Highlights

  • From 1 April 2027, portable electronic devices and other work-related items provided through salary sacrifice will no longer be FBT-exempt.
  • The change is already law, and with less than six months left in the current FBT year, employers and staff are reviewing their packaging arrangements now.
  • The change sits in Schedule 4 of the Treasury Laws Amendment (Tax Reform No.
  • Part 2 of that schedule amends the Fringe Benefits Tax Assessment Act 1986.

From 1 April 2027, laptops, phones and tools provided through salary sacrifice lose their fringe benefits tax exemption. Items an employer provides directly stay exempt, but packaging is about to get much more expensive. Salary-packaging a laptop or phone has long been one of the simplest tax perks on offer.

What the Changes Mean

That ends with the current fringe benefits tax year. Schedule 4 introduces the standard deduction for work-related expenses. Under the current rules, the work-related items exemption in section 58X of that Act means a salary-packaged laptop or phone is generally free of FBT. That is what makes packaging attractive: the employee gives up pre-tax salary, and neither income tax nor FBT applies to the item. The ATO published guidance on 7 September. It says that from 1 April 2027, the start of the 2027–28 FBT year, these items are no longer exempt when provided through salary sacrifice:

What stays exempt

The exemption is not abolished. The ATO says the same items remain exempt when they are not salary sacrificed, meaning the employer simply provides them for work. The ATO also says the limit of one item per FBT year for items with substantially identical functions is removed for all employers, not just small businesses. That applies where the items are mainly for work and are not salary sacrificed. For staff, the difference comes down to who is really paying. A laptop handed out by the employer stays outside FBT. A laptop bought by giving up pre-tax salary does not. The removal of the one-item limit is a genuine loosening. An employer could, for example, provide both a laptop and a tablet to the same worker in one FBT year, and both could be exempt if they are mainly for work and not packaged.

Why the government made the change

The FBT change is tied to the new $1,000 standard deduction for work-related expenses, which applies from the 2026–27 income year and will first be claimed in tax returns lodged from July 2027. It notes the change applies "regardless of amount", even where benefits are well above $1,000, and calls this a "design flaw". BDO expects some employees may stop their arrangements and some employers may pass FBT costs on. In practice, a worker packaging a $3,000 laptop from April 2027 loses the exemption, even though the cost is well above the $1,000 standard deduction.

Hypothetical example: a $2,000 laptop

Hypothetical example: an employee on a 30% marginal tax rate wants a $2,000 laptop, GST included, used mainly for work. The example ignores the Medicare levy and assumes current FBT settings continue: a 47% FBT rate and a Type 1 gross-up factor of 2.0802. The employee gives up $2,000 of pre-tax salary and no FBT applies. To have $2,000 left after tax at 30%, the employee needs about $2,857.14 of pre-tax salary.