Edited version of private ruling

Authorisation Number: 1011774826551

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Ruling

Subject: Home to work travel-Business or Private

Question 1

Will the commuting trips between home and work undertaken by rostered on-call employees constitute business journeys for the purposes of calculating the employer's taxable value of car fringe benefits under section 10 of the Fringe Benefits Tax Assessment Act 1986?

Advice/Answer

No

This ruling applies for the following period

01 April 2010 - 31 March 2015

Relevant facts

The relevant facts described below are based on:

· your application for a Private Binding Ruling

· information you provided by telephone, and

· information you provided by email

The employer manages the operational activities of three care centres. Two of which are on the same premises and the third centre at a different address.

Organisational Environment

Whilst the relevant employees' positions are based at one centre, there may be occasions where they will be required to travel to the third centre.

The job description of rostered on-call employees states that, when on-call, the employees will perform on-call on weekends and nights as part of a roster system.

On-call staff members include executives, managers and staff members. Collectively these will be referred to in this ruling as the employees.

The employees perform on-call duties as part of a roster on weekends and nights. The employees performing on-call duties are paid an on-call allowance.

The employees are required to be available to attend to after-hours urgent matters at the centres in order to carry out their employment duties. There may be occasions where the on-call employees will be required to travel to the centre that is not their regular work location.

The employees use cars to commute to and from work carrying equipment that consists of the following items:

· client files kept in a lockable brief case

· laptop

· mobile phone

· raincoat

· gum boots

· helmet

· torch

· jacket

The total weight of these items is between 10 and 20 kilograms.

The employees are required to take confidential client files home. The details in the files make the clients easily identifiable.

The information in the files is required in a call out situation to enable the employee to perform their duties. Due to their highly confidential, sensitive and personal nature, the files must be kept secure at all times.

The employer considers that the files cannot be carried on public transport and that the nature of the after hours on-call work requires cars so that the officers can respond to urgent matters in a timely manner where public transport is not available.

The employees on roster duty take the cars home carrying the clients' files and back to work the following day during their rostered periods.

The executive employees on roster duty take their own salary packaged cars home carrying the clients' files and back to work the following day during their rostered periods.

The motor vehicles referred to in this private ruling application are cars within the meaning of the FBTAA.

When an employee is on-call they may or may not get called-out.

Employees on roster duty who take the cars home are not allowed to use the car for private purposes except their home to work commuting trips.

When not rostered the non executive staff members use their own transport mode to travel from and to work.

Assumptions

None

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 - Section 10
Fringe Benefits Tax Assessment Act 1986 - Subsection 136(1)
Income Tax Assessment Act 1997 - Section 8-1.

Reasons for decision

Question 1

'Business journey' as relevant to this application is defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 as:

business journey means:

(a) for the purposes of the application of Division 2 of Part III in relation to a car fringe benefit in relation to an employer in relation to a car - 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;...

Subsection 8-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that taxpayers can deduct from their assessable income any loss or outgoing to the extent that:

(a) it is incurred in gaining or producing your assessable income; or

(b) it is necessarily incurred in carrying on a business for the purpose of gaining or producing the assessable income.

However, they cannot deduct an amount to the extent that the outgoing is of a capital, private or domestic nature, or relates to the earning of exempt income (subsection 8-1(2) of the ITAA 1997).

Generally, expenses incurred by taxpayers in travelling between home and work are not deductible under section 8-1 of the ITAA 1997 as they are considered to be private in nature. This is because generally expenses incurred travelling from home to work are not treated as incurred in the derivation of assessable income but are rather incurred in order to enable the taxpayer to derive assessable income. This well established principle was reinforced by the High Court in Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478.

The High Courts reasons for the general principle of non deductibility of home to work travel are twofold:

Whilst it is necessary for a taxpayer to arrive at work to derive income, they do not start deriving that income until they actually arrive at work.  As such, their travel expenses are a prerequisite to the earning of their assessable income, rather than being incurred in the course of gaining that income. Accordingly, the travel expenses are not incidental and relevant to the derivation of their assessable income and would not fulfil the requirements of subsection 8-1(1) of the ITAA 1997.

