Do you provide employees with work from home benefits?
If an employer has provided their employees with benefits to enable them to work from home over the past 12 month, here are fact sheet which can help them work out which benefits attract fringe benefits tax, including reductions in taxable value, and which may be exempt.
Portable electronic devices 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.
For more information about portable electronic devices, see Work-Related Portable Electronic Device Exemption.
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. For more information, see Work Out If You’re A Small Business For The Income Year.
The term ‘tools of trade’ refers to items that are handheld for use in mechanical operations or require manual operation to produce a defined result. They are of a specialist nature for use by an operator in a particular occupation (for example, an employee carpenter is provided with a hammer, screwdriver or chisel). It does not cover desktop computers, computer peripherals, or general office equipment.
For more information about tools of trade, see ATO Interpretative Decision ATO ID 2006/248 Fringe Benefits Tax-Exempt Benefits: Work-Related Item – Tool Of Trade.
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 general office equipment depends on how you provide the benefit to your employee.
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.
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.
Office closed due to lockdown restrictions
Example 1: Employees working from home due to lockdown restrictions
Your office closed due to COVID-19 lockdown restrictions. To support your employee to work from home, you ordered an ergonomic chair from an office equipment supplier and had it delivered directly to your employee’s home. When your office returns to normal operation, your employee must return the chair to your office.
Your provision of the chair to your employee is exempt from FBT even though the chair had never been used in your office. Your employee uses the chair to undertake their employment duties. The chair remains your property, and it would ordinarily be located on your business 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, we will 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.
Example 2 – office equipment covered by no-private-use declaration
Your office temporarily closed due to COVID-19 and your employee began a WFH arrangement. After your office reopens, you arrange for your employee to continue their WFH arrangement for part of each week.
You provide your employee with an ergonomic chair and computer peripherals to support their WFH arrangement. You have two policies in effect to which your employee has agreed, through written confirmation:
- The items are only provided to enable your employee to perform their duties at home
- The items remain the property of your business and your employee will need to return them when they cease their WFH arrangement
You complete a no-private-use declaration for the residual fringe benefits. These benefits are exempt from FBT.
If your employee does not complete a no-private-use declaration, the taxable value of that benefit may be reduced under the otherwise deductible rule (ODR). The ODR applies if your employee would have received a once-only deduction had they incurred the expenditure themselves to rent the equipment solely to use for work purposes.
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 of the item is 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
Where an item of general office equipment is given or the amount paid to acquire it is reimbursed on a once off basis to support the establishment of a WFH arrangement, the ATO will generally accept that the benefit is infrequent and irregular.
If the benefit is not a minor benefit, the ODR may still apply to reduce the benefit’s taxable value if your employee would have been entitled to a deduction if they had incurred the expenditure themselves. You will need to keep evidence that demonstrates the employment use by the employee (for example, a diary of usage).
Taxable value of the item is equal to $300
An item which cost $300 (including GST) will not qualify for the minor benefits exemption. If the employee would have been entitled to a once-only deduction under the capital allowance provisions in Division 40 of the Income Tax Assessment Act 1997 had they incurred the expenditure themselves, the ODR may apply to reduce the taxable value of the benefit.
Taxable value of the item is more than $300
Where the taxable value of the benefit is $300 (including GST) or more, FBT is generally payable. The minor benefits exemption does not apply to any benefits with a notional taxable value of $300 or more.
The ODR does not apply because the employee would be entitled to a deduction for depreciation, (which is not a once-only deduction) under the capital allowance provisions in Division 40 of the Income Tax Assessment Act 1997.
Work-related counselling services
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.
Work-related preventative 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
Information source: Covid-19 And Working From Home Benefits