ATO ID 2008/160: Exempt benefits: work related items - loan arrangements
Date of decision: 28 November 2008
Year of income: Year ended 31 March 2009
Business line: Superannuation and Employer Obligations

Issue
If an employer pays an employee's loan repayments, where the loan was taken out by the employee to purchase an eligible work related item, 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 an eligible work related item 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 laptop computer is 'a portable electronic device' for the purposes of paragraph 58X(2)(a) of the FBTAA. The employee enters into a valid salary sacrifice arrangement (SSA) for the employer to make the loan repayments (principal and interest) on their behalf.

Reasons for decision
Summary: 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 the items that, if provided primarily for use in the employee's employment, are eligible work related items and includes at paragraph (a) 'a portable electronic device.' 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.' For the exemption under paragraph 58X(1)(a) of the FBTAA to apply, the employer's payments under the SSA need to be referable to the reimbursement or payment of an expense. 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.

Legislative references: Fringe Benefits Tax Assessment Act 1986 paragraph 20(a) paragraph 20(b) section 58X paragraph 58X(1)(a) subsection 136(1)
Subject references: Exempt benefits Expense payment fringe benefits Fringe benefits tax