The essential character of expenses incurred in travelling from home to work are of a private or domestic nature, as they relate to the taxpayer's  personal and living expenses as part of the taxpayer's choice of where to live and at what distance from work. Therefore, the expenses would not satisfy subsection 8-1(2) of the ITAA 1997.

However, subsequent court decisions have modified this general principle in light of the particular facts set out in those decisions. One such example arose out of the case Federal Commissioner of Taxation v. Vogt 75 ATC 4073; 5 ATR 274 (Vogt's Case).

This means there are exceptional circumstances under which taxpayer may be entitled to a deduction for direct home to work travel expenses, for example:

(1) If taxpayer has a home office which is a place of business;

(2) If taxpayer has to carry bulky equipment; or

(3) If taxpayer has shifting places of employment.

It is considered that (1) and (3) are not applicable in your case, and these situations will not be considered any further in this ruling.

Bulky equipment

The Commissioners views regarding the deductibility of expenses incurred in transporting bulky equipment between home and work is contained in a number of public rulings including Taxation Ruling IT 112 Deductibility of travelling expenses between residence and place of employment or business and Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses and can be summarised as follows (paragraphs 63 and 64 of TR 95/34):

· A deduction may be allowable if the transport costs can be attributed to the transportation of bulky equipment rather than to private travel between home and work.

· If the equipment is transported to and from work by the employee as a matter of convenience or personal choice, it is considered that the transport costs are private and no deduction is allowable.

· A deduction is not allowable if a secure area for the storage of equipment is provided at the work place.

As explained above, paragraph 63 of TR 95/34 states that a deduction is allowable for home to work travel where an employee is required to carry bulky equipment.

The tax legislation does not define the term bulky equipment and it is a matter of fact and degree in the individual circumstances. Accordingly, it is necessary to consider the relevant case law on what constitutes bulky in order to determine whether the equipment the employees transport in the cars can be regarded as bulky. Specifically, we have to refer to the cases which address the issue of transportation of bulky equipment.

These cases provide an indication of the factors taken into consideration by the courts in determining whether, as a question of fact and degree, an item is bulky. These factors may include number and volume (Vogts case), weight and overall size, or how cumbersome the items are.

We refer to the following case law on transportation of bulky equipment.

In Vogts case the taxpayer, a professional musician, was allowed a deduction for his home to work and back travel because the expense could be attributed to the transportation of bulky equipment (musical instruments) to various places of work, rather than to private travel between home and work. The equipment constituted two guitars, each with its own amplifier, a trumpet and a flugel horn. He normally took all his instruments home in order to practice.

The deduction was allowed because the travel was seen as attributable to the need to transport the instruments to work venues. The mode of his travel was simply a consequence of the means which he employed to get his instruments to the place of performance, that is by carrying them in the motor vehicle which he drove (75 ATC 4073 at 4078; 5 ATR 274 at 279).

In Crestani v Federal Commissioner of Taxation 98 ATC 2219; 40 ATR 1037 (Crestani's Case) the Tribunal found that a 25cm wide, 28cm high and 57 cm long toolbox that weighed 27 kilograms was bulky within the meaning contained in paragraphs 138 to 141 of Taxation Ruling TR 95/19 Income tax: airline industry employees - allowances, reimbursements and work-related deductions, a reflection of paragraphs 63 to 71 of TR 95/34. The Tribunal found that the toolbox was not 'easy to lift, and could not, in the opinion of the Tribunal, conveniently be carried for any distance'. In the course of his decision, Block J stated:

I do not think that the term 'bulky' should be construed to refer only to an article which is of a larger size, such as the musical instruments which were the subject of the decision in FC of T v Vogt The term is, in my view, more aptly to be construed as similar to 'cumbersome' in the sense that it is not easily portable.

