Wednesday, March 22, 2006

Be careful how you salary sacrifice

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)?

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.

Even if an arrangement to me sounds like within the spirit of a FBT-exempt salary sacrifice arrangement, the ATO may chose not to grant FBT-exemption. The ATO has taken a position that a personal loan to buy a computer is different from lease payments on a computer.

Reference: ATO Interpretive Decision ATO ID 2005/68


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