2008 Federal Budget: Laptops

The one single non-standard tax ‘thing’ that many people I know do is to salary sacrifice for a new laptop. Quick review of how this works: normally, you are discouraged from buying yourself stuff out of pre-tax income, because otherwise a sensible financial strategy would go something like: pay for everything, declare small remainder to government, be taxed only on small remainder. The way the government puts a stop to this is by charging Fringe Benefits Tax on things bought from pre-tax income. FBT is a huge amount of money, you’ll pay an insane amount of tax on fringe benefits: better to buy things from your wages after tax was taken out.

There are a few exceptions or partial exceptions to FBT, and one is laptops, at present, more info here (written from an employer’s point of view). Given how many people I know get their employer to let them salary sacrifice for their ‘yearly laptop’, I am surprised to see less commentary on this aspect of the Federal Budget for 2008/2009:

FBT improves tax fairness by taxing non-cash remuneration. Tax planning arrangements and changes in technology have eroded the fairness and integrity of the FBT system, which will be addressed by:

  • removing the FBT exemption for work-related items used mainly for private purposes such as laptops
  • removing the double benefit from employee depreciation deductions on FBT exempt items used mainly for work purposes

Budget Overview 2008–2009 [706K], page 5

What does this mean for you? I am not a tax professional (or financial professional) but my interpretation is:

  • if you are buying yourself a new laptop and it won’t be used mostly for work, you buy it out of post-tax income from now on (and you don’t claim depreciation on it either, you’ve never been allowed to depreciate private possessions like that anyway); or
  • if you are buying yourself a new laptop and it will be used mostly for work, you can either buy it out of pre-tax income, or you can claim depreciation, but not both as you may have done previously.

I assume this applies from July 1 2008 on. My understanding of depreciation is that ‘work purposes’ in the above is something along the lines of ‘assisting in the production of assessable income’, but this is certainly getting into regions where you should consult the ATO and tax professionals.