Salary packaging iPads makes the news!

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For the latest information about salary packaging iPads & Tablet computers, please click here.

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The Australian’s IT section has just run an article (quoting Simon Ellis, our Senior Tax Advisor) outlining the salary packaging industry’s general response to the question of iPad packaging. The article makes clear that the industry is broadly following SmartSalary’s lead, and exercising a fair amount of caution before adding iPads to the menu of available packaging items.

As the article notes, it is only where an individual‘s employment duties involve regular tasks requiring access to an iPad (or similar machine) that the ATO will accept salary packaging. We interpret this to mean that the ATO is not going to test packaging arrangements by looking at the actual use of the machine – it’s going to test them by looking at your ordinary employment duties, and deciding whether those duties justify access to an iPad.

Simon tells me that this approach is consistent with ATO guidelines on laptops, as set out in ATO ID 2008/127.

Thus SmartSalary’s cautious approach to packaging iPads seems to have been warranted. We will, of course, continue to liaise with our employer clients in this regard but for the time being iPads are likely to stay off the menu for many of our packaging customers.

6 Responses to “Salary packaging iPads makes the news!”

  1. 1 Bram van Dooren August 13, 2010 at 11:46 pm

    I still don’t see what the problem is with salary sacrificing iPads. The ATO classify them as a laptop, I can justifiably use them for 50%+ for work, yet I can’t sacrifice them.

    In my opinion Smart Salary isn’t doing enough to educate the businesses/employers out there.

    Please help!

    • 2 ceosmartsalary August 23, 2010 at 3:30 pm

      Hi Bram – it’s Simon Ellis here.

      You’re right! Keeping abreast of the latest salary packaging trends and educating employers on the alternatives available to their employees is a key part of SmartSalary’s service. We have clarified to all our employer clients that these products can be salary packaged if there is a reasonable basis for assuming that they will be used by employees primarily to perform employment duties.

      This is the key test – and by law it is your employer’s responsibility to meet it (see the rules set out in ATO Interpretive Decision ATO ID 2008/127). You must remember that the Federal Government deliberately limited laptop packaging in the 2008 Budget by adding a very strict employment-use test – if your employer has not yet asked us to add iPads to the menu of packagable benefits it is because it is not yet comfortable that there is a clear or “primary” business use for the machine in the ordinary course of its employees’ duties.

      However as the iPad’s range of business apps grows it seems very likely that this position will change, and the more we are able to demonstrate a legitimate employment-based need for iPads the easier it will be for your employer to justify addition of this product to the menu.

      • 3 Suneel Randhawa November 11, 2010 at 12:47 pm

        Hi Simon,

        A iPads have been classified as laptops by the ATO, then what justification are employers using to differentiate an iPad from any other laptop?

        What if Company X sells a laptop – assuming the traditional laptop form factor – for which application are scarce. Would that laptop be eligible for salary sacrifice? This would suggest to me that employers are basing their eligibility decisions on what operating systems run on those devices – and hence what applications are available. Otherwise they would be making eligibility decisions for each model for each brand of laptop on a case by case basis. Surely that is not right. Is my logic flawed here?

        Conversely, if some employers are suggesting that scarce applications on the iPad rule them out as laptops, would it not be justifiable to salary sacrifice an iPad as a PDA? given that it DOES have a calendar function out of the box. It would require no additional software purchase.

        Just my $0.02 (+GST) worth 🙂

  2. 4 ceosmartsalary November 11, 2010 at 3:45 pm

    Hi Suneel

    The salary packaging law changed in 2008 and it is no longer relevant whether the item fits the definition of ‘laptop’ or ‘PDA’. Under the new laws salary packaging is available for any ‘portable electronic device’ that is used primarily in the performance of employment duties.

    An iPad is definitely a portable electronic device and therefore it can be packaged under the new rules – but only if it meets the work-use test: i.e. will it primarily be used by the employee in the performance of their ordinary employment duties?

    At the end of the day all employers must look at the ordinary duties of their staff and decide whether it is reasonable to assume that iPads will have a functional use for those employees.

    If the answer is no then iPads will not be added to the menu of available benefits, but if the answer is yes then there’s no legal impediment to adding them as a packageable item.



    • 5 Suneel November 12, 2010 at 3:59 am

      Thanks Simon. The process, as you described, seems fair.

      I understand that under the salary packaging law there is no fundamental distinction between “portable electronic devices” as long as they pass the work-use test. However I’m guessing employers do make a distinction so they can generically group devices that do meet the work-use test and those that do not. e.g “Laptops meet the test but Pagers do not”. They then provide this advice to SmartSalary who act accordingly. SmartSalary then look at a claim and decide if the device falls into one of the groups that meet the work-use rule.

      However I’m still unclear as to why some employers treat iPads as a special case? i.e why is is not automatically a laptop?

      For example, assuming an employer has already deemed that laptops meet their work-use test. Along comes the iPad. Does the employer now have to make a decision as to whether an iPad is a laptop, and therefore already satisfies the work-rule test; or some other electronic device which requires a different category, needing to be rechecked against the work-use test. Is that what is happening?

      If the above is correct, then what triggers an employer to recheck the category of an electronic device that enters the market? Do SmartSalary say to the employer “There is a new device on the market called X. You need to let us know if you think it’s a laptop or something else”.

      I hope what I’ve tried to convey above makes sense. Apologies if I am missing your point.

  3. 6 ceosmartsalary November 17, 2010 at 1:24 pm

    Hi Suneel

    Above you note that: I’m guessing employers do make a distinction so they can generically group devices that do meet the work-use test and those that do not. e.g “Laptops meet the test but Pagers do not”.

    This is actually not correct. While employers do group devices for convenience it is not correct to interpret the decision to add a device to the menu as a declaration that every employee will be able to package that device. For example, by adding laptops to the menu the employer is not saying that laptops can be packaged by all employees, it is simply saying that some of its employees will have roles that require the use of a laptop, and that those employees may be able to package one.

    In effect, each electronic device must pass two tests in order to be packageable:

    Test 1: The employer must recognise that it is the type of device that might be used by some of its employees in the performance of their employment duties, and on this basis instruct Smartsalary to add it to the menu of available benefits, and

    Test 2: The individual employee must demonstrate that they are one of the specific employees who actually does use the device in their employment duties and that this use comprises more than 50% of their total use of the device.

    The problem with iPads is that they aren’t getting past the first test for some employers. Those employers are looking at the business functionality of iPads and saying that they do not think any of their employees have employment duties that will enable them to pass Test 2.

    For the record we actually have gone out to each employer, as you have guessed above, but instead of asking whether the employer considers iPads to be a “laptop” we have asked whether they consider iPads to be potential work tools for their employees.

    If your employer does not allow iPad packaging then you can assume that it answered ‘no’ to that question. But perhaps you can change its mind!!



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Deven Billimoria
Chief Executive Officer

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