Edited version of private ruling

Authorisation Number: 1011480331707

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Ruling

Subject: Fringe benefits tax - dual cab vehicles - exempt and excluded benefits

Issue 1

Question 1

Is the Mitsubishi Triton double cab utility manufactured in the recent year a car as defined by subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

Question 2

Are the fringe benefits provided in relation to the Mitsubishi Triton utilities exempt car benefits as per subsection 8(2) of the FBTAA?

Answer

No

Issue 2

Question 1

Are the fringe benefits provided in relation to the Mitsubishi Tritons excluded benefits as prescribed by regulation 3F of the Fringe Benefits Tax Regulations 1992?

Answer

No

This ruling applies for the following period:

Year ended 31 March 2010

The scheme commences on:

01/04/2009

Relevant facts and circumstances

The taxpayer is a company.

The taxpayer provides employees with fully maintained identical vehicles.

Both vehicles are Mitsubishi Triton 4x4 double cab utilities, manufactured in the recent year

The maximum payload as per the specifications provided by the taxpayer for the vehicles is 930kgs.

The vehicles are listed in Miscellaneous Taxation Ruling MT 2024 as an eligible vehicle type.

One vehicle was used 79% for business/work use and the other was used 92% for business/work use, as per the log books kept.

The taxpayer has stated that the private use of each vehicle is more than minor, infrequent and irregular.

The taxpayer has calculated the residual fringe benefit for each vehicle using the operating cost method and has provided calculations.

The vehicles are pooled vehicles and were used by other employees for business purposes only during the FBT year.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 995(1)

Fringe Benefits Tax Assessment Act 1986 section 5E

Fringe Benefits Tax Assessment Act 1986 paragraph 5E(3)(i)

Fringe Benefits Tax Assessment Act 1986 subsection 7(1)

Fringe Benefits Tax Assessment Act 1986 subsection 47(6)

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 subsection 8(2)

Fringe Benefits Tax Regulations 1992 regulation 3F

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Issue 1

Question 1

Summary

As provided by subsection 136(1) of the FBTAA the Mitsubishi Triton utilities fall within the definition of car.

Detailed reasoning

The term car is defined in subsection 136(1) of the FBTAA) as:

the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997.

Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines a car as:

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

The manufacturer specifications that were provided for the Mitsubishi Triton utilities indicate they have a payload of 930 kilograms. As the payload is less than 1 tonne the Mitsubishi Triton utilities come within the definition of car.

Question 2

Summary

Whilst the Mitsubishi Triton utility is considered an eligible vehicle for the work-related use exemption the employees' private use of the cars exceeds the set limitations and therefore a car fringe benefit applies.

Detailed reasoning

The guidelines for determining whether dual cab vehicles are eligible for a work-related use exemption are provided by Miscellaneous Taxation Ruling MT 2024.

MT 2024 provides that certain dual cab vehicles are eligible for exemption of fringe benefits tax, where private use is limited to certain work-related travel.

Dual cab vehicles will be capable of qualifying for the work-related use exemption only if either of the following tests are satisfied:

· they are designed to carry a load of one tonne or more, or more than eight passengers (see subsection 47(6) of the FBTAA); or

· while having a designed load capacity of less than one tonne, they are not designed for the principal purpose of carrying passengers (see subsection 8(2) of the FBTAA).

As the Mitsubishi Triton has a payload of less than one tonne (930 kg) it does not satisfy the first test for the exemption. It must satisfy the second test to qualify for the exemption.

Subsection 8(2) of the FBTAA states:

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 associate of the employee, being other use that was minor, infrequent and irregular.

Previously available as an appendix to MT 2024, the ATO guide titled FBT exempt car benefits now provides a list of dual cab vehicles which are considered eligible vehicle types for the work-related use exemption.

Of the vehicles listed as eligible for the work-related use exemption, the majority have a designed load capacity of one tonne or more. The remaining vehicles satisfy the requirement of not being designed principally for the carriage of passengers, as is the case with the Mitsubishi Triton.

The eligibility criteria that must be met in order to claim the exemption for the employees private use of the Mitsubishi Tritons is limited to:

· travel between home and work

· travel that is incidental to travel in the course of duties of employment

· non-work related use that is minor, infrequent and irregular.

Although the Mitsubishi Triton is listed as an eligible vehicle type the exemption under subsection 8(2) of the FBTAA will not apply as you have advised that the use of the vehicles is more than minor, infrequent and irregular.

Therefore the benefits provide in relation to Mitsubishi Triton utilities are not an exempt car benefit, and are consequently liable to FBT as a car fringe benefit.

As a result, the taxpayer may elect to use either the operating cost or statutory formula methods to calculate the fringe benefit tax liability.

Issue 2

Question 1

Summary

The car benefits provided to the two employees in relation to the two Mitsubishi Tritons are not excluded benefits as prescribed by regulation 3F of the Fringe Benefits Tax Regulations 1992.

Detailed reasoning

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 Fringe Benefits Tax Regulations 1992 (FBTR) provides that from 1 April 2007 a car benefit arising from an employee's private use of pooled or shared cars is an excluded fringe benefit for the purposes of paragraph 5E(3)(i) of the FBTAA.

The ATO guide titled Fringe benefits tax - pooled or shared car reporting exclusion provides that for the benefit to be an excluded benefit it must meet the following conditions:

· the benefit must be either a car fringe benefit or an exempt car benefit for more than one employee for the same car

· the employer must direct, or consent to, each employee using the car.

It has been determined that the Mitsubishi Triton utilities are cars defined by subsection 136(1) of the FBTAA and as such the employees private use in relation to the Mitsubishi Triton utilities are car benefits as provided by 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.

You have advised that the Mitsubishi Tritons are used by other employees during business hours for work-related purposes only and that no other employee has received a car fringe benefit or exempt car benefit in relation to either vehicle.

As a result the Mitsubishi Tritons are not a car that comes within regulation 3F of the FBTR as the car was not used to provide a car fringe benefit, or an exempt car benefit, for more than one employee. The use of the two cars by the two employees is not an excluded benefit and therefore the reporting exclusion does not apply.

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