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Ruling

Subject: Car Fringe Benefits

Question 1

Is the car that is provided for private use by the employer to the employee available for private use under section 7 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), when the car has been impounded under anti hoon laws?

Answer

No

This ruling applies for the following period:

Fringe Benefits Tax year ending 31 March 2011

The scheme commences on:

1 April 2010

Relevant facts and circumstances

A car held under a salary packaging arrangement was impounded by the police for a period of 30 days under the anti hoon laws. The car was not available to the employee who held the novated lease arrangement or any of the employee's associates for the full 30 days.

Relevant legislative provisions

Subsection 7(1) of the Fringe Benefits Tax Assessment Act 1986

Subsection 7(2) of the Fringe Benefits Tax Assessment Act 1986

Subsection 7(3) of the Fringe Benefits Tax Assessment Act 1986

Subsection 7(4) of the Fringe Benefits Tax Assessment Act 1986

Section 9 of the Fringe Benefits Tax Assessment Act 1986

Subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986

Detailed reasoning

Subsection 136(1) of the FBTAA defines 'car benefit' as meaning a benefit referred to in subsection 7(1) of the FBTAA.

Section 9 of the FBTAA determines the taxable value of car fringe benefits using the statutory formula method. Component C in the formula is the number of days during the year of tax on which the car fringe benefits were provided.

Subsection 7(1) of the FBTAA provides that a car fringe benefit will arise when either the employer's car is either:

· Applied for private use; or

· Taken to be available for private use of an employee.

Subsection 7(3) of the FBTAA states

Where, at a particular time, the following conditions are satisfied in relation to an employee of an employer:

(a) a car is held by a person, being:

(i) the employer;

(a) the car is not at business premises of:

(i) the employer;

(ii) an associate of the employer; or

(iii) a person (other than the employer or an associate of the employer) with whom, or in respect of whom, the employer or an associate of the employer has an arrangement relating to the use or availability of the car;

(a) any one of the following conditions is satisfied:

(i) the employee is entitled to apply the car to a private use;

(ii) the employee is not performing the duties of his or her employment and has custody and control of, the car;

the car shall be taken, for the purposes of this Act, to be available at that time for the private use of the employee or associate, as the case may be.

Subsection 7(4) of the of the FBTAA states:

For the purposes of subsection (3), where a prohibition on the application of a car for a private use, by a person is not consistently enforced, the person shall be deemed to be entitled to use the car, or to apply the care to a private use, notwithstanding the prohibition.

Tax Determination TD 94/16 paragraph 2 states that:

Where, however:

a. the employer's car is kept in safe storage away from the employee's place of residence ; and

b. the employer's car is not at the business premises; and

c. the custody and control of the car has been removed from the employee and from the associates of the employee; and

d. the employee is not entitled to use the car for private purposes and an associate of the employee is not entitled to use the car'

the car will not be taken to be available for the employee's private use, unless the condition in paragraph 2d. is not consistently enforced (subsections 7(3) & (4)).

TD 94/16 uses the following example:

An employee who is provided with a car by her employer leaves the car in a commercial storage facility( e.g. an airport parking station) while on an interstate business trip. The employee cannot leave the car on the employer's premises because there are no car parking facilities available. The commercial storage facility is not in the vicinity of the employee's residence. The car will not be taken as being available for the employee's private use if the employer removes the control and custody of the car from the employee (e.g. takes the car keys) and enforces a prohibition on the private use of the car by the employee or any associate of the employee.

It is necessary to consider both who has control and custody of the vehicle, and whether or not the employee or associate is entitled to use the car for private purposes during the period.

Fringe benefits tax - a guide for employers in chapter 7 states that where a car is in a workshop for extensive repairs, for example, following a motor vehicle accident, it is not available for the private use of the employee. However, a car is considered to be available for private use where it is in the workshop for routine service and maintenance.

When the car has been impounded for 30 days it has not been available for the private use of the employee or their associates. The custody and control of the car has been removed from the employee and associates of the employee, and the car has been kept in safe storage away from the employee's place of residence and the employer's business premises.

Given the factors outlined above the car is considered not to be available for personal use when the vehicle is impounded for the period of 30 days.

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