With the new budget comes the announcement by the Treasurer of changes to the Fringe Benefits Tax law (FBT), which has tightened exemptions for eligible work-related items and property used on an employer's premises.

Affected items include laptops, PDAs, smartphones, software, briefcases and tools of the trade. The government has also removed employees' ability to claim deductions for the depreciation of such items.

The tightening of restrictions means employees can no longer "salary package" laptops and pass them onto their child for use at school and home.

Robin Vincent, a policy officer with the Department of the Treasury, said as there was no previous work related requirements, people were salary packaging laptops for private purposes.

"That really wasn't the [original] intention of the provision. The exemption is only intended to apply if the item is for work related purposes," she said.

"People might see that as negative because they can no longer salary package for private purposes, but on the other hand we've extended the provision for the exemption to apply to portable electronic devices.

"There was a lot of confusion because of changes in technologies about which ones qualify for the exemption; GPS devices, PDAs etc. Because you can get a combination of functions on the same electronic device, they didn't [previously] fall within the exemption," she said.

John Brazzale, a partner with accounting firm Pitcher Partners, said the new exemptions are inconsistent with other federal budget initiatives to provide tax refunds for certain education costs, including the purchase of laptops.

"The actual tightening of the exemption itself, whilst disappointing and not a positive measure for business, cannot be seen to be overly bad for business. It isn't an attack on a flexible workplace as the exemption now has a test that requires that for the exemption to apply the item must be 'used primarily for work purposes' so there is still the ability to encourage flexible working arrangements," Brazzale said.

Brazzale said that the concept of a "used primarily for work purposes" test is a subjective one for which there is no clear guidance, meaning employers will have more administration and paperwork to ensure the test is met and has appropriate means of substantiating the use of the exemption.

"In an environment where Governments are supposedly trying to reduce the compliance and administration burden of taxes on business it is disappointing that the proposed amendment is going to cause more administration for businesses. Indeed, given the subjective nature of the test businesses may be risking an FBT exposure by adoption a particular position, and may be forced to pay FBT on the item merely to avoid the risk of such an exposure," he said.

The test is something the Australian Tax Office (ATO) will need to clarify, said Vincent. The requirement already exists for mobile phones, and has now spread to cover all other electronic devices.

"We are expecting the ATO to put out guidance for what they consider to be primarily work related. We expect this to be raised at the National Tax Liaison Group, which is a meeting the ATO has with professional bodies, and I imagine the ATO will give some guidance there on these issues," she said.

The Treasury said the changes will restore the original intent of the FBT law and improve equity in the treatment of employee remuneration. According to the Treasury the combined effect of the measures will raise approximately A$1.2 billion (US$1.1 billion) over the forward estimates.

Brazzale also said the period over which in-house computer software is depreciated will increase from 2.5 years to 4 years for expenditure incurred after 13 May 2008, with the straight line basis of depreciation the only method of depreciation allowable for in-house computer software. "The move to increase the effective life of computer software is somewhat bewildering. In the current environment, the effective life of computer software is much more accurately reflected by 2.5 years than 4 years. The effect of this change will be to defer the tax deductions for the depreciation. Ultimately, the deductions will be available merely over an extended period."

Brazzale said that in many cases businesses will, by the necessity of technological change, replace software after 2.5 years in which case it will merely write off the balance of the software's cost. The only impact will be slightly lower tax deductions in the earlier years.