Fringe benefits tax (FBT) implications of Home Use Program (HUP)
Microsoft has sought advice from KPMG on the general application of the Fringe Benefits Tax (“FBT”)
legislation to the Home Use Program (“HUP”). The advice obtained from KPMG is set out below.
Microsoft recommends that you obtain professional advice on the FBT implications for your
organisation, which takes into account your specific circumstances. The comments set out below are
for information purposes only, and neither Microsoft nor KPMG can accept any responsibility to
Microsoft customers in respect of use of the information below.
A fringe benefit can arise where a third party (in this case Microsoft) provides services (such as HUP) to
a customer's employees as part of an agreement or arrangement with the customer.
The employer of the employee does not have to pay fringe benefits tax in respect of the provision of
HUP, where the HUP license agreement between Microsoft and the employee is at arm's length and
the employee pays an arm's length price for the service. The following features of the HUP license are
indicative of an arm's length agreement and price between Microsoft and the employee:
1) The price Microsoft charges the customer for Software Assurance is not affected by the take-up of
HUP. If the customer elects not to allow its employees to take advantage of HUP, it does not lower the
price of the Software Assurance. Therefore the customer's Software Assurance licensing fee is not
subsidising the take up of HUP by employees.
2) Microsoft does not make any separate charge to the corporate customer in respect of HUP.
3) Microsoft charges the employee a fee for activating the HUP licensing agreement. Microsoft has set
the level of this fee so that HUP will be attractive to employees, while at the same time providing a
commercial return to Microsoft.
It should be noted that the licensing conditions under HUP are unique. They are tied to the employee's
continued employment with the customer and the customer's continued licensing of Software
Assurance. Therefore the HUP license is not comparable with Microsoft software packages that are
otherwise available to members of the public.
Monday 23rd June 2008