Edited version of private ruling

Authorisation Number: 1011359664566

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Car Fringe Benefits

Issue 1

Where you provide an employee with the use of a motor vehicle that is used to travel between home and work, will such use be an exempt benefit pursuant to subsection 47(6) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Yes.

Issue 2

EXEMPT CAR BENEFITS

1. Where you provide an employee with the use of a motor vehicle that is used to travel between home and work, will such use be an exempt benefit pursuant to subsection 8(2) of the FBTAA?

Yes.

2. Where you provide an employee with the use of car as defined by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) that is used to travel between home and work, will such use be an exempt benefit under subsection 8(2) of the FBTAA?

No.

Issue 3

BUSINESS JOURNEYS

1. Will journeys undertaken by an employee with a working pattern of rostered work constitute a business journey as defined in subsection 136(1) of the FBTAA for the purposes of section 10 of the FBTAA?

Yes.

2. Will journeys undertaken by an employee with a working pattern of rostered work constitute a business journey as defined in subsection 136(1) of the FBTAA for the purposes of section 7 and section 10 of the FBTAA?

Yes.

This ruling applies for the following period/s:

Year ended 31 March 2010

Year ended 31 March 2011

Year ended 31 March 2012

Year ended 31 March 2013

The scheme commenced on

1 July 2008

Relevant facts

The employee is provided with a vehicle by the employer.

Some of the vehicles are vehicles which are designed to carry more than one tonne.

None of the vehicles have been permanently modified to alter the number of passengers they can carry.

All of the vehicles are designed to carry less than nine passengers.

The employer uses the cost method to value its car fringe benefits.

An adequate purpose of the journey is provided in the log book.

A collective employment agreement sets out the pay and employment conditions for employees.

Rostered employees work shifts that cover a 24 hour period, seven days a week, including public holidays.

When on call the employee uses a car to drive between their home, the call-out site and the employer's premises.

An on-call employee is on duty from the time he/she is called-out.

Occasionally an employee may be required in the course of work duties to travel and stay overnight at temporary accommodation to perform duties at an alternative worksite.

The employer has described several factual scenarios where an employee will use a work car to travel between home and work. These are:

· Employees who are stand-by.

These employees are directed to be available for return to duty outside their normal pattern of work. They may be called in to resume duty at any time at a location that is their regular base of work or at another alternative worksite. Stand-by employees receive an additional allowance where the recall exceeds 30 minutes.

A stand-by employee will use a work car to drive home and then later to the call out site and/or the work premises to perform their duties.

· Employees who receive a travel allowance to stay overnight in temporary accommodation in the performance of their duties.

An employee in receipt of travel allowance may take a work car home overnight ready to travel the next day to an alternative worksite or temporary accommodation in another location. At the conclusion of the performance of their duties they may first return home before returning the car to the office.

· Employees who periodically perform duties en block as part of their overall duties.

This work requires an employee to work irregular hours, travel to various alternative worksites on a frequent and changing basis and rare attendance at the employment base. Consequently, travel in the work car is generally between alternative worksites and the employee's home. The vehicle is not regularly applied for the employee's private use other than to travel between home and alternative worksites. The vehicle used is kitted out for normal work with additional equipment as required for the en block work.

· Employees who attend a training course to acquire or improve employment skills.

The employee takes a car home overnight to drive to a residential training course at another location early the next day. The employee may drive the car home at the conclusion of the course before resuming normal work duties at the regular work base or an alternative work location as required. An employee who lives locally may be required to take a work car to be used in the training and to reside temporarily with other trainees. The employee's use of the car may replicate the home to work travel of other out-of-town trainees.

· Operations and rostered operations employees who use a work car.

Employees may be required to use a car for work purposes. Each vehicle is kitted out with standard equipment ready for a range of potential situations encountered in the employee's day to day activities. Cumulatively the equipment weighs more than 50 kilograms. The employee uses the car to travel between home and work locations.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 7.

Fringe Benefits Tax Assessment Act 1986 subsection 8(2)

Fringe Benefits Tax Assessment Act 1986 section 10.

