The exemption under section 58X of the Fringe Benefits Tax Assessment Act 1986 (‘the FBT Act’), applies to certain eligible work-related items that are provided primarily for use in an employee’s employment.
One such item specifically listed as qualifying for exemption is a ‘briefcase’.
Although the FBT Act does not provide a detailed definition of a ‘briefcase’, the interpretation generally covers items traditionally known as briefcases used primarily for work purposes, such as for carrying papers, documents, and work-related materials.
If you are brave enough to endure the price tags, the Prada website, for example, displays a number of leather ‘briefcases’ for men and women.
Is it possible for these high end items to qualify as eligible work-related items that are FBT exempt?
This issue was put to the ATO at the National Tax Liaison Group, FBT Sub-committee meeting of 13 November 2008.
The ATO stated that the term ‘briefcase’ was intended to be limited in its meaning and was not intended to include other types of luggage/bags that may be used to some extent by an employee undertaking their duties of employment. It was also noted that the FBT Act does not use the phrase ‘briefcase or similar item’.
For assistance, the ATO referred to a number of dictionary definitions, as follows;
briefcase
“a flat, rectangular case of leather or other material used for carrying documents, books, manuscripts, etc.”
briefcase
“a flat rectangular case for carrying documents etc.”
A wide interpretation by reference to a variety of ‘modern bags’ that employees may use was not agreed to by the Tax Office. The ATO’s view as the exemption would only apply to items that fit the definition of a briefcase as above.
Given the ATO view, we would consider the following ‘briefcase equivalents’ are high-risk and typically not within the ordinary meaning of ‘briefcase’ for the purposes of section 58X, even if used by employee sometimes/regularly to carry work items:
Where a ‘bag’ is fundamentally a personal or multi‑purpose item rather than designed as a work case, it is difficult to characterise it as a ‘briefcase’ and therefore potentially eligible for exemption under section 58X.
Certainly claiming section 58X exemption (including by way of a salary sacrifice scenario) is a high risk strategy.
The section 58X exemption also extends to a ‘tool of trade’.
Unfortunately though, the ATO, relying on their analysis in their Interpretative Decision ATO ID 2006/248 also stated in the FBT Sub-committee meeting of 13 November 2008 that a ‘modern bag’ would not be considered to be a ‘tool’.
The section 58P minor benefit exemption could certainly apply where the cost of the item is less than $300 regardless of whether the bag qualifies as a ‘briefcase’. Although, a leather Prada briefcase won’t likely benefit from this exemption!
Finally, although benefits relating to ‘modern bags’ which are not briefcases cannot be considered for exemption under section 58X, benefits relating to such items may be subject to the ‘otherwise deductible’ rule where an employee declaration is provided that states the percentage of employment related use of the item.
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