that a reimbursement should not be shown on the employee’s payment summary as it is not assessable to the employee.

Item (3):

See answer for Item (2) above.

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