"The Federal Labor Government has gone further than altering the ability to salary sacrifice a laptop, by reversing a long established tax principle (albeit a generous one) that also allowed work-related depreciation. This indicates an apparent lack of understanding of the consequence of the date of effect given that depreciation over time is the benefit in question.
While this apparent "double deduction" appeared to be generous, it nevertheless was valid and legal and supported by ATO rulings. Removing the “double deduction” is perhaps understandable; what is not is the retrospective nature of the announced measure.
"The changes that disallow depreciation for FBT-exempt items will take effect as follows:
- for items purchased after 7.30 pm (AEST) on 13 May 2008, this measure will take effect from that time;
- for items purchased before 7.30 pm (AEST) on 13 May 2008, employees will be denied depreciation for the 2008-09 and later income years."
The second point means that on a purchase made pre-Budget under the laws of the day, the only depreciation allowed will be for the 48 days from 13 May 2008 to 30 June 2008. As an example, someone earning $40,000 who might have salary sacrificed a $2,200 work-related laptop on 12 May 2008 has now had the after-tax cost of their laptop nearly doubled from about $700 to $1,320! Perhaps that doesn’t quite meet the definition of a retrospective law change, but it is extremely mean-spirited for anyone lawfully relying on the tax laws of the day! I wonder if the writers of the policy know what depreciation actually is?"