ATO Interpretative Decision

ATO ID 2008/21

Fringe Benefits Tax

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Are the fringe benefits provided to an employee, being the private use of a car held by the employer during the year of tax, excluded fringe benefits as prescribed by regulation 3F of the Fringe Benefits Tax Regulations 1992 (FBTR), when a second employee's private use of the same car is an exempt benefit?

Decision

Yes. Regulation 3F of the FBTR is satisfied and the fringe benefits provided to the first employee are excluded fringe benefits in relation to the year of tax.

Facts

The employer owns and maintains a car which is designed to carry a load of less than one tonne.

The employer provides the first employee with the use of the car during the year of tax. The first employee uses the car for travel to and from work and for other private purposes.

The benefits that arise through the first employee's use of the car are benefits provided in respect of the employee's employment and are fringe benefits within the meaning of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

The employer also provides a second employee with the use of the same car during the year of tax. The second employee uses the car for private purposes to travel from work to a home emergency and then returns to work.

The benefits that arise through the second employee's use of the car are benefits provided in respect of the employee's employment and are exempt benefits (minor benefits) under section 58P of the FBTAA. These benefits would be fringe benefits except that the benefits are exempt benefits

The year of tax is the year starting on 1 April 2007.

Reasons for Decision

Section 5E of the FBTAA determines the employee's individual fringe benefits amount. Excluded from the individual fringe benefits amount are excluded fringe benefits. Benefits which are prescribed for the purposes of paragraph 5E(3)(i) of the FBTAA are excluded fringe benefits.

Regulation 3F of the FBTR prescribes benefits relating to pooled or shared cars as being excluded fringe benefits for the purposes of paragraph 5E(3)(i) of the FBTAA.

Fringe benefits which are excluded fringe benefits would also not be included in the employee's reportable fringe benefits amount under Part XIB of the FBTAA.

In general terms, the exclusion prescribed by regulation 3F of the FBTR for pooled or shared cars is available from 1 April 2007 where a car held by an employer is used by two employees during the year of tax, where each employee is provided with:

•

a fringe benefit which is a car benefit, or,

•

an exempt benefit which is a car benefit which would have been a fringe benefit if it were not an exempt benefit.

Where such a pooled or shared use exists during the year of tax the benefits are excluded fringe benefits for both employees.

Regulation 3F of the FBTR provides:

3F Excluded fringe benefit - pooled or shared cars (Act s 5E)

(1)

For paragraph 5E (3) (i) of the Act, a benefit is an excluded fringe benefit if, during a year of tax:

(a)

the benefit is a car benefit, as described in subsection 7 (1) of the Act, that is:

(i)

a fringe benefit within the meaning of subsection 136 (1) of the Act; or

(ii)

a benefit that:

(A)

is an exempt benefit; and

(B)

would have been a fringe benefit except that the benefit is an exempt benefit; and

(b)

the car benefit relates to a car the provision of which gives rise to the benefit described in paragraph (a) for more than 1 employee.

Example

The employer of 3 employees makes 1 car available to the employees, for private use, at different times during the year of tax.

(2)

The fringe benefit is an excluded fringe benefit in relation to each of those employees.

(3)

The fringe benefit is an excluded fringe benefit in relation to:

(a)

the year of tax starting on 1 April 2007; and

(b)

each later year of tax.

Subregulation 3F(1)(a) of the FBTR requires the benefit to be a 'car benefit' as described in subsection 7(1) of the FBTAA. The term 'car benefit' is defined in subsection 136(1) of the FBTAA and means a benefit referred to in subsection 7(1) of the FBTAA.

Under subsection 7(1) of the FBTAA, a car benefit will arise at any time on a day in respect of the employment of an employee where a car is held by the employer and is applied to a private use by the employee or is taken to be available for the private use of the employee.

Subsection 136(1) of the FBTAA and subsection 995-1(1) of the Income Tax Assessment Act 1997 provides:

car means a *motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers.

During the year of tax the car is held by the employer and is applied to a private use by the first and second employees.

The benefits provided to both employees are benefits which are car benefits under subsection 7(1) of the FBTAA.

The benefits provided to the first employee are fringe benefits within the meaning of subsection 136(1) of the FBTAA. These benefits satisfy subregulation 3F(1)(a)(i) of the FBTR.

The benefits provided to the second employee are benefits which are exempt benefits under section 58P of the FBTAA and would be fringe benefits within the meaning of subsection 136(1) of the FBTAA except that the benefits are exempt benefits. These benefits satisfy subregulation 3F(1)(a)(ii) of the FBTR.

The car benefits provided to the first employee relates to a car, the provision of which gives rise to the benefit described in subregulation 3F(1)(a) of the FBTR for more than one employee. Subregulation 3F(1)(b) of the FBTR is satisfied and the fringe benefits are excluded fringe benefits under subregulation 3F(2) of the FBTR.

The year of tax is a year commencing after 31 March 2007. Subregulation 3F(3) of the FBTR is satisfied.

Regulation 3F of the FBTR is satisfied and the fringe benefits provided to the first employee, being the private use of the car by the employee, are excluded fringe benefits in relation to the year of tax.

Year of income:  FBT year ended 31 March 2008

Legislative References:
Fringe Benefits Tax Regulations 1992
   Regulation 3F
   Subregulation 3F(1)(a)
   Subregulation 3F(1)(a)(i)
   Subregulation 3F(1)(a)(ii)
   Subregulation 3F(1)(b)
   Subregulation 3F(2)
   Subregulation 3F(3)

Keywords
Car fringe benefits
Excluded fringe benefits
FBT car fringe benefit
Fringe benefits
Fringe benefits tax
Reportable fringe benefits

Siebel/TDMS Reference Number:  5883989

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  25 January 2008

ISSN: 1445-2782