Fringe Benefits Tax Assessment Act 1986 subsection 47(6)

Fringe Benefits Tax Assessment Act 1986 section 136(1).

Reasons for decision

Issue 1

EXEMPT BENEFITS WHERE VEHICLES ARE NOT CARS.

A car fringe benefit will only arise when the vehicle being provided to an employee is a car as defined. Car is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as '…a motor vehicle…designed to carry a load of less than 1 tonne and fewer than nine passengers'.

Of the vehicles used by the employer three are vehicles that are designed to carry more than one tonne and less than nine passengers. These vehicles are therefore not cars as defined.

Subsection 47(6) of the FBTAA provides an exemption from fringe benefits tax in the tax year for which a residual benefit is provided to an employee through the use of a motor vehicle where:

(aa) the motor vehicle is not:

(i) a taxi let on hire to the provider; or

(ii) a car, not being:

(A) a panel van or utility truck; or

(B) any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers);

and the vehicle is used primarily for work-related travel of the employee and for private purposes on a minor, infrequent or irregular basis.

Paragraph 8 of Miscellaneous Tax Ruling MT 2034 Fringe benefits tax : private use of motor vehicles other than cars provides:

significant exemption from FBT is, however, provided under sub-section 47(6) of the Act. Under this sub-section, no liability for FBT will arise in respect of the provision of a vehicle to an employee where there is no private use of the vehicle by the employee or where private use of the vehicle by the employee during a year of tax is limited to certain work-related travel. Work related travel is defined in sub-section 136(1) of the Act to be travel between the employee's residence and place of employment or other place at which employment duties are performed and any travel that is incidental to travel in the course of performing duties of employment.

As some of the vehicles are not cars and the private use of them is limited to travelling between their homes and work premises or call out locations, the use of the vehicles will be an exempt benefit.

Issue 2

EXEMPT CAR BENEFITS

Question 1

The exemption provided in subsection 47(6) is extended in subsection 8 (2) of the FBTAA as follows:

A car benefit provided in a year of tax in respect of the employment of a current employee is an exempt benefit in relation to the year of tax if:

(a) the car is:

(i) a taxi, panel van or utility truck, designed to carry a load of less than 1 tonne; or

(ii) any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers); and

(b) there was no private use of the car during the year of tax and at a time when the benefit was provided other than:

(i) work-related travel of the employee; and

(ii) other private use by the employee or an associate of the employee, being other use that was minor, infrequent and irregular.

'Work-related travel' is defined in section 136(1) of the FBTAA as follows:

"work-related travel" , in relation to an employee, means:

(a) travel by the employee between:

(i) the place of residence of the employee; and

(ii) the place of employment of the employee or any other place from which or at which the employee performs duties of his or her employment; or

(b) travel by the employee that is incidental to travel in the course of performing the duties of his or her employment.

The Commissioner advises in paragraph 7 of Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel:

7. A further point to note is that under sub-section 8(2) of the Act, a liability for FBT will not arise where the private use of certain vehicles by employees during a year of tax is limited to travel between the employee's residence and place of employment or other place at which employment duties are performed and any travel that is incidental to travel in the course of performing duties of employment. Vehicles which qualify for this concession are taxis, panel vans, utility trucks and any other road vehicle that, while designed to carry a load of less than one tonne, is not designed for the principal purpose of carrying passengers.

The ute is a utility truck that carries a load of less than one tonne. The vehicle is only used to travel between the employee's home, the work premises, call out site or training course. Therefore, the vehicle is used for work-related travel and private use is minor or infrequent. The use of this vehicle is an exempt car benefit by virtue of subsection 8(2) of the FBTAA.

Question 2

These are vehicles that are less than one tonne but are designed for the principal purpose of carrying passengers. These vehicles are 'cars' as defined by section 995-1 of the ITAA 1997. They are not taxis, panel vans, utility trucks or any other vehicle designed to carry a load of less than one tonne. As such they do not fit the definition of a 'car' for the purpose of subsection 8(2) of the FBTAA.

