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FBT – Can a smart watch be exempt from FBT?

Are you considering providing your employee with a smart watch? This article will help you consider whether the smart watch will be subject to FBT.

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The ATO has considered whether a smart watch can be exempt from FBT in a recent private binding ruling (PBR). The PBR discusses whether a specific type of smart watch would be considered a portable electronic device to which s. 58X of the FBTAA can apply.

S. 58X of the FBTAA provides that each of the following is an eligible work related itemif it is primarily for use in the employee’s employment:

‘(a) a portable electronic device;
(b) an item of computer software;
(c) an item of protective clothing;
(d) a briefcase;
(e) a tool of trade.’

The term ‘portable electronic device’ is not defined for this purpose. However, the ATO provides its view on what constitutes a portable electronic device in Chapter 20 of the FBT Guide for Employers which states:

‘A portable electronic device is a device that is all of the following:

  • easily portable and designed for use away from an office environment
  • small and light
  • can operate without an external power supply
  • designed as a complete unit.

Examples of portable electronic devices include a mobile phone, calculator, personal digital assistant, laptop, portable printer, and portable global positioning system (GPS) navigation receiver.’

In ATO ID 2008/133, it states:

‘The Macquarie Dictionary, [Multimedia] version 5.0.0, 1/10/01. defines ‘portable’ as:

  1. easily carried or conveyed by hand.

The Macquarie Dictionary, [Multimedia] version 5.0.0, 1/10/01. defines ‘electronic’ as:

  1. of, relating to, or concerned with electronics or any devices or systems based on electronics.

The meaning of the words ‘a portable electronic device’ should be restricted to the characteristics of the words that precede the word device. That is, the meaning of ‘a portable electronic device’ is limited to a device that is easily carried by hand and is based on electronics.’

Private binding ruling (PBR) 1051394401249 considers whether a Series X (and prior) smart watch as advertised for sale in Australia at mid-2018 (Smart Watch) is a portable electronic device for the purposes of s. 58X of the FBTAA. The ATO concludes that the Smart Watch is easily portable and designed for use away from an office environment, small and light, can operate without an external power supply and is designed as a complete unit. It is a similar device to the types of devices listed in the FBT Guide for Employers and ATO ID 2008/133.

Now, before you go rushing off and encouraging your staff to acquire smart watches, remember that a private binding ruling is only binding on the applicant and is very specific to the facts presented.

The ATO notes that the decision in PBR 1051394401249 is restricted to consideration of the Smart Watch i.e. a Series X (and prior) smart watch as advertised for sale in Australia at mid-2018. Later updates to the features of the smart watch may change the answers in this ruling and the issues would need to be reconsidered.

The private ruling refers to the website information of the features of the smart watch and lists them out fully. The ruling response and analysis is based on these specific features and therefore you cannot automatically assume every smart watch will qualify for an FBT exemption.

The onus for paying FBT rests solely with the employer, so appropriate due diligence should occur before you implement any potential smart watch benefit policy.

Disclaimer: This article is based upon information available as at the time of publishing and may be subject to change.