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Ruling

Subject: use of a bus for travel and accommodation during picking season

Question 1

Does a housing fringe benefit under section 25 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) in respect of the use of the motor home as employee accommodation?

Answer:

No

Question 2

If the answer to question 1 is no, then would subsection 47(5) of the FBTAA apply to exempt accommodation provided to employees in the motor home?

Answer:

No, but the otherwise deductible rule will apply to reduce the taxable value to nil.

Question 3

Does subsection 47(6) of the FBTAA apply to exempt a residual benefit that may arise from driving the motor home to and from the cotton picking locations?

Answer:

Yes

This ruling applies for the following periods:

Year ended 31 March 2012

Year ended 31 March 2013

Year ended 31 March 2014

The scheme commences on:

1 April 2011.

Relevant facts and circumstances

The taxpayer company is considering purchasing a second hand motor home which is a converted bus.

The taxpayer is engaged in picking of produce on farms and the motor home will be used for onsite accommodation for the taxpayer company's employees (including the director of the company) during the picking season. It will also be used as a base to work from while the taxpayer company conducts contract picking at a number of different locations.

The picking season runs for a number of months and as a vehicle the bus will only be driven from the employee's home to picking locations, between picking locations and from picking locations back to home.

It will only be used as accommodation at cotton picking locations.

Outside of the picking season the bus will not be used and will be parked.

Whilst picking all employees will be away from their usual place of residence.

Relevant legislative provisions

FBTAA section 25

FBTAA subsection 47(5)

FBTAA subsection 47(6)

FBTAA section 52

FBTAA subsection 136(1)

Income Tax Assessment Act 1997 (ITAA 1997) subsection 995-1

Reasons for decision

Question 1

Summary

A housing benefit does not arise under section 25 of the FBTAA as the bus is not being used as any employee's usual place of residence.

Detailed reasoning

