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In many cases, employers have adopted bring-your-own-device (BYOD) strategies to allow employees flexibility in choosing the devices and contracts that meet their personal and business needs. In this case, they might give employees a regular allowance for their costs or ask employees to claim their business expenses each month.
In other cases – though increasingly rare – employers take out the mobile or broadband contract in the business’s name and give employees access to a company-owned device. The payroll department needs to look carefully at each of these scenarios to ensure that the business complies with tax regulations with the least effort, cost and risk.
The basic principle is simple: the use of the employer’s mobile device, or the provision of a communication service such as the internet or a telephone service, is tax-free if used for business purposes, but the personal use is taxable. The difficult (and sometimes admin-intensive) part is separating personal from business usage, so that personal use can be taxed as a fringe benefit. Let’s look at how this works in practice...
When the employer provides the employee with a device that is leased, rented or fully owned, personal use by the employee should be treated as a fringe benefit. The value of the fringe benefit is calculated as follows:
Employers may deduct any amount spent by the employee on the maintenance or repair of the asset as well as their work usage from the fringe benefit valuation. The good news is that if the employee uses the device mainly (more than 50%) for business purposes, there is no fringe benefit to declare.
When an employee has personal use of a communication service (home broadband, mobile internet, internet connectivity, voice lines etc.) provided by his or her employer, this should be treated as a fringe benefit. The initial value is the cost to the employer of providing the service.
Again, the fringe benefit has no value if the service is used mainly (more than 50%) for business purposes. This also applies to personal use of a telecommunications service made available at work, for example personal calls made from the office using the employer’s fixed line service.
Employers generally compensate employees for business-related device expenditure by way of reimbursements (or advances) and allowances.
Closing words
Companies spend a lot of time considering the technical and accounting aspects of the ownership and payment models they follow for communication devices and services. However, the implications for the payroll should not be neglected if a company is looking at implementing a BYOD strategy or reverting to an employer-owned approach.