Issue 3

BUSINESS JOURNEYS

Question 1

The employer uses the operating cost method detailed in section 10 of the FBTAA to value car fringe benefits. Where an election is made to use this method it is necessary to determine the business use percentage of the vehicle. The term 'business use percentage' is defined under subsection 136(1) of the FBTAA by way of a formula which takes into account the number of business kilometres travelled by the car as a percentage of the total number of kilometres travelled by the car.

The term 'business kilometre' is defined in subsection 136(1) as '... a kilometre travelled by a car in the course of a business journey.' The term 'business journey' is defined in subsection 136(1) to mean:

a journey undertaken in a car otherwise than in the application of the car to a private use, being an application that results in the provision of a fringe benefit in relation to the employer.

And private use is defined in subsection 136(1) of the FBTAA as:

any use of the motor vehicle by the employee or associate, as the case may be, that is not exclusively in the course of producing assessable income of the employee.

A business journey therefore occurs when a car provided to an employee is being used exclusively in the course of producing assessable income of the employee.

The employer provides a car to its employees who have a working pattern that classifies them as operations or rostered operations staff. Journeys undertaken by such employees in a car to exclusively perform their work duties from which they derive assessable income will be business journeys.

Journeys that you have described that meet this definition are journeys undertaken at the direction of the employer for which the employee is paid.

The employer requires its employees to attend training courses to provide or improve work skills to maintain the employee's continuing employment in certain roles. When training is provided by the employer to its employees, the employee is paid to attend. The employee is therefore deriving assessable income whilst so engaged. Journeys undertaken by employees in training on paid work time are:

· to drive between the office and the temporary accommodation

· to drive between the temporary accommodation and the training venue

· to drive the car between the temporary accommodation to other locations as part of the training course

· to drive between the temporary accommodation and town to purchase a meal

· to drive between the temporary accommodation and the alternative worksite.

Occasionally the employee is required in the course of work duties to travel and stay overnight at temporary accommodation to perform those duties at an alternative worksite. The employee is in receipt of a travel allowance for the duration of the trip and is paid to perform the duties. The journeys described in your factual scenario about temporary accommodation where the employee is exclusively performing their work duties from which they derive assessable income are:

· Between the temporary accommodation and the alternative worksite

· Between the temporary accommodation and town to obtain a meal

· From the temporary accommodation to the office.

Therefore travel between the employee's base of employment and alternative worksites and/or training locations and/or temporary accommodation, between alternative worksites and temporary accommodation and training locations and between temporary accommodation to town to obtain a meal while on duty in an employer supplied car at the direction of the employer are business journeys. Distance covered in a business journey will meet the definition of a business kilometre(s) as defined in section 136(1) of the FBTAA for the purposes of section 10 of the FBTAA.

Question 2

Private use of a car and car fringe benefits.

Section 7 of the FBTAA describes the situations in which a car fringe benefit will arise. In effect a car fringe benefit will arise where the car is available for the private use of the employee. Under subsection 7(2) of the FBTAA a car is taken to be available for private use on any day it is garaged or kept at or near a place of residence of an employee. When the employee garages the car at their home and uses it to travel between their home and their workplace, a car fringe benefit will arise as the car is deemed to be available for private use. Private use is defined in subsection 136(1) of the FBTAA as:

any use of the motor vehicle by the employee or associate, as the case may be, that is not exclusively in the course of producing assessable income of the employee.

A journey where the car is not being used exclusively in the course of producing assessable income of the employee is not a business journey.

TRAVEL BETWEEN HOME AND WORK

As a general rule, travel to and from work is private use of a motor vehicle. However there are some exceptions in which travel between home and work is accepted as business travel. These exceptions are addressed by the Commissioner in Miscellaneous Taxation Ruling MT 2027 about the private use of cars by an employee for home to work travel. When determining the distinction between private and business use for FBT purposes, paragraph 12 of MT 2027 employs a principle of first asking whether the expenditure would have been wholly deductible to the employee for income tax purposes.

The employer has described several factual scenarios where an employee will use a work car to travel between home and work.

Applying the Commissioner's guidance in MT 2027 to the five situations of home to work travel you have described, we consider the following journeys between work and home to be business journeys.

