Edited version of private ruling

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Ruling

Subject: Car Fringe Benefits

Question 1

Does a car fringe benefit arise under section 7 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), when the two 'commuter use only' vehicles are taken home by employees due to security reasons?

Answer

Yes

Question 2

Does the provision of two 'commuter use only' vehicles by the employer provide an exemption to a car benefit under section 8 of the FBTAA 1986?

Answer

No

This ruling applies for the following periods:

Year ended 31 March 2011

Year ended 31 March 2012

The scheme commences on:

1 April 2010

Relevant facts and circumstances

The employer has two vehicles which are used by employees in the course of their normal employment and are not intended to be included in any employee salary package.

The employer does not have enough secure on site parking to ensure the safety of the vehicles overnight and due to these security reasons the employer allows the vehicles to be 'taken home' by employees.

These two vehicles are cars as defined by subsection 136(1) of the FBTAA, but are not taxis, panel vans or utility trucks, designed to carry a load of less than 1 tonne; or any other road vehicles designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers).

The vehicles are considered by the employer to be 'Commuter Use only' vehicles and a policy is in place to ensure that the vehicles are not used for any private use when they are taken home. The commuter use vehicle agreement has been provided.

The employee requires employees to sign this agreement recognising that the vehicles are for the commuter use only.

Relevant legislative provisions

FBTAA Section 7.

FBTAA Section 8.

FBTAA subsection 136(1).

Reasons for decision

Question 1

Does a car fringe benefit arise under section 7 of the FBTAA, when the two commuter use only vehicles are taken home by employees due to security reasons?

Summary

When vehicles are allowed to be taken and garaged at or near the home of an employee a car is deemed to be available for private use. This is the case even if the vehicle was taken home for security reasons. The use of these cars under your 'commuter use policy' constitutes a car benefit.

Detailed reasoning

Section 7 of the FBTAA, provides a description of what constitutes a car benefit.

Subsection 7(1) of the FBTAA provides two important concepts which relate to establishing whether a car benefit is provided on the day and is available for the employee's private use. Subsection 7(1) of the FBTAA states in part:

Where:

(a) at any time on a day, in respect of the employment of an employee, a car held by a person (in this subsection referred to as the ``provider''):

(i) is applied to a private use by the employee or an associate of the employee;

(ii) is taken to be available for the private use of the employee or an associate of the employee; and…

Subsection 7(2) 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;

(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;

(b) the car is garaged or kept at or near a place of residence of the employee or of an associate of the employee;

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

This subsection has the effect of deeming any car garaged at or near an employee's place of residence to be available for private use.

Miscellaneous Taxation Ruling MT 2027 provides guidance regarding the concept of taken to be available, paragraph 5 states in part:

. . .a fringe benefits tax liability will arise on any day on which the car is available for the private use of an employee irrespective of the fact there may have been no actual private use of the car on that day. . .

Due to the employer not having adequate on site secure parking and to ensure that the safety of all the vehicles overnight, these two vehicles are allowed to be driven home based on the 'commuter use only' policy.

A place of residence is defined by subsection 136(1) of the FBTAA as a place at which a person resides; or a place at which the person has sleeping accommodation whether on a permanent or temporary basis and whether or not on a shared basis. The employee's home is a place of residence as defined.

Under this policy the employer allows the vehicles to be garaged at or near the employee's place of residence and this will result in the vehicles being deemed to be available for private use.

A car benefit will arise whenever these two vehicles are garaged at home.

Question 2

Does the provision of two 'commuter use only' vehicles by the employer provide an exemption to a car benefit under section 8 of the Fringe Benefits Tax Assessment Act 1986?

Summary

The vehicles which were provided to the employees, does not satisfy any of the requirements required for an exemption and thus a car benefit will arise.

Detailed reasoning

Section 8 of the FBTAA provides the circumstances in which a car benefit will be exempt from FBT. Subsection 8(1) of the FBTAA identifies that if section 7 of the FBTAA is not satisfied the use of a car for a private purpose would then be exempt. As subsection 7(2) of the FBTAA has been satisfied, section 7 of the FBTAA does apply and therefore subsection 8(1) of the FBTAA has no application.

Subsection 8(2) of the FBTAA provides a description of an exempt vehicle, they are 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

This is paraphrased in paragraph 7 of the MT 2027 which states in part:

… 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 vehicle that, while designed to carry a load of less than one tonne, is not designed for the principal purpose of carrying passengers.

The two vehicles do not comply with the specific types of vehicle listed in subsection 8(2) of the FBTAA and therefore this subsection cannot apply.

Subsection 8(3) of the FBTAA also identifies that if car is unregistered it would be exempt from car fringe benefit, the section states that:

Where:

(a) a car benefit relating to a particular car is provided by a particular person (in this subsection called the "provider") in a year of tax in respect of the employment of a current employee of an employer;

(b) at all times during the year of tax when the car was held by the provider, the car was unregistered; and

(c) during the period in the year of tax when the car was held by the provider, the car was wholly or principally used directly in connection with business operations of:

(i) the employer; or

(ii) if the employer is a company - the employer or a company that is related to the employer;

The car benefit is an exempt benefit in relation to the year of tax.

This exemption provision would not be applicable because all vehicles covered by the Commuter use vehicle agreement form part of the employer's vehicle pool during normal working hours and would need to be registered.

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