The Primary School Child and the i-Pad

Dec 4, 2015 | Community

Leigh Harry

If it has not happened yet just wait a while and pretty soon (if you have primary school aged children) the school will send home a notice to say that your child requires his/her own i-Pad as part of the curriculum for the year they are about to enter.

At my son’s school alone there are 58 grade four children this year all needing their own i-Pad along with ‘bomb proof’ protective casing. This means that on top of other school related costs there is now another $750 to devote to his education this year.

For some families, particularly those with multiple children subject to the same requirement, this can be financially onerous. It is rare that these words are ever said but the tax system can help.

Section 58X of the Fringe Benefits Tax Assessment Act 1986 provides an exemption from fringe benefits tax for certain eligible work related items where the item is acquired primarily for use in the employee’s employment.

This exemption generally applies to:

a) a portable electronic device (laptop computer, Tablet, Mobile phone);
b) an item of computer software;
c) an item of protective clothing;
d) a briefcase;
e) a tool of trade.

In general terms the exemption can only be applied to one item each year for items with substantially identical functions.

This means that if you use an i-Pad for work and your employer has provided you with one in the current FBT year (1 April 2015 to 31 March 2016) you cannot use the FBT exemption again unless the previous i-pad had been lost, destroyed or rendered obsolete.

If, however, you use an i-Pad for work and the current i-Pad was provided to you prior to 1 April 2015 then you can access the concession again in time for the 2016 school year. The outcome would be that you get a new i-Pad and your child inherits the current i-Pad for school.

It may occur that your employer may not be inclined to buy you another i-Pad out of the goodness of their own heart and if so you could explore the option of a salary sacrifice. If this can be arranged then you might expect the following reduction in your out of pocket spend relative to the device:

Purchase Price$750.00
Less GST-$68.18
Net Amount/Salary Reduction$681.82
Tax (Assumed MTR of 34%)-$231.82
Reduction in Net Pay$450.00

Assuming a top marginal tax rate (MTR) of 34% (including Medicare Levy Surcharge) this process can reduce the cost of purchasing the device by $300 (40%). A different MTR will of course produce a different result. The employer can still claim the GST (providing conditions are met) and will be entitled to a deduction for the purchase of the device.

By way of note there are legislative changes that will enable small businesses (turnover less than $2M) to provide more than one device per year to employees but as these do not commence until 1 April 2016 there is no real value in discussing them at this time.

It should be understood that there are certain criteria that must be met to make the purchase and also the salary sacrifice (if required) effective and these may alter depending on the specific circumstances. It is therefore recommended that you speak with your LBW client manager prior to the purchase or entering into any arrangement.

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