Issue
If an employer pays an employee's loan repayments, where the loan was taken out by the employee to purchase a laptop computer, will this be an exempt benefit under paragraph 58X(1)(a) of the Fringe Benefits Tax Assessment Act (1986) (FBTAA)?
Decision
No. The repayment of the employee's loan is not considered to be referable to the purchase of a laptop computer and is therefore not exempt under paragraph 58X(1)(a) of the FBTAA.
Facts
The employee selects a laptop computer that they intend to acquire from a retailer.
The employee obtains a personal loan, in their own name, to buy the computer.
The employee uses the loan funds to purchase the laptop computer.
The employee enters into valid salary sacrifice arrangement (SSA) for the employer to make the loan repayments (principal and interest) on their behalf.
Reasons for Decision
Section 58X of the FBTAA exempts from fringe benefits tax (FBT) certain expense payment, property or residual benefits in respect of an eligible work related item. Subsection 58X(2) of the FBTAA lists all eligible work related items and includes at paragraph (h) 'a notebook computer, a laptop computer or a similar portable computer.'
Where the eligible work related item is provided by way of an expense payment, the requirement under paragraph 58X(1)(a) of the FBTAA is that the 'recipients expenditure' is in respect of an eligible work related item. The term 'recipients expenditure' is defined in subsection 136(1) of the FBTAA as 'in relation to an expense payment benefit, means the expenditure incurred by the recipient as mentioned in paragraph 20(a) or 20(b) of the FBTAA, as the case requires.'
Under a SSA, the employer's payments need to be referable to the reimbursement or payment of an expense where the recipients expenditure is in relation to the laptop computer, for the exemption under paragraph 58X(1)(a) of the FBTAA to apply. Where under the SSA the employer makes loan repayments it cannot be said that 'the recipients expenditure is in respect of an eligible work related item', because the employer is not making payments towards the purchase of the laptop by the employee. Rather, the employer is meeting the employee's personal loan obligations, which are not considered to be referable to the purchase of the laptop.
Therefore the expense payment is not an exempt benefit under paragraph 58X(1)(a) of the FBTAA and remains subject to FBT.