My staff salary sacrifice their laptops and course fees — does that still work from 2027?

It is one of the few arrangements in a small business that everybody is happy with. An employee asks to salary sacrifice a laptop, a short course, or the home internet they use three days a week for work. The amount comes out of pre-tax salary, the business pays the invoice, and the fringe benefits tax on it comes to nothing — either the item is exempt outright, or the otherwise deductible rule brings the taxable value to nil. It has run this way for years.

On 7 September the ATO published a note to employers saying that from 1 April 2027, for a specific list of benefits, it stops working.

What was actually amended

Two sections of the Fringe Benefits Tax Assessment Act 1986 were amended by the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 — the same Act that introduced the $1,000 standard deduction from 1 July 2026. They are section 24, the otherwise deductible rule for expense payment fringe benefits, and section 58X, the exemption for certain work-related items.

The changes apply to FBT years starting on or after 1 April 2027 — the FBT year runs 1 April to 31 March, so the first year affected is 2027–28. The current one is untouched. The ATO's draft ruling states the purpose plainly: to stop the standard deduction being combined with a salary packaging arrangement in a way that produces a double tax benefit. That ruling is LCR 2026/D5, issued on 26 August 2026, and Part C of it is written for employers. It is a draft and does not take effect until finalised — but the amendments it explains are already law.

Change one: the otherwise deductible rule is switched off for packaged expenses

The otherwise deductible rule is why most reimbursements cost an employer no FBT: the taxable value of an expense payment fringe benefit is reduced by what the employee could have claimed as a once-only deduction had they paid for it themselves. Keep the records and the value falls to nil.

New subsection 24(1A) turns that off where three things are all true — the benefit is an expense payment fringe benefit, the expense is a work-related expense of the kind covered by the standard deduction, and it is provided under a salary packaging arrangement. The ATO's examples of the expenses caught are home office expenses, home phone or internet expenses, and self-education expenses. Its bulletin adds three words that matter: this applies regardless of the value. There is no small-amount let-off.

What survives is equally specific. The rule still applies to expense payments not covered by the standard deduction, and to those that are covered but do not come through a packaging arrangement. The draft ruling's two examples make the line visible: $350 of corporate uniforms reimbursed outside any packaging arrangement still reduces to nil, while a pharmacist whose flights, taxi and conference registration are salary packaged leaves her employer paying FBT on the full amount.

Change two: packaged devices and tools lose their exemption

Section 58X currently exempts a short list of items provided primarily for use in the employee's employment: a portable electronic device, computer software, protective clothing, a briefcase, and a tool of trade. It is the exemption behind the salary-sacrificed work laptop and the packaged phone.

From 1 April 2027 those items are no longer eligible work-related items when provided under a salary packaging arrangement, so the employer is assessed on the taxable value unless another exemption applies. Provided outside such an arrangement, the same items stay exempt. The distinction the law now draws is not what the item is or how it is used, but whether the employee gave up salary to get it.

One restriction is lifted on the same date. Subsection 58X(3), which limits the exemption where an item with substantially identical functions was already provided to that employee earlier in the same FBT year, is repealed. From 1 April 2027 an employer can provide more than one item of the same type in an FBT year and keep the exemption, provided the items are used mainly for work and do not come through a packaging arrangement. The ATO notes this removes the current one-item-per-employee-per-year limit and extends it to all employers, not only small businesses.

Two things commonly got wrong

The first is assuming the employee can simply claim the expense instead. They cannot — section 51AH of the Income Tax Assessment Act 1936 has always prevented an employee deducting an expense their employer reimbursed. But the corollary is better than most people expect: because there is no entitlement to deduct a reimbursed expense, a reimbursed work-related expense does not reduce the employee's standard deduction either — the draft ruling says so for both fringe benefits and exempt benefits. The employee keeps the standard deduction in full; what they lose is a second bite at the same cost.

The second is deciding you do not have a salary packaging arrangement. Subsection 136(1) covers a benefit given in return for a reduction in salary, and also a benefit forming part of a remuneration package where it is reasonable to conclude the salary would otherwise have been higher. An informal we will cover your course instead of a pay rise can sit inside that definition.

The useful work here is a list, and it can be made now. Sort the benefits your business provides on one question: does this come through a salary packaging arrangement, or is it an ordinary reimbursement or an employer-provided tool? Anything in the first column that is a home office, phone, internet or self-education expense payment, or a device, software, protective clothing, briefcase or tool of trade, is what the changes reach. Then work out what each is worth once FBT is payable on the full taxable value — for some packaged items the answer from April 2027 will be that a plain employer-provided tool is cheaper for both sides.

This is general information current as at 9 September 2026, not advice about your business or any particular employee's package. Our earlier piece on the $1,000 standard deduction covers the individual side of the same Act. This one lands with your 2027–28 FBT reporting, and lining the arrangements and records up before 1 April 2027 is exactly what our companies, trusts and bookkeeping service is built to carry.