If you salary sacrifice a laptop, mobile phone or other work-related equipment, or offer these arrangements to your staff, important changes to the Fringe Benefits Tax (FBT) rules are coming. From 1 April 2027, these arrangements will generally lose their FBT exemption, making salary packaging less attractive for employees and employers.

The changes are part of the Federal Government’s introduction of a new $1,000 standard tax deduction for work-related expenses. Here’s what you need to know.

How do the current rules work?

Currently, employers can provide certain work-related items to employees without paying FBT, provided the items are primarily used for employment purposes. These include:

• Laptops, tablets and mobile phones.
• Computer software.
• Protective clothing.
• Briefcases and tools of trade.

Importantly, the exemption can also apply where an employee salary sacrifices the cost of the item. This allows the employee to pay for the equipment from their pre-tax salary, potentially reducing their income tax.

For example, an employee earning $120,000 salary sacrifices a laptop costing $2,200 (including GST). Assuming the employer is entitled to claim the $200 GST credit, the employee only needs to salary sacrifice the $2,000 GST-exclusive cost. At a marginal tax rate of 32% (including the Medicare levy), the employee saves about $640 in income tax, bringing the effective after-tax cost of the laptop down to $1,360—a total saving of $840 compared with purchasing it personally for $2,200.

Under the current rules, there are some restrictions on providing multiple items with substantially identical functions in the same FBT year, although businesses with aggregated turnover below $50 million have greater flexibility.

What’s changing from 1 April 2027?

There are two key changes.

1. Salary sacrificed work-related items will no longer be FBT exempt

From 1 April 2027, the FBT exemption will no longer apply to laptops, mobile phones, tablets, computer software, protective clothing, briefcases and tools of trade provided through a salary sacrifice arrangement.

This means employers who continue to offer these arrangements may face an FBT liability, potentially eliminating the tax savings previously available to employees.

However, employers can still provide these items FBT-free where they are genuinely employer-funded and primarily used for work, rather than provided through salary sacrifice.

2. Changes to salary packaging other work-related expenses

The changes also affect arrangements where employers salary package or reimburse other work-related expenses, such as:

• Working-from-home expenses.
• Home phone and internet costs.
• Work-related self-education expenses.

Currently, employers can generally use the otherwise deductible rule to reduce or eliminate FBT where the employee would have been entitled to claim a tax deduction had they paid the expense themselves.

From 1 April 2027, this FBT concession will no longer be available for salary sacrificed expenses covered by the new standard deduction. The concession can still apply where the employer pays the expense outside a salary sacrifice arrangement, or where the expense is not covered by the standard deduction.

What about the new $1,000 standard tax deduction?

From the 2026–27 income year, eligible taxpayers will be entitled to a standard deduction of up to $1,000 for certain work-related expenses, without needing to substantiate individual expenses covered by that deduction.

Taxpayers who incur more than $1,000 in eligible work-related expenses can still claim their actual deductible expenses instead, provided they maintain the necessary records.

Importantly, the $1,000 is a tax deduction, not a tax refund. For someone on a 32% marginal tax rate (including Medicare levy), a $1,000 deduction could provide a tax saving of approximately $320.

While the standard deduction simplifies tax returns for many employees, it does not necessarily replace the tax savings previously available through salary packaging.

What does this mean for employers and employees?

For employees, salary sacrificing a laptop, mobile phone or other eligible equipment may no longer offer the same tax advantages from 1 April 2027.

If you’re considering purchasing a new work-related device, it may be worth discussing whether you can salary package it before 31 March 2027, while the current exemption remains available.

For employers, the changes are an opportunity to review existing salary packaging arrangements and consider whether it makes more sense to provide necessary work equipment directly to employees.

There is also some good news for employers. From 1 April 2027, businesses of all sizes will be able to provide multiple qualifying work-related items with substantially identical functions in the same FBT year, without losing the exemption, provided they are primarily used for work and are not salary sacrificed.

Planning ahead

With the changes taking effect on 1 April 2027, now is a good time to review your arrangements.

Employees considering salary packaging work-related equipment should check the timing and eligibility requirements with their employer. Employers should review their salary packaging policies, identify affected benefits and consider any changes needed to their payroll and FBT processes.

DFK Everalls can help employers and employees understand how the new rules apply to their circumstances and identify the most tax-effective way to provide or purchase work-related equipment. Reach out to our team if you have any questions.