Member Q&A – Does the timing of the reimbursement for a section 58X ‘eligible work related item’ impact which FBT year applies to the benefit?

Question

An employee purchased a portable electronic device in March 2021 (the prior FBT year). However, we did not reimburse her until the 2022 FBT year. Can we apply the section 58X exemption in the 2022 FBT year?

Answer

The provision that exempts certain work-related items – section 58X of the FBT Act – reads as follows:

Any of the following benefits provided by an employer to an employee of the employer in respect of the employee’s employment is an exempt benefit:

(a) an expense payment benefit where the recipients expenditure is in respect of an eligible work related item;

(b) a property benefit where the recipients property is an eligible work related item;

(c) a residual benefit where the recipients benefit consists of the making available of an eligible work related item.

An expense payment fringe benefit arises when the employer pays an employee’s expense obligation, or reimburses them for that expense obligation. In this case the benefit is the reimbursement, and therefore the expense payment fringe benefit arises in the 2022 FBT year.

As such, exemption will be available in the 2022 FBT year provided the other requirements of section 58X are met, namely the ‘eligible work related item‘ (which includes a portable electronic device’) is provided principally for use in the employee’s employment and only one benefit per type of work-related item is provided to the employee in the FBT year (unless a replacement item or a small business entity).

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