27 April 2012

Work tool, or just cool? iPad & FBT

Tax and remuneration experts are reporting that many employers have been declining requests to provide tablet devices such as the iPad as a fringe benefit for fear of being found to be in breach of the fringe benefits tax (FBT) rules as they apply to exempt benefits.

Including 'portable electronic devices' in remuneration packages has been part and parcel of the FBT regime for many years, with employees able to include laptop computers, mobile phones, PDA5 and more. But advances in technology have also led to a blending of some of the functionalities offered by various electronic tools. For example, a mobile phone may also have calendar/organiser functions, much like a traditional PDA device. However; presently for FBT purposes, a mobile phone and a PDA are considered separate items, each able to be included in a salary package without losing the applicable FBT exemption.

It is important to remember that the FBT rules include a 'substantially identical functions' test (which is very important in that only one item classified as a 'portable electronic device' can be supplied to an employee on an exempt basis per year). Applying this test to the above phone/PDA conundrum, for example, resulted in the two items deemed to have 'functions in common' but not functions 'that are the same in most respects' - so an employer can provide each as a benefit which is exempt from FBT.

As far as the iPad goes, the Tax Office has classed it as a 'portable electronic device' in regard to the FBT regime, but this does not, as might be assumed, lump iPads in with laptop computers with regard to their tax treatment in all situations. The Tax Office says it accepts that an iPad does not have 'substantially identical functions' to a laptop computer. 'Although an iPad may have some functions in common to a laptop, an iPad does not have functions that are the same in most respects to a laptop.'

So does this mean that an employer can provide an iPad AND a laptop computer in the same FBT year? Well, that depends, says the Tax Office. It says it will still need to be satisfied that an iPad is to be used 'primarily for use in the employee's employment', and that it will be a 'question of fact' as to whether the iPad's use and function is 'substantially identical' or different to the use and function of a laptop computer used by the employee (although if used in their intended manner; the current Tax Office interpretation would support the view that the laptop and iPad are sufficiently different to fall outside 'substantially identical').

So as far as being able to provide an iPad as an exempt fringe benefit, the question seems to have been settled in the affirmative (although an employer will have to agree to package). However the iPad brings with it a further requirement to prove, case by case, that the electronic device is used primarily for work purposes.

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This Newsletter, of necessity, has dealt with matters of a technical nature in general terms only. Clients should contact us for detailed information on any of the items in the Newsletter. No responsibility for loss occasioned to any person acting or refraining from acting in reliance upon any material in this Newsletter can be accepted by any member or employee of the firm.

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