With an increasing number of employees working from home we are considering providing a printer for use by the employee whilst at home. The employer will retain ownership of the printer and each printer will cost about $800. In practical terms we expect there will be some private use of the printer and employees are expected to continue to work from home for the foreseeable future.
We have seen this question a lot recently and it is a good one as it highlights the nuances of the FBT system. It also shows that, in many ways, the FBT system is somewhat out of date in the modern work environment.
An employer providing use of equipment to an employee where there may be some private use of the equipment would ordinarily constitute a residual fringe benefit and potentially give rise to an FBT liability unless an exemption or concession applies.
In terms of printers provided to employees for use at home the following exemptions and concessions are relevant.
Work related items
Section 58X of the Fringe Benefits Tax Assessment Act 1986 (‘the FBT Act’) provides a ‘work related item’ exemption. However, the exemption is somewhat limited when it comes to printers. The definition of a ‘work related item’ includes a portable electronic device. Whilst the ATO accept a portable electronic device could include a ‘portable printer’ the ATO take the view a portable electronic device must be capable of operation without an external power supply meaning a portable printer must be battery powered (although could also operate with mains power). This significantly limits the range of printers that may qualify for section 58X exemption. If the relevant printer happens to also be battery powered (most are not) the section 58X exemption may apply.
Residual Benefits and determining taxable value
Section 47(3) of the FBT Act’) provides that a residual benefit is exempt where it consists of the use of property that is ordinarily located on business premises of the employer and is wholly or principally used directly in connection with the employer’s business operations.
Where an employee is allowed to take a printer home for a short period but where the printer is ordinarily located at the employer’s premises (such as a COV-ID 19 related office closure) it can be expected s47(3) exemption would apply. It should be noted that an employee’s residence does not qualify as ‘business premises’ of the employer (it is excluded from the definition there-of).
However, where printers are purchased new and dispatched directly and permanently to an employee’s home they are not ‘ordinarily located at the employer’s premises’ meaning the exemption does not apply. It could be argued that a broader view should be taken and that, if it is the intention the printer will normally be located on the employer premises, for example, after the period when it is located at the employee’s residence, then the exemption is still available. We express some reservations with this view.
If the employer is willing to prohibit private use of the printer section 47A of the FBT Act provides the residual benefit can be FBT exempt although the employer must consistently enforce the no private use policy and make a ‘no private use declaration’ covering the benefit.
The more likely outcome is that the residual benefit does give rise to a taxable value with a likely acceptable basis of calculation there-of being a market value of equivalent printer rental. The taxable value of the benefit (provision of use of the printer) is likely able to be reduced to nil due to the operation of either:
- The ‘otherwise deductible’ rule in section 52 of the FBT Act where the taxable value is able to be reduced to the extent the employee would have been able to claim a tax deduction had the employee incurred the taxable value of the benefit as an expense (the employee must provide an otherwise deductible declaration based on work % use); and/or
- The minor benefit rule under section 58P of the FBT Act assuming the taxable value is less than $300 per annum (which would be expected to be the case).
If relying on the ‘otherwise deductible rule’, the employee should be instructed to keep a usage diary for at least a 4-week period or the period of time the printer was kept at home, whichever is the shorter, in order to substantiate their work-related usage.
Overall, this question demonstrates both the complexity with the FBT system and the out of date nature of the concept of ‘work related items’. On a positive note though it appears no FBT is payable.