WA laptop deal stirs GST debate

A $40 million deal negotiated by the West Australian education department will land 14,000 Acer laptops, shorn of GST, in the homes of WA teachers.

The contract, due for signing this month is a welcome reversal of form for Acer which last month lost a similar Victorian Government deal to IBM.

However, its GST-free provisions are stirring concern among critics who argue they violate the intent if not the spirit of GST legislation.

As an education provider, the WA education department can claim back the GST component of its lease payments to Acer for the laptops.

It will re-lease the machines to teachers under a payroll deduction plan costing the average participant in the voluntary program about $7.30 a fortnight.

The salary-sacrifice mechanism allows teachers to deduct the payments from their gross income. In addition to the GST saving, it effectively chops prices in half for employees on the top 48.5 cents tax rate.

It all adds up to a sweetheart deal at taxpayers' expense, claim critics in the WA reseller community who have been excluded from the direct-to-manufacturer pact.

The notebooks will be used as a classroom communication and planning aid, says EDWA acting director of information and communications technology, Bevan Doyle. The proposed treatment of GST is still subject to a ruling by the Australian Tax Office, he said.

The department says teachers in 21st century classrooms need a thorough, first-hand understanding of technology if they are going to relate to their students.

The issue is whether leasing a laptop can be classed as provision of an educational service.

If it is not an education service, then it should attract a GST, says tax consultant and accountant Brian Tucker.

Industry critics claim half of WA's teachers already own computers so many of the new laptops could end up in the hands of family members.

They are also concerned that direct-to-manufacturer arrangements such as the WA pact and the recent $92 million deal with IBM in Victoria shut out local industry.

"It [supply of product] goes 100 per cent offshore," says Neil Hancock, managing director of Perth mobile systems reseller Portacom.

The education department contract represents more laptops than Portacom has sold in its 18 years of business, he says.

Jim Loader, managing director of Perth IBM reseller Stott and Hoare, agrees: "It isn't helping local industry . . . we are at the mercy of the manufacturers."

The salary-sacrifice education contracts with their GST-free provisions are described as "breakthoughs" by Acer marketing director Raymond Vardenega.

They are part of a trend among large organisations to offer employees the benefits of corporate buying power as part of their salary package.

The Federal Government sees merit in encouraging the acquisition of computers for a combination of work and self-education.

So there is no fringe benefits tax on the provision of business tools such as personal digital assistants, notebook and mobile phones. That translates into large savings for employees able to deduct payments from their gross salaries before tax.

Among the more enlightened corporate users of the salary-sacrifice approach to IT buying are the NRMA and the ANZ Bank.

IT vendors see it as a growth area and Toshiba has been targeting customers for about six months.

Toshiba information systems division general manager Ralph Stadus reports "a lot of interest" from the corporate space and some government agencies.

However, the most fruitful approaches are made through human relations departments, not IT departments, he says.

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