Issue
Where an employee is reimbursed by their employer for the purchase of a laptop computer with additional memory, will the cost of the additional memory be exempt from FBT under paragraph 58X(2)(h) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
Decision
Yes. Any cost of upgrades involving built-in internal components of a laptop computer, that are made at the time of purchase, will be exempt under paragraph 58X(2)(h) of the FBTAA.
Facts
An employee purchased a laptop computer. At the time of purchase the employee also requested additional memory be included in the computer. The laptop computer and the additional memory were itemised on the one invoice.
The employer agreed to reimburse the employee for the cost of the laptop and additional memory, 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 (h) 'a notebook computer, a laptop computer or a similar portable computer.'
The exemption under paragraph 58X(2)(h) of the FBTAA applies to any computer upgrades made at the time of purchase involving built-in internal components; such as additional memory, bigger hard drive, internal modem or wireless LAN module, which are ordered and itemised on the one invoice (even at a separate cost). These items are clearly not peripheral items in relation to the laptop computer and form part of the laptop computer. It is no different, in effect, from simply purchasing a laptop computer model with better specifications at an increased cost.
However, where the employee requests peripheral items such as cables, modems or cradles or an extension to the warranty that is offered, and these come at an additional cost, the exemption in paragraph 58X(2)(h) will not extend to these items.
Accordingly, where an employee is reimbursed by their employer for the purchase of a laptop computer with additional memory, the cost of the upgrade will be exempt from FBT under paragraph 58X(2)(h) of the FBTAA.