We continue to get many questions seeking clarification regarding the FBT rules regarding how to treatment equipment ‘provided’ for use by employees in work from home scenarios.
Whilst it is not our usual practice, we reproduce an article published recently which covers off the more common questions we get asked.
Despite there being some possible ‘technical’ FBT exposures the ATO provided some useful and taxpayer friendly guidance regarding the FBT treatment of various scenarios where an employer provides equipment to an employee to support a ‘working from home’ scenario. The ATO guidance (titled COVID-19 and working from home benefits) was issued on 12 March 2021 and can be viewed here.
The reproduced article summarises the more interesting aspects of the guidance.
Equipment provided to an employee to support a working from home scenario will either be loaned (a residual fringe benefit) or given (eg ownership transferred to the employee including by way of reimbursement of costs incurred by the employee) meaning a property or expense payment benefit arises.
The basis on which the equipment is provided will impact the FBT outcome.
Eligible work related item
We have previously dealt with the FBT exemption available for an ‘eligible work related item’ provided to an employee. By way of summary, exemption may apply where an eligible work related item is loaned or given to an employee in a work from home scenario provided, amongst other conditions, the item is an ‘eligible work related item’ and provided primarily for use in the employee’s employment.
This exemption should ensure FBT is not payable on items such as laptops, Ipads etc and mobile phones provided for use in a work from home scenario. We have also previously noted (refer October 2020 TaxEd Update) issues such as whether printers for use at home would satisfy the definition of an ‘eligible work related item’.
We deal below with situations where FBT exemption under the ‘eligible work related item’ category is not available.
Loaned equipment – temporary and longer term arrangements
Section 47(3) of the FBT Act provides an exemption for use of equipment where that the equipment is ordinarily located on the employer’s business premises and wholly or principally used in connection with the business operations.
For example, during COVID-19 employees may have been allowed to take home chairs, office desks, printers etc where that equipment was otherwise located at the employer’s business premises and used in the business operations. Section 47(3) provides exemption for these types of scenarios.
Interestingly though, where an employer was required to purchase equipment and that equipment was delivered directly to an employee’s home an issue arose as to whether section 47(3) was capable of being satisfied as the equipment was arguably never ordinarily located on the employer’s business premises.
In the recent guidance the ATO takes the view that provided it is the intention the equipment will be returned to the employer’s business premises once a temporary working from home situation has ended the exemption may still be claimed.
Where the working from home situation is a longer term arrangement the ATO express a view that the section 47(3) exemption may not be capable of being satisfied as the equipment is not ordinarily located on the employers business premises.
However, the ATO express the view in the guidance that an employer may be able to access FBT exemption where the equipment is covered by a ‘no private use declaration’ that covers all equipment loaned by the employer to employees.
The ATO position is reproduced below:
However, the benefit may be exempt if you make a no-private-use declaration that covers all office equipment loaned to your employees to support their WFH arrangements where both of the following apply:
- the equipment is subject to a consistently enforced policy in relation to its use
- this use means the benefits would have a taxable value of nil.
Where you provide general office equipment to your employees solely to enable them to work from home, and have a consistently enforced policy documenting this purpose, we will accept that the requirements of this exemption are met.
You will not be required to provide documentation that demonstrates the employment use of the office equipment. The fact that there may be some incidental use of an item outside of work hours while it is located at an employee’s home does not prevent the benefit from meeting this exemption.
Example 2 – office equipment covered by no-private-use declaration
Your office temporarily closed due to COVID-19 and your employee began a WFH arrangement. After your office reopens, you arrange for your employee to continue their WFH arrangement for part of each week.
You provide your employee with an ergonomic chair and computer peripherals to support their WFH arrangement.
You have two policies in effect to which your employee has agreed, through written confirmation:
- the items are only provided to enable your employee to perform their duties at home
- the items remain the property of your business and your employee will need to return them when they cease their WFH arrangement.
You complete a no-private-use declaration for the residual fringe benefits. These benefits are exempt from FBT.
Equipment where ownership is transferred including where employee or an expense reimbursement occurs
The ATO guidance confirms the minor benefit is likely to be available where the item costs less than $300. An item costing more than $300 however will not attract the minor benefit exemption.
Equipment provided as part of ‘work-related preventative health care’ program
The ATO guidance also confirms that items such as a sit/stand desk may qualify for FBT exemption where the item is provided by way of being associated with work-related preventative health care of an employee.
The following example from the guidance illustrates the scope of the exemption.
Example 3 – Ergonomic consultations and provision of a sit/stand desk
To ensure your employees’ WFH setups meet workplace health and safety standards, you organise personalised online health consultations with a legally-qualified medical practitioner for all of your employees.
The medical practitioner identifies that one of your employees is suffering from back pain due to having to sit down for extended periods of time while working, and recommends certain health interventions to prevent further aggravation/injury, including the use of a sit/stand desk while the employee is WFH. As a result, you purchase a sit/stand desk and arrange for it to be set up at your employee’s home.
The provision of these consultations to all of your employees and the sit/stand desk to the employee are exempt from FBT as work-related preventative health care.
This exemption applies to the purchase of the sit/stand desk because it is associated with work-related preventative health care, that is, the workplace health and safety consultations. However, if you simply purchase this equipment for an employee, without the recommendation of a legally-qualified medical practitioner or nurse, the purchase would not be exempt from FBT.