Issue
Where an employee is reimbursed by their employer for the purchase of a laptop computer and some additional separate computer software, will the provision of the benefits in respect of the separate software constitute exempt benefits, pursuant to paragraph 58X(2)(h) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
Decision
No. The provision of the benefits in respect of the additional separate computer software are not exempt under paragraph 58X(2)(h) of the FBTAA, but can be considered for exemption under paragraph 58X(2)(f) of the FBTAA.
Facts
An employee purchased a laptop computer. The purchase price of the laptop computer included basic computer software, for example, an operating system, anti-virus trial software and a word processing application; which was not charged separately and had no clearly identifiable additional cost.
At the time of purchase of the laptop computer, the employee also purchased, at an extra cost, additional computer software for employment use. The laptop computer and the additional software were itemised on the one invoice.
The employer agreed to reimburse the employee for the cost of the laptop computer and the additional computer software, that is, the total invoiced amount.
The employer's reimbursement is an expense payment benefit for the purposes of paragraph 20(b) of the FBTAA.
Reasons for Decision
Section 58X of the FBTAA exempts from FBT the provision of certain eligible work related items. Subsection 58X(1) of the FBTAA, subject to subsections 58X(2) and 58X(3) of the FBTAA, provides that the provision of an expense payment benefit, a property benefit or a residual benefit by an employer to an employee in respect of an eligible work related item will be an exempt benefit.
Subsection 58X(2) of the FBTAA lists the items that are 'eligible work related items' that may be subject to exemption. Included in this list is: paragraph (f) an item of computer software for use in the employee's employment;' and paragraph (h) 'a notebook computer, a laptop computer or a similar portable computer.'
Consequently, any computer software forming part of the overall laptop purchase price (that is, not charged separately and no clearly identifiable cost) would be included under the paragraph 58X(2)(h) exemption. This applies equally to pre-loaded software.
However, the purchase of additional separate computer software (even where it is charged by the retailer on the same invoice as the laptop computer) will not be exempt under paragraph 58X(2)(h). This additional software can be considered for exemption under paragraph 58X(2)(f) of the FBTAA. An item of computer software need only be for use in the employee's employment to be exempt under paragraph 58X(2)(f) of the FBTAA. This does not require a predominant or primary test to satisfy the exemption.
Accordingly, where an employee is reimbursed by their employer for the purchase of a laptop computer (which includes basic software as part of the purchase price) and additional separate computer software, the provision of the benefits in respect of the separate computer software, that has a clearly identifiable additional cost, are not exempt under paragraph 58X(2)(h) of the FBTAA.