In Case 43/94 a Royal Australian Air Force flight sergeant was denied a deduction for the cost of using his car to transport various items of work equipment to and form work. Among the items the taxpayer was required to have available were:

· flying suit

· torch

· personal survival gear

· full dress uniform

· working uniform

· flying jacket

· flying boots

The taxpayer carried the required equipment in briefcase sized navigational bag and a standard air force issue duffle bag measuring 75cm long x  55cm wide and 50cm deep which, when packed, weighed 20 kilograms and sometimes also carried a suit bag weighing 10 kg. The Tribunal found (at paragraph 14) that 'the duffle bag with its contents was not of a size or weight to impede facile transportation'. The Tribunal concluded that the taxpayer's travel expenses should be attributed to his travel to and from work rather than the carriage of various items constituting his work equipment. In arriving at this conclusion, the Tribunal stated (paragraph 19 of the decision):

...the mode of transporting the duffel bag, the navigational bag, and occasionally the suit bag, was simply a consequence of the means adopted by the taxpayer in conveying himself to and from his place of employment. Merely putting those items in the boot of his car did not alter either the nature of the trip or the character of the expenditure.

In Case Z22 92 ATC 230; 23 ATR 7944 (Case Z22), the Tribunal held that the taxpayer was not entitled to a deduction for the cost of using his car to transport various work related tools to and from work. The taxpayer carried the tools in a canvass bag 10 to 12 inches long, 6 inches wide and 12 inches deep which weighed approximately 15 kilograms. In the course of his decision, Mr Barbour observed that:

The applicant acknowledged that he carries the bag over his shoulder and although it gets heavy after carrying it for an extended period, no other valid reason for not using public transport was presented. The applicant would not have to carry or hold the bag once on public transport and it is difficult to see why it should be regarded as being especially awkward; for example, in comparison to a heavy attach or briefcase.

Scott v. Federal Commissioner of Taxation (No 3) 2002 ATC 2243 (Scott's case) dealt with the deductibility of motor vehicle expenses incurred by a dental practitioner for travel between his home and a second surgery operated by the practice, which was about 70 kilometres from the main surgery. The distance from the taxpayer's home to the second surgery is not stated in the decision, but presumably is comparable. On each trip he carried a box that typically contained, amongst other things, patient files, cash float and wax denture moulds. The box was about the size of an archive box and weighed up to about 10 kilograms. The box was open at the top and could not always be sealed because of the shape of the items it held.

The AAT held that if the exception to the rule in Lunney and Hayley only extended to the carriage of bulky equipment to and from work, the taxpayer's claim for his travel expenses would fail. However, in the AATs view, the exception extended to cover the cost of transporting items that have other attributes (other than weight or bulkiness) for example items that are valuable, have a noxious smell, which are offensive, or may scandalise or embarrass other people. The AAT found that the taxpayer carried items which were sufficiently sensitive and valuable to justify special arrangements for their transport. The AAT, in finding that the taxpayer was entitled to a deduction for the cost of using his motor vehicle to transport the box to and from work, stated (at paragraph 17 of the decision):

He (and his fellow travellers were he to use public transport, and his patients) might feel distinctly uncomfortable were the contents of the box to spill or be observed by others. Since the evidence suggests the contents of the box might be visible to others because it often could not be sealed, special arrangements for its transport were justified.

Application to the employee's circumstances

The relevant employees are required to carry a briefcase kit with them which contains highly confidential client documentation.

The officers are also required to carry a laptop computer and a mobile phone.

It is accepted that there is a necessity created by the on-call duties to carry and have readily available such information and the laptop computer.

However, we consider that such travel does not fall within the exception to the general rule as the size and weight of the equipment carried are not considered bulky or cumbersome.

Adding a torch, raincoat, gum boots, helmet and jacket (additional items) to the briefcase kit, laptop and mobile phone carried in the car would not bring the DHS Officers commuting trips within the principles established in FC of T v Vogt 75 ATC 4073.

In support of this view, we note that the musical instruments carried by the taxpayer in that case were essential tools of trade necessarily used by the taxpayer to practice at home and play at various venues for the purpose of gaining or producing the assessable income. They were not merely carried in the car in anticipation that they may be used during a call out situation that occurs in adverse weather conditions.

There is an insufficient connection between the carrying of these additional items by the employees to and from work and the activities engaged in by them in gaining their assessable income. The 'Position Details' submitted in the application for private ruling do not indicate that there is a necessity for the employees to carry and have available the additional items in order to perform their duties.

