From 1 April 2027, employers will no longer be able to use the ‘otherwise deductible rule’ to reduce the taxable value of an expense payment fringe benefit provided to an employee where the expense is:
- work-related;
- covered by the new $1,000 standard deduction; and
- provided under a salary sacrifice arrangement.
This includes where an employer pays for, or reimburses, work-related expenses, such as home office expenses, home phone or internet expenses, or self-education expenses.
However, the otherwise deductible rule can continue to apply where the expense is:
- not covered by the standard deduction; or
- covered by the standard deduction but the benefit is not provided under a salary sacrifice arrangement.
Further, from 1 April 2027, certain work-related items will no longer qualify for the FBT exemption where they are provided under a salary sacrifice arrangement. These include:
- portable electronic devices;
- computer software;
- protective clothing; and
- briefcases and tools of trade.
Eligible work-related items may still qualify for the exemption where they are not provided under a salary sacrifice arrangement.
Further, under the changes, employers may be able to provide an employee with more than one eligible work-related item in an FBT year, even where the items have the same or substantially identical function, and continue to receive the exemption where the items:
- are mainly used for work purposes; and
- are not provided under a salary sacrifice arrangement.
This repeals the general ‘one-item’ restriction applying to this work-related item exemption from 1 April 2027.
