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Edited version of private ruling
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Ruling
Subject: Fringe benefits tax
Question 1
Will the taxpayer be required to annualise the number of kilometres travelled by the employees transferred from it as a result of the restructure in order to determine the statutory fraction to apply when calculating the taxable value of car fringe benefits provided during the year ended 31 March 2012?
Answer: Yes
This ruling applies for the following period:
Year ended 31 March 2012
The scheme commences on:
2011
Relevant facts and circumstances
There will be a restructure affecting three companies including the taxpayer (collectively the Companies).
The restructure will result in the retention of two of the companies. (The two continuing companies will be described as the Continuing Companies when referring to them collectively after the restructure.)
The restructure will involve the transfer of businesses and/or shares of a subsidiary dependant on where and how certain businesses are held by each the Companies.
The restructure is intended to occur part way during the fringe benefits tax year.
The restructure will be effected by the transfer of businesses as follows:
· An asset, liability or instrument of a business of the Companies will become an asset, liability or instrument of the Continuing Companies.
· An employee of an existing business in the Companies will be taken to be an employee of that business in the Continuing Companies.
· The applicable Continuing Companies will be declared the successor in law of the Companies, for the purposes of a business.
As part of the restructure, some employees will be transferred from one of the Companies to one of the Continuing Companies. This means that the Continuing Company will become successor at law in relation to the employment contracts for transferring employees such that it will not be necessary for new employment contracts to be entered into.
Leased cars which are provided to employees may also be transferred from the Companies to the Continuing Companies.
Assumption
The contracts in relation to the lease of motor vehicles will remain with the existing leasing companies.
Relevant legislative provisions
Fringe Benefits Tax Assessment Act 1936 Section 9,
Fringe Benefits Tax Assessment Act 1936 Subsection 136(1) and
Fringe Benefits Tax Assessment Act 1936 Section 162.
Reasons for decision
All references made in these reasons for decision are to the Fringe Benefits Tax Assessment Act 1986 unless otherwise stated.
Question 1
Summary
The taxpayer will be required to annualise the number of kilometres travelled by the employees transferred from it as a result of the restructure in order to determine the statutory fraction to apply when calculating the taxable value of car fringe benefits provided to those employees.
Detailed reasoning
Paragraph 9(2)(c) provides that the statutory fraction will depend upon the annualised kilometres travelled by the car.
The annualised number of kilometres travelled by the car is defined in paragraph 9(2)(d) as follows:
the annualised number of whole kilometres travelled by the car during the year of tax is the number calculated in accordance with the formula
AB
C
where:
A is the number of whole kilometres travelled by the car during the period in the year of tax when the car was held by the provider (in this subsection referred to as the ``holding period'');
B is the number of days in the year of tax; and
C is the number of days in the holding period; and
Year of tax is defined in subsection 136(1) to mean '…the year starting on 1 April 197, and each later year starting on 1 April'. Therefore the figure at B will be 365 for the 2012 year of tax.
This formula depends upon the distance travelled and the number of days the car was held by the provider.
In accordance with subsection 9(1) the provider of a car benefit is the person who holds the car. A reference to a car held by a person under subsection 162(1) includes a car leased to the person.
Until the proposed date of the restructure the taxpayer leases the cars it provides to its employees who will be transferring to another of the Continuing Companies. From that date it will no longer hold those cars.
The taxpayer will be required to calculate the taxable value of the car fringe benefits it provided to those transferring employees up until the date of the restructure.
The taxpayer will be required to annualise the number of kilometres travelled in accordance with the formula in paragraph 9(2)(d) on the basis that it held the car for only part of the year.
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