Upgrading your iPhone? There could be a smarter way to pay for it.
If you use your phone for work, you may be able to salary package the cost and potentially save through pre-tax deductions.
Here's how it works.
Can you salary package an iPhone?
Yes, provided you meet the eligibility requirements.
Mobile phones can qualify for salary packaging when they are primarily used for work purposes and your workplace allows them to be packaged.
The Australian Taxation Office (ATO) considers mobile phones to be portable electronic devices. These devices can be exempt from Fringe Benefits Tax (FBT) when they are primarily used for work.
For mobile phone salary packaging, the phone must be used at least 50% for work purposes. You'll also need to provide evidence supporting your work use.
Why salary package your new iPhone?
Think about how often you reach for your phone during the working day.
Emails, calls, messages, calendars, authentication apps and documents. For many of us, a smartphone is now an essential work tool.
If you're already planning to buy a new iPhone, salary packaging may provide a more cost-effective way to pay for it.
Rather than paying entirely from your after-tax income, the eligible cost can be deducted from your salary before income tax is calculated. This reduces your taxable income and may reduce the overall cost of your phone.
Depending on the arrangement, GST savings may also apply.
The actual benefit will depend on your individual circumstances and workplace salary packaging policy.
How does salary packaging an iPhone work?
The process is fairly straightforward.
1. Check your eligibility
First, check whether mobile phones are included in your workplace's salary packaging policy.
Your phone will need to be used at least 50% for work purposes, and you'll need to be able to support this with the required documentation.
2. Apply to salary package your phone
Submit your application and provide evidence showing that more than 50% of your phone use is for work.
This generally includes two recent phone accounts, along with a declaration regarding the phone's work use.
3. Choose your packaging period
You can nominate the number of pays over which you'd like to salary package the eligible expense.
This allows the cost to be incorporated into your regular pay cycle rather than simply being treated as an after-tax purchase.
4. Purchase your phone and submit your receipt
Once you've purchased your new iPhone, provide the relevant invoice or receipt.
The reimbursement can then be paid into your nominated bank account in line with your salary packaging arrangement.
How could salary packaging an iPhone save you money?
It comes down to how you pay for the phone.
Normally, you earn your salary, pay income tax and then purchase your phone from your remaining take-home pay.
With an eligible salary packaging arrangement, the cost can instead be deducted from your pre-tax salary.
That reduces your taxable income. Depending on the arrangement, there may also be GST savings.
How much you could save will vary depending on your income, the cost of the phone and your individual circumstances.
What are the FBT rules for salary packaging a phone?
Work use is important.
The ATO includes mobile phones among the portable electronic devices that can qualify as FBT-exempt work-related items. To qualify for the exemption, the device must be primarily for use in your employment.
Generally, the exemption is limited to one item per FBT year where multiple items have substantially identical functions, unless the second item is a replacement. Different rules may apply in some circumstances.
Can you salary package the latest iPhone?
The model itself isn't what determines eligibility.
Whether you're buying the newest iPhone or another smartphone, what matters is whether the device meets the work-use requirements and your workplace allows mobile phones to be salary packaged.
So, if an upgrade is already on your radar, it's worth checking your eligibility before making the purchase.
What do you need to apply?
Having the right information ready can make the process much easier.
- Evidence supporting more than 50% work use
- Two recent phone accounts
- Your purchase invoice or receipt
- Your nominated bank account details
- The number of pays over which you'd like to package the expense
You'll also need to complete a declaration confirming that the phone meets the required level of work use.
Can you claim the phone as a tax deduction too?
You can't claim the same packaged purchase as an income tax deduction.
Salary packaging and claiming a personal tax deduction are different approaches, so it's important to understand which applies to your circumstances.
If you're unsure, consider speaking with an independent tax or financial adviser.
Thinking about upgrading your iPhone?
If you use your phone regularly for work, it's worth checking whether salary packaging is available before you buy.
A little planning before your next upgrade could help you make the most of an expense you were already going to make.
Learn more about salary packaging a mobile phone and check the eligibility requirements before getting started.