Changes from 1 April 2027
Restriction on the “Otherwise Deductible” Rule
From 1 April 2027, employers generally may not use the “otherwise deductible” rule to reduce the taxable value of salary-sacrificed work-related expense payment fringe benefits covered by the standard deduction, regardless of the benefit’s value.
The Australian Taxation Office identifies the following examples:
- home-office expenses;
- home telephone or internet expenses; and
- self-education expenses.
The “otherwise deductible” rule is expected to only remain available for expense payment fringe benefits that:
- are not covered by the standard work-related expenses deduction which came into effect on 1 July 2026; or
- are covered by this standard deduction but are not provided through a salary sacrifice arrangement.
Work-Related Item Exemption
From 1 April 2027, the FBT exemption for certain work-related items generally will not apply when the items are provided through a salary sacrifice arrangement. The identified items include:
- portable electronic devices, e.g., laptops, mobile phones and iPads;
- computer software;
- protective clothing;
- briefcases; and
- tools of trade.
Eligible work-related items not provided through a salary sacrifice arrangement may continue to qualify for the exemption.
Expanded FBT Exemption for Multiple Work-Related Items
From 1 April 2027, employers may provide more than one qualifying work-related item to an employee during an FBT year, including items with the same or substantially identical functions, if:
- the items are used mainly for work purposes; and
- the items are not provided through a salary sacrifice arrangement.
This change removes the current one-item limitation and makes the multiple-item exemption available to employers generally, rather than only to eligible small businesses.