Travel while on stand-by duty (Paragraphs 17 to 22 of MT 2027).

An employee who is directed or rostered before the end of their usual working day to be on-call may be called back to duty at any time within a 24 hour period and may be provided with a car to drive home for the purpose of being available to travel to any site immediately if recalled to duty. The employee in scenario one is on stand-by duty and is on duty from the time the employee leaves their residence and travels to the call out site (which may be the base of operations or another location). Whilst travelling, the employee is responsible for attending to any incidents that may arise and communicating with other employees to co-ordinate the response. In these circumstances, we conclude that the journey from home to the place of employment is undertaken, not in order to commence employment duties but to complete duties of employment already underway before the trip commenced. According to paragraph 18 of MT 2027 the travel would constitute business travel including the trip home.

Paragraph 22 of MT 2027 cautions that this situation does not include normal daily travel undertaken by the employee to and from the office or base of employment. Nor will it apply to an employee who chooses to perform some of their employment duties at home. The use of a work car by a stand-by employee to travel between home and the regular base of employment and/or alternative worksite is regarded as business travel.

Business trip on way to or from work (Paragraphs 28 to 36 of MT 2027).

Paragraphs 28 to 36 of MT 2027 discuss employee travel on the way to or from work when the employment is not inherently itinerant. Where travel of this kind is undertaken from the employee's usual place of employment, it will constitute business travel. The position is less clear where the employee travels from home directly to changing alternative locations and then on to the office or base of employment.

34. While the position is not free from doubt and is perhaps clearer in some of the instances cited in paragraph 30 than in others, it has been decided that the total journey from the employee's home to the client's premises and on to the office should be accepted as business travel. This approach is to be adopted where -

· the employee has a regular place of employment to which he or she travels habitually;

· in the performance of his or her duties as an employee, travel is undertaken to an alternative destination which is not itself a regular place of employment (i.e., this approach would not apply, for example, to a plant operator who ordinarily travels directly to the job site rather than calling first at the depot or to an employee of a consultancy firm who is placed on assignment for a period with a client firm); and

· the journey is undertaken to a location at which the employee performs substantial employment duties. '

The employee works from a specific base of employment to which the employee would habitually travel. In the factual scenarios provided, the employees may be required to travel between home to alternative worksites in the course of their work sometimes staying in temporary accommodation, to perform their duties. The work performed at the temporary location is substantial not incidental. The converse is true for an employee who performs substantial duties at an alternative worksite before travelling home.

In the second factual scenario the employee is required to stay overnight in temporary accommodation in the performance of their duties at an alternative worksite. The employee may take a car home before setting out the next day to commence duties at an alternative worksite or to the temporary accommodation. The converse may occur on the return trip home. The third scenario describes the home to work travel in a car by an employee performing en block duties as part of their mix of duties. The nature of the work requires the employee to work predominantly at alternative worksites with little contact with the habitual place of employment when performing en block. The fourth scenario describes the home to work travel of employees engaged in paid training. An employee on a training course arranged by the employer to instil and improve employee skills who is paid to attend the training is on duty and earning assessable income. The employee takes a car home for the purpose of travelling direct the next day to the alternative worksite (the training venue) and/or temporary accommodation before resuming their usual duties at the work premises or another alternative worksite.

In all three scenarios the employee has a regular base of employment at a work premise to which they would ordinarily travel habitually. While the employee performing en block work will rarely attend the work premises during the block period, the employee would ordinarily in the performance of their other duties travel habitually to a work premise.

The nature of the employment duties in these three scenarios requires substantial time to be spent at other alternative changing locations sometimes requiring the employee to stay in temporary accommodation to perform their paid duties. This also includes the trainee at an in-house course who lives locally but whose course requires the employee to reside on site for training purposes. There is no regularity in the alternative worksites thrown up in the course of the employee's duties including the paid training.

The employee in each of the three scenarios travels between work (which may be the base of employment or an alternative worksite where substantial work is performed), to home where the car is garaged overnight before the employee resumes duty the next day at a training location, temporary accommodation or temporary worksite in the course of producing their assessable income.

