ATO ID 2008/158: Exempt benefits: work related items - portable electronic device - upgrades made at the time of purchase
Date of decision: 20 November 2008
Year of income: Year ended 31 March 2009
Business line: Superannuation and Employer Obligations

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 form part of the cost of the portable electronic device under paragraph 58X(2)(a) 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 form part of the cost of the portable electronic device under paragraph 58X(2)(a) 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 laptop computer is 'a portable electronic device' for the purposes of paragraph 58X(2)(a) of the FBTAA. The employer's reimbursement is an expense payment benefit for the purposes of paragraph 20(b) of the FBTAA.

Reasons for decision
Summary: Section 58X of the FBTAA exempts from FBT the provision of certain eligible work related items. Subsection 58X(1) 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, if provided primarily for use in the employee's employment, are 'eligible work related items' that may be subject to exemption. Included in this list is paragraph (a) 'a portable electronic device.' The exemption under paragraph 58X(2)(a) 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)(a) of the FBTAA 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 form part of the cost of the portable electronic device under paragraph 58X(2)(a) of the FBTAA.

Legislative references: Fringe Benefits Tax Assessment Act 1986 section 58X subsection 58X(1) subsection 58X(2) paragraph 58X(2)(a) subsection 58X(5)
Subject references: Exempt benefits Expense payment fringe benefits FBT reimbursements Fringe benefits tax