Working from home – FBT obligations for employers

April 9, 2021

As employee working from home arrangements have become common-place, it is important for employers who provide benefits and support to their employees, to understand their tax obligations including the application of fringe benefits tax.

As an employer, your fringe benefits tax (FBT) obligations may be affected if you have provided a benefit to your employee to facilitate working from home (WFH) arrangements due to the impacts of COVID-19.

Work laptop, other portable electronic device and tools of trade

You may have given or loaned certain eligible work-related items to your employee so they could work from home as a result of COVID-19 or reimbursed them for expenditure they incurred on these items.

An eligible work-related item is exempt from FBT if it is:

primarily for use in the employee’s employment
not a duplicate of something with a substantially identical function that has already been provided to the employee in the FBT year (unless it is a replacement).

An eligible work-related item is:

a portable electronic device
computer software
protective clothing
a briefcase
a tool of trade.

Examples of portable electronic devices include laptops, tablets, smart phones, and calculators. However, a desktop computer would not be considered a portable electronic device.

If you are a small business you may be eligible for an exemption, so that you can provide multiple portable electronic devices to an employee, even where the items have substantially identical functions.

From 1 April 2021, the turnover threshold for businesses to be eligible for this exemption will increase from $10 million to $50 million.

General office equipment

General office equipment includes desks, chairs, cabinets, stationery, computer monitors and peripherals, and other items generally available for use in an office setting.

The way FBT applies to the provision of general office equipment by an employer to employee depends on how you provide the benefit to your employees.

Lending office equipment

The benefit arising from lending general office equipment to your employee during temporary WFH arrangements due to COVID-19 may be exempt from FBT.

For ongoing WFH arrangements, the benefit may also be exempt in some circumstances, and where it is not exempt, the taxable value may be reduced by the Otherwise Deductible Rule (ODR).

Temporary WFH arrangements

During periods of temporary WFH arrangements due to COVID-19, the provision of office equipment will be exempt from FBT if it is:

property that is ordinarily located on your business premises
wholly or principally used directly in connection with your business operations.

Office equipment is considered ‘ordinarily located on your business premises’ if:

the home use of the equipment by your employee is temporary
there is an expectation that the equipment will be returned to your business premises when the temporary WFH arrangement ceases.

The equipment does not need to have been physically located on your business premises prior to entering into a WFH arrangement to meet the test, provided it is an item that is expected to be returned to the premises.

Ongoing WFH arrangements

Office equipment that you loan to an employee to support a WFH arrangement that will continue on a long-term basis is unlikely to meet the exemption above.

However, the benefit may be exempt if you make a no-private-use declaration that covers all office equipment loaned to your employees to support their WFH arrangements where both of the following apply:

the equipment is subject to a consistently enforced policy in relation to its use
this use means the benefits would have a taxable value of nil.

Where you provide general office equipment to your employees solely to enable them to work from home, and have a consistently enforced policy documenting this purpose, the ATO will generally accept that the requirements of this exemption are met.

You will not be required to provide documentation that demonstrates the employment use of the office equipment. The fact that there may be some incidental use of an item outside of work hours while it is located at an employee’s home does not prevent the benefit from meeting this exemption.

Template documentation

The ATO provides a list of templates for use, including a no-private use declaration template. If you require any assistance or have any queries in relation to your documentation requirements, please contact our office.

Alternate uses

If the equipment provided has an alternative purpose besides the WFH arrangement, or is significantly used for private purposes, you may need to apportion the use of the equipment to determine the amount of reduction to the taxable value. In these circumstances, you will be required to provide a copy of the employee’s residual benefit declaration and evidence of the employee’s work-related use of the equipment (for example, a diary of usage).

You still must be able to show that the equipment was only lent or made available to your employee. That is, the equipment still belongs to you and it will be returned when the WFH arrangement ceases. If this cannot be shown, then the provision of the equipment may be a property benefit (see below).

Giving office equipment or reimbursing for purchases

Where you have given an employee office equipment that has a notional taxable value of less than $300 (including goods and services tax (GST)), or you have reimbursed them for expenses of less than $300 which they incurred in acquiring equipment, the item may be exempt from FBT or its taxable value may be reduced by the ODR.

Where the value of that office equipment is $300 (including GST) or more, then FBT is generally payable.

Taxable value less than $300

Where the taxable value of the item or reimbursement is less than $300 (including GST), the benefit may be exempt if it is a minor benefit.

You should have regard to the following factors in determining whether a benefit you have provided is a minor benefit:

whether the provision of the benefit is infrequent or irregular
whether the provision of the benefit arises from an unexpected event
whether other similar benefits are provided at the same time, and if so, the value of all combined similar benefits.

The minor benefits rules may apply to the provision of equipment to employees however you should seek advice in this regard to confirm the FBT position as these rules are rather complex. Furthermore, the FBT treatment can differ for items of value of less than $300, valued at $300 or more than $300 depending on individual circumstances.

Counselling

Counselling services provided to support an employee’s WFH arrangement may be exempt from FBT under the existing rules for work-related counselling.

‘Work-related counselling’ refers to counselling that seeks to improve or maintain the quality of your employee’s work performance and relates to matters such as health and safety, stress management, relationships, retirement, and any other similar matters. This includes counselling sessions undertaken via telephony or online platforms during a WFH arrangement.

Health care

Health care provided to your employee to support their WFH arrangement may also be exempt from FBT if it is the provision of work-related preventative health care.

‘Work-related preventative health care’ means any form of care that:

is provided by or on behalf of a legally-qualified medical practitioner, nurse, dentist or optometrist
has the principal purpose of preventing your employee from suffering from injury or disease that is related to their employment
is available to all your employees who are likely to suffer from similar work-related injury or disease.

Also exempt from FBT is a car benefit, expense payment benefit, property benefit or residual benefit provided to an employee that is associated with work-related preventative health care of the employee.

For example, this exemption may apply to the purchase of a sit/stand desk because it is associated with work-related preventative health care, that is, further to workplace health and safety consultations. However, if you simply purchase this equipment for an employee, without the recommendation of a legally-qualified medical practitioner or nurse, the purchase may not be exempt from FBT.