Salary sacrificing a laptop was all the rage prior to 2008 when everyone could use what was known as the double dip rule. The double dip rule allowed employees to purchase a laptop that was being used primarily for work via a salary sacrifice arrangement, and then double dip by claiming the balance as a tax deduction in their tax return.
The double dip rule was costing the government thousands of dollars as they virtually gave away free laptops. So, like any good thing with the government lately, it came to an end.
You can now still salary sacrifice one laptop per year, but you will no longer be able to double dip and claim it as a tax deduction as well.
Since the axing of the double dip rule, you don’t really hear as much about the benefits of salary sacrificing a laptop. Information available on the internet regarding this topic is very scarce, and certainly not pinned to the front page of the ATO website with bells and whistles.
This begs the question – is it still worth it?
The short answer to this question is YES!
What is salary sacrifice?
Salary sacrifice is where an employee purchases a laptop with pre-tax income, therefore not paying tax on that part of their income. For those employees in the top tax brackets, that means a saving of up to 40% on the cost of the laptop. On top of that, the employee doesn’t have to pay GST on the notebook, saving another 10%. This essentially means that employees in the top tax bracket can get a laptop for half price.
To take advantage of the salary sacrifice you need to make sure your device fits the ATO’s definition of a Portable Electronic Device. A Portable electronic device is a device that is all of the following:
- easily portable and designed for use away from an office environment
- small and light
- can operate without an external power supply
- designed as a complete unit.
According to the ATO, examples of portable electronic devices include a mobile phone, calculator, personal digital assistant, laptop, portable printer, and portable global positioning system (GPS) navigation receiver. Although it is not on this list, an iPad would most likely also pass as an electronic device.
Once you are satisfied that your device fits these ATO guidelines, you will then need to make sure you intend on using it primarily for work related purposes.
Primarily for use in the employees employment
In my eyes this is where the real benefits of salary sacrificing come in. I did actually phone the ATO before writing this article just to confirm the following definition of what “primarily for use in the employees employment” actually means. The ATO’s answer was this:
For a device to fall under the definition of “primarily for use in the employees employment”, it must be used for work purposes at least 51% of the time.
Now, I’m not sure about you, but I found this percentage very interesting. It certainly changes the whole ball game when considering whether salary sacrificing a laptop is worthwhile! The ATO is virtually saying you can use your laptop 49% of the time for private use, and still claim a 100% tax deduction via salary sacrifice.
For example, most people choose not to salary sacrifice. Instead they purchase their own laptop and claim 60 – 80% work related use as a tax deduction, by depreciating it over three years in their tax return. This seems rather silly when you can salary sacrifice it through your employer, and effectively get a 100% tax deduction up front in the year that you purchase it, on top of saving 10% GST on the cost of the laptop.
At the end of the day, if your employer offers salary sacrifice, then depending on your individual circumstances, it’s definitely something you should consider. And the benefits don’t just stop with the employee. If you’re an employer who runs a small business, offering salary sacrifice can be a great incentive to help you retain quality staff. No one likes a boss better than one who is flexible, and is seen to be going out of their way for their employees by putting them first. Believe me, if you have ever been on the receiving end, where you were lucky enough to be able to salary sacrifice a laptop, you would realise how helpful it was.
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