Ask LH: Can I Salary Sacrifice A Laptop, An iPad And Some Software?

Dear Lifehacker, I am about to enter negotiations for a new work contract and will be putting forward my ideas for some real perks. I want to salary sacrifice to purchase a MacBook Pro with software, and possibly an iPad.

What is the current standing on getting it cheaper this way? If I claim it is for personal use does that win? Or is it better to say it's for work purposes? My employer doesn't currently supply me a laptop for work, but if I can salary sacrifice to get one personally as part of a contract agreement at work that would be sweet. Any advice? Thanks, Aspiring Aztec

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Dear Aspiring Aztec,

This is a very timely question given our Tax Week 2012 coverage. We addressed this issue in an Ask Lifehacker post back in December 2010, and the fundamental rules haven't changed. In your situation, these are the relevant main points:

  • You can purchase a laptop through salary sacrifice, but you can't then claim depreciation on it. (As we noted earlier this week, in some professions you can claim depreciation on a home computer used for work, but that presumes you purchased the machine yourself.)
  • Your employer will attract fringe benefits tax (FBT) if they supply you with more than one laptop a year. Since employers pay FBT, in practice there's not much point in a salary sacrifice arrangement for a second laptop. Either your employer will refuse to agree to it, or they'll reduce your salary to cover the FBT, which makes it a pointless arrangement for you.

So the first issue is that your employer has to be willing to consider it. They're not obliged to, and many shy away because of the perceived FBT complications.

Since this is going to be your sole machine, there shouldn't be a problem with salary sacrificing the laptop itself -- the logic in this case being that it's for work purposes. A machine for personal use isn't eligible for salary sacrifice. However, you might run into a problem with the iPad and software purchases.

The ATO rules note that you can only purchase one item in the categories "portable electronic device" and "computer software" and remain exempt from FBT. The items must be primarily for work-related use, and you can only claim one item a year that has a "substantially identical function".

What does that mean? You could potentially purchase Office and Creative Suite under salary sacrifice, but only if both were requirements for your job. And if they are, your employer's site licence might well be a more economic option anyway.

The same issue applies to the iPad. If you can't demonstrate that it's primarily needed for work, it doesn't even qualify. Even then, you need to show that you're using it for a different work-related purpose than the laptop, or it will attract FBT. If you're a mobile software developer, it wouldn't be a problem claiming it as a test device, but if you're just checking email, that might be trickier. I'm not aware of this arrangement being tested yet, but your employer may not want to be the first test case.

A final general piece of advice: if you're negotiating a complex contract, you should seek independent advice on effective tax arrangements. It might be that working as an independent contractor will offer you more deductions and perks, but the rules are complicated and getting expert advice in that case makes sense.

Cheers Lifehacker

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Comments

    Thanks for this article. I'm thinking about using salary sacrifice to get a car loan and I've been surprised at the lack of info and the plusses and minusses.

      Salary sacrifice can be used to fund a vehicle in two ways;

      First and most popular is through a novated lease arrangement

      Second is to simply salary package ordinary vehicle loan repayments, though these attract FBT and generally speaking you would have to work in an industry that provides an exemption from FBT, such as health care or charity so the tax is not payable (FBT is a whopping 46.5%).

      The main difference between these two as far as your car is concerned is that with a novated lease, you're under a lease finance arrangement, meaning you are effectively 'renting' the car with an option to buy at expected market value at the end, trade it in for something else, or re-lease it for a longer term.

      With a loan of course, you're paying off the cost of the car meaning you own the car outright at the end.

      One of the plusses with a novated lease is that not only do you package the lease cost, but all related vehicle expenses as well, so long as what you're paying for doesn't change the value of the vehicle itself.

      I came in late to the party on this article, which is a shame.. Hope this helps anyway

    This comment has been deemed inappropriate and has been deleted.

      Why does LH need a tax agent number to give their opinion? The article clearly states getting expert and independent tax advice and in his capacity, Angus would have plenty of personal experience on this matter to share.

        This site goes isnt just a personal opinion site and therefore he is gettting PAID. As such he cant give Tax advice. He can refer to ATO website but other than that LH is walking a grey line

          There's a difference between providing factual information and giving financial advice. At no point does he tell Aspiring Aztec what to do, he just runs through options and consequences. Are you a financial adviser?

        Tax advice like Financial Plannning cant be just pushed aside with YOU NEED TO SEEK PROFESSIONAL advice. If you think it can OFFER FINANCIAL ADVICE and then call ASIC/ATO to see what happens. This is more than a PERSONAL BLOG SITE as such Duty of Care is higher.
        Having said that anyone who acts on Financial or Tax advice from anyone other than and Accountant / Tax lawyer or Fin Planner is a complete tool. But we live in a world that likes to blame others for their mistakes.

      Just out of interest, under what authority are you making your claims? If you are in a position to enforce the law or journalistic standards regarding this topic, would you seriously be posting it as a criticism in the comments section instead of actually pursuing it through the proper channels?

    i wanna salary sacrifice a fighter jet

      Lol, you will be sacrificing forever mate :P

    ' A machine for personal use isn’t eligible for salary sacrifice.' This is untrue. You can salary sacrifice anything you want. Just as you can buy anything with your pay. The only implications are FBT on the sacrifice itself.

    Coming up to that most wonderful of times.... yeah right. Even with e-Tax making life so much easier I still hate tax time. Soon be time to haul out all the spreadsheets, pull together the receipts and get cracking.

    Aspiring Aztec sounds a bit too high maintenance to make a good employee.

      Andrew sound a bit too lazy to make a good boss.

      Funny thing is, at least Aspiring Aztec makes it clear what motivates him, so if I was his boss (and he had performed adequately as an employee), I would do what I could to make it happen (within allowable corporate policy - IT and HR).

    For anyone else reading this, be wary of laptop loans or leases.

    You only get to package one laptop/similar device in a given financial year, and if your repayments carry over to the next financial year it will count toward that year as well. Something to watch out for if you plan to upgrade your portable computing devices each year.

      Also, the common misconception is that you can just "get a laptop on salary sacrifice" so it's worth stressing again that it MUST be a work related expense. The tax office goes on whether or not it would be 'reasonable' that you require a laptop for work, but I would recommend getting a signed letter from your employer stating so just in case the ATO asks for proof of this.

    According to the FBT assessment act of 1986 (specifically section 58 subsection 4) you can salary package two laptops in one year, if the second is a replacement for the first due to the first laptop being lost. destroyed or because of developments in technology.

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