Paragraph 36 of MT 2027 specifically includes travel home the preceding night before a business trip the next morning as an incidental business trip.

36. Where an employer provides an employee with a car solely for the purposes of undertaking a business journey from the employee's home the next morning, the trip home on the preceding night will be accepted as business travel, being incidental to the next morning's journey. However, this approach is restricted to circumstances of the kind detailed and would not, for example, apply where a person has regular use of the car for private purposes.

Employing the first principle as instructed in paragraph 12 of MT 2027, we ask whether the expenditure on travel would have been wholly deductible to the employee for income tax purposes. In the income tax ruling that discusses income tax deductions allowable to this particular occupation group, and states that travel:

· from the normal work place to an alternative work place while still on duty and back to the normal work place or directly home, and

· from home to an alternative work place for work-related purposes and then to the normal work place or directly home

is an allowable deduction.

Therefore employee journeys by car between home and work premises, alternative worksites or temporary accommodation near those worksites and to training venues that are conducted at the direction of the employer for the purpose of fulfilling the employee's duties and deriving assessable income are regarded as business journeys. The kilometres driven by an employee in a work car between home and various worksites in scenarios two to five inclusive constitute business kilometres for the purposes of section 10 of the FBTAA.

Travel incorporating the transport of equipment and so on (paragraphs 37 to 38 of MT 2027). In factual scenario five, the employee is required to use a work car for operational work and may use a work car for travel between home and work. The duties are varied and scenario three is also included in the application of paragraphs 37-38 of MT 2027.

One of the exceptions discussed in MT 2027 is where an employee's use of the vehicle can be attributed to the necessary carriage of equipment rather than simply travelling to and from work. The Commissioner's view of the so-called bulky equipment exception is discussed in Income Tax Ruling IT 112 Deductibility of travelling expenses between residence and place of employment or business. Whilst IT 112 is specifically concerned with the availability of an income tax deduction, the principles for determining whether a deduction will be available are the same as those for determining whether or not a journey will constitute a business journey for the purposes of the FBTAA.

The principles stated in IT 112 for determining whether or not travel between work and home will be deductible due to the transport of bulky equipment involve a consideration of the fundamental nature of the duties carried out by the employee within the following framework:

· The journey was undertaken as part of the operation by which the employee earns their assessable income.

· The journey is essential to the carrying on of those operations; there is no other practicable way of getting the equipment to the places where the employee is to perform their duties of employment.

In a practical sense, the journey should be attributed to the carriage of the equipment rather than to travel to the place of employment. The mode of the employee's travel should simply be a consequence of the means employed to get the equipment to the workplace.

Taxation Ruling TR 95/8 Income tax: employee cleaners - allowances, reimbursements and work-related deductions, adds an additional requirement. Namely, that for the bulky equipment exception to apply there needs to be no secure storage at the workplace in which to store the equipment (thereby eliminating the need to transport it to and from the workplace).

The equipment carried in the work cars is used in the various situations encountered by the employee when performing his/her duties away from the regular base of employment. It is standard equipment stored in the work cars available for immediate use. Each car is kitted out with 20 separate types of items and cumulatively the equipment required weighs more than 50kg. Some duties require additional equipment to be carried. The equipment weight, the potential immediate need of its use and its installation in all work vehicles is necessitated by the nature of the duties performed. Whilst it is possible to store the equipment at the regular base of employment, it would not be possible to secure the equipment at the many alternative worksites at which the equipment would be required for substantial periods of time. Neither would it be operationally efficient to pack all items before answering an urgent call-out, or to expect an employee to carry bulky equipment on public transport and store it at an alternative work location. An employee engaged in particular types of work for a block of time as part of their duties will be required to transport heavy equipment on a frequent basis from home to a changing pattern of worksites.

Therefore, when the employee travels between their home and their workplace transporting such equipment, it will be considered a business journey.

Employee travel will need to be recorded as a business journey when maintaining the logbook to determine the business percentage under the operating cost method under section 10 of the FBTAA.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).