Further, these additional items may be easily stored at the workplace and accessed in the event they are required as would be the situation in case of an incident during normal working hours. It would seem unnecessary to make special arrangements to transport items that may be easily stored and accessed in the workplace by employees who were travelling to work anyway.

Furthermore, given their nature, the additional items even when taken together with the briefcase kit, laptop and mobile phone are not considered to be bulky or cumbersome. At a combined weight of between 10 to 20 Kilograms, the items carried in the cars are not considered to be bulky equipment within the meaning contained in paragraphs 138 to 141 of Taxation Ruling TR 95/19 or paragraphs 63 to 71 of TR 95/34. The mode of travel between work and home during the on-call rostered periods was primarily to transport the employees and does not change the nature of the home to work travel from private to business.

The above conclusion is consistent with the views in Case 43/94 and Case Z22 discussed previously.

Paragraph 6 in ruling IT 2543 states:

the mode of transport, the availability of transport, the lack of suitable public transport, the erratic hours and times of employment, the on-call nature of the employment, the time of travel, the distance of travel, the unavailability of residential accommodation near the place of work, the frequency of travel and the necessity of travel are not factors which will alter the essential character of travel between home and work (Case U156, Case V103, Case V111 and Case V131).

We consider that unlike the taxpayer's toolbox in Crestani's Case, the equipment the employees carry in the cars would not be considered cumbersome. The number and weight of the items carried and their dimensions would, instead, support a finding that collectively the items are neither bulky equipment nor cumbersome. They are portable and could be carried without much difficulty for distance.

Confidential documents

The private and domestic nature of the travel to and from work by the employees is not altered by the fact that the files are confidential and the concerns about the security of the information contained in the files if they are carried on public transport.

The employees' circumstances are not similar to that of the taxpayer's in Scott's Case. The employees' circumstances can be distinguished from Scott's Case on the basis that, unlike the taxpayer in that case, the employees carry the confidential client files in a lock-up briefcase that provides an adequate level of security. As such, the employees do not have to contend with the risk of their files falling out of an unsecured container and compromising sensitive information and confidentiality and embarrassing themselves and other users of public transportation.

Scott's case is confined to its facts and circumstances. In any event, the Commissioner does not accept that the decision in Scotts Case supports a general extension to the exception provided by Vogt's Case.

Further, the carriage of the confidential files in a briefcase (were the employees to use public transport) is not considered to bear a similar degree of risk as decided in the Scott case. Nor could the files be considered sufficiently valuable in themselves, or have other characteristics, that would justify an exclusion from the general principle denying deductibility for home to work travel. The security concerns expressed regarding the sensitivity of the information contained in the files transported by the employees are not considered sufficiently extraordinary in the context of normal travel so as to characterise the home to work and back commuting trips as business to work travel

Other considerations

We note that receipt of an allowance by an employee does not automatically entitle the employee to a deduction for travel expenses. The payment of an allowance may be an indicative factor in determining itinerancy and deductibility. A work-related travel expense must be incurred and only the amount actually spent can be claimed as a deduction. The employees on on-call duty are not itinerant employees. Their home to work travel is not considered business travel expense as the travel is determined to be private in nature.

We also note that private rulings issued to taxpayers and the publication of edited versions of such rulings on our Register of Private Binding Rulings do not have application to other rulings issued to taxpayers as they are rulings issued on the specific facts and circumstances as described in the relevant application.

Conclusion

We have concluded that the home to work travel by the employees during their on-call rostered periods should be attributed to their own travel between home and work and the need to be able to respond in a timely manner, rather than the transportation of the equipment that in any case is not considered bulky or cumbersome.

The private and domestic nature of the travel to and from work by the employees is not altered by the carriage of the files and other items in the vehicles. During their on-call rostered periods the employees travel from home to their regular place of work and back is of a private nature and would not constitute deductible business travel under section 8-1 of the ITAA 1997.

Accordingly, the home to work travel by the employees does not constitute business journeys for the purposes of calculating the taxable value of car fringe benefits under section 10 of the Fringe Benefits Tax Assessment Act 1986.

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