Salary Packaging a Work Laptop or Phone? The Tax Break Ends on 1 April 2027
From 1 April 2027, laptops, phones and other work items paid from your pre-tax salary lose their FBT exemption. Here's what changes and what to do first.
For years, one of the easiest tax wins for employees has been salary packaging a work laptop or phone. Instead of buying it with your take-home pay, your employer buys it and takes the cost out of your salary before tax. Same device, noticeably cheaper.
That deal has an end date. From 1 April 2027, work items paid for out of your pre-tax salary lose their special tax treatment. The ATO has already published guidance for employers on the change. Here's what's going, what's staying, and what to do if you're due for a new device.
First, a 30-second refresher
Salary packaging (also called salary sacrifice) means swapping part of your pre-tax pay for something your employer pays for. Because those dollars never become taxable income, you skip the income tax on them.
Normally there's a catch: fringe benefits tax (FBT, a tax your employer pays on perks it gives staff). FBT is charged at 47%, so for most perks it cancels out the saving. The trick has always been the exceptions. Certain work items, including portable electronic devices such as laptops, tablets and phones, have been exempt from FBT as long as they're mainly used for work.
What changes on 1 April 2027
1 April is the start of the FBT year, which runs from 1 April to 31 March. From 1 April 2027, two things change for anything provided through salary packaging:
- These work items lose their FBT exemption when salary sacrificed: portable electronic devices (laptops, tablets, phones), computer software, protective clothing, and briefcases and tools of trade.
- Your employer can no longer use the 'otherwise deductible rule' (a rule that lets FBT drop to nil when you could have claimed the cost as a tax deduction yourself) on salary-sacrificed work expenses covered by the new standard deduction. The ATO gives home office costs, home phone or internet bills, and self-education as examples. This applies whatever the amount.
Why it's happening
It's linked to the new $1,000 standard deduction for work-related expenses, which starts from the 2026-27 income year. That deduction lets you knock up to $1,000 off your taxable income for work expenses with no receipts.
The government's view is that you shouldn't be able to get a tax break on a work expense twice: once by packaging it tax-free, and again through the flat $1,000 deduction. So the packaging route for these everyday work costs is being closed off.
What it's worth to you right now
To see what's at stake, take Priya. She earns $85,000, so in 2026-27 her top dollars are taxed at 30% plus the 2% Medicare levy, or 32c in the dollar. She needs a new $2,400 laptop that she'll use mainly for work.
Worked example
If Priya packages the laptop before 1 April 2027, $2,400 comes out of her salary before tax. That's $2,400 less taxable income, so she pays $768 less income tax ($2,400 x 32%). If she buys it with take-home pay instead, she needs to earn about $3,529 before tax to have $2,400 left to spend. Packaging saves her roughly $768 on the same laptop. From 1 April 2027, a packaged laptop becomes a taxable fringe benefit, and the FBT, if it's passed on to her, would generally wipe out that saving.
What isn't changing
This is narrower than the headlines suggest. A few things stay exactly as they are:
- A laptop or phone your employer simply gives you to do your job, without taking it out of your salary, stays FBT-exempt. In fact it gets slightly easier: from 1 April 2027, the general one-item-per-year limit is removed, so your employer can give you more than one device with the same function in a year, as long as they're mainly for work.
- Salary packaging super is completely separate and isn't affected by this change.
- If you buy a work device yourself, you can still claim the work-use share at tax time under the normal rules. From 2026-27, remember the new standard deduction gives you either the flat $1,000 or your itemised work expenses, whichever is bigger, not both.
The trap: thinking work laptops are now taxed
They're not. The change only bites when the item is paid for out of your pre-tax salary. If your employer hands you a laptop as a work tool and your pay stays the same, nothing changes for you, and from April 2027 your employer can even give you more than one device a year tax-free.
What to do now
If you don't salary package work gear, you can stop reading here with a clear conscience. If you do, or you've been meaning to, a few quick checks:
- Due for a new laptop or phone anyway? Ask payroll whether you can package it before 31 March 2027, while the current rules still apply. Your employer or packaging provider may set its own earlier cut-off, so ask sooner rather than later.
- Remember the current one-item rule still applies until then. If you've already packaged a laptop since 1 April 2026, a second one in the same FBT year generally won't be exempt unless it replaces the first.
- Packaging your home internet, phone bill or a course? Expect your employer to review those arrangements before April 2027, as they're caught by the same change.
- Don't buy something you don't need just to beat the deadline. Saving 32% on a laptop you didn't need is still spending 68% you didn't have to.
This is general information only, not tax or financial advice. Your employer's packaging policy decides what you can actually package, so check with payroll or a registered tax agent before making a decision.
FAQ
Can I still salary package a laptop in Australia?
Yes, until 31 March 2027, a laptop used mainly for work can generally be packaged free of FBT, subject to your employer's policy and the one-item-per-year limit. From 1 April 2027, a salary-packaged laptop is no longer FBT-exempt, so it usually stops being worth it. This is general information, not tax advice.
Will my work laptop be taxed from April 2027?
Not if your employer simply provides it for work and doesn't take the cost out of your salary. Those items stay FBT-exempt, and from 1 April 2027 your employer can provide more than one device with the same function in a year, as long as they're mainly for work.
Why is the government removing the exemption?
It's tied to the new $1,000 standard deduction for work-related expenses, which starts from the 2026-27 income year. The aim is to stop people getting a tax benefit twice for the same kind of work expense: once through tax-free packaging and again through the flat deduction.
Run your own numbers