With employees self-isolating and working from home, the need for a well-equipped home office has never been greater. Employers and employees have been on a buying spree to ensure that employees have the necessary equipment to work remotely.
SETTING UP YOUR EMPLOYEES TO WORK FROM HOME WITHOUT INCURRING FBT
Fringe Benefits Tax (FBT) has broad reach and applies to non-cash items received by employees unless the items is in some way exempt or the taxable value reduced.
In setting up your employees to work from home, ‘Portable electronic devices’, ‘Tools of trade’ and ‘protective clothing’ may be exempt from FBT. Items that may be exempt include:
- Laptops and docking stations
- Work related software
- Ipads, tablets and other electronic note taking devices
- Smart watches used to receive emails, messages and meting reminders
- Mobile phones / Smart phones including the phone and data plans
- GPS Navigation devices
- Protective clothing such as gloves and masks
- Charges, and cable connections related to portable electronic devices
- Trade tools for electricians, plumbers, carpenters
- Medical equipment used by doctors
What is the threshold test for providing FBT exempt work related items?
The item must be primarily for use in the employee’s employment. Accordingly, the employer should be able to show how the device would be used by the employee to assist with their employment duties. Employee declarations are not required.
Can more than one item be provided to an employee during the same FBT year?
Yes, in the following circumstances:
- If the item is lost, broken or stolen, a replacement item can be provided to an employee exempt from FBT.
- If an item has substantially different functions to another item, then different items can be provided to the employee within the same FBT year. For example, a laptop, tablet, smart phone and smart watch all have substantially different functions.
- If you are small business entity (i.e. the employer has aggregated turnover of less than $10 million) more than one item with the same functions can be provided to an employee during the same FBT year.
Please contact Kelly + Partners should you require assistance with determining what items can be provided to your employees in a tax effective way.
What do employers need to do to do to reimburse home phone and internet expenses in a tax effective way?
Paying an employee’s home phone and internet will give rise to an expense payment fringe benefit. The FBT taxable value of these benefits can be reduced by:
- Documenting he business use percentage of this expenditure; and
- Obtaining an employee declaration confirming the business use percentage.
The reimbursement of other home office expenses should be possible provided the correct documentation is maintained.
With the FBT year commencing on 1 April 2020, it is imperative that systems and procedures are put in place to minimise your FBT exposure and to minimise the amount of work that will be required to substantiate your exemptions. Please contact Kelly + Partners should you require assistance.