Insights

For years, Australian businesses have benefited from Fringe Benefits Tax (FBT) exemptions when providing employees with work-related electronic devices such as laptops, mobile phones and tablets. These exemptions have helped employers equip their teams with the technology needed to stay productive without creating additional tax burdens.

The current provisions end on 31 March 2027, with new rules commencing as part of the introduction of the “standard deduction” for individuals. These changes limit the tax effectiveness of some existing arrangements.

What are the current Fringe Benefits Tax concessions for Electronic Devices?

For many years now there has been a concession to FBT whereby “Eligible Work Related Items” that were provided under a salary sacrifice arrangement were also not subject to FBT.

“Eligible Work Related Items” include:

• Portable electronic devices (mobile phones, tablets, laptops, etc)
• Computer Software
• Protective Clothing
• Briefcase
• A Tool of Trade

Small businesses were able to provide as many items of each type as they liked each year. Larger businesses were limited to 1 item of each type per year, any extra were caught by FBT rules.

Further, if an expense payment made by an employer on behalf of an employee was “Otherwise Deductible”, that is, the employee could claim a deduction for that cost, then up to 100% of the benefit was not subject to FBT. This has made it easier for employers to help employees acquire the things they need to do their jobs with minimal tax impact.

What is Changing, and Why?

The FBT concession for salary sacrificed purchases of “Eligible Work Related Items” including portable electronic devices, is being removed effective 1 April 2027, being the start of the new FBT year. The concession for “Otherwise Deductible” expense payments being salary sacrificed is also being removed from the same date.

With the introduction of the $1,000 per year “Standard Deduction”, which is available to individuals from the 2027 income tax return lodgement onwards, the concessions need to change to limit the possibility of a double deduction being available.

Thus from 1 April 2027, where employees salary sacrifice for any of these items, it will become a Taxable Fringe Benefit. That will require employers to keep the relevant records and make annual FBT return lodgements, and pay the requisite Fringe Benefits Tax. The net effect of this is that the salary packaged benefit provided is taxed at the top marginal tax rate.

The key consideration is that the additional tax applicable under the changes is levied on employers, not employees. If no changes are made to existing salary sacrifice arrangements and remuneration packages before the new rules commence, then employees will retain all the tax benefits, and the tax liability will be levied on employers.

What Businesses Should Do Now

Business owners should take the opportunity to review how technology is currently provided to employees and understand where potential FBT exposure may exist. Any existing salary packaging arrangements need to be finalised by 31 March 2027 to avoid attracting FBT.

The structuring of ongoing arrangements to be able to provide employees of these benefits beyond 1 April 2027 needs to be carefully considered to minimise unexpected tax and administrative impacts for businesses.

If you’re unsure how these changes could affect your business, or for employees, your personal remuneration agreements, speaking with your accountant early can help you understand your obligations and identify practical strategies to minimise disruption and stay compliant.