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.
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