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FBT Q&A – Can a departing employee salary sacrifice?


We have an employee who is leaving our organisation within the next month and wants to salary sacrifice her last pay to purchase two laptops. Are there any FBT or other tax issues that will prevent us from allowing this?


The ATO is fine with an employee salary sacrificing for benefits, provided they sacrifice prospective salary (i.e. salary that is yet to be earned)—refer to TR 2001/10.

To the extent that the provision of the laptops to the departing employee through salary sacrifice is considered a fringe benefit, FBT will be payable unless a specific exemption applies.

It is difficult to see how the exemption in s. 58X of the FBTAA for work-related items can apply in this scenario. S. 58X provides for certain portable electronic items to be exempt from FBT. Laptops are considered to be portable electronic items for this purpose. However, to qualify for the exemption, the benefit must be provided to the employee in respect of the employee’s employment and the item must be ‘primarily for use in the employee’s employment’. Further, generally speaking only one portable electronic item of a similar type can be provided per FBT year.

In our view, the FBT exemption under s. 58X will not be available as the departing employee isn’t being provided with the laptop primarily for use in their employment role with the employer. There are no other FBT reductions or exemptions we can think of that can apply.

You may wish to consider providing the laptops to the employee as part of their termination package. In this case, it could be argued the value of the laptops forms part of the employee’s termination pay and is, therefore, excluded from the definition of ‘fringe benefit’. However, the ‘flip side’ of this arrangement is that the employee would need to include the value of the laptops in her assessable income (to the extent of their market value), the employer would have PAYG withholding obligations and the arrangement may also be subject to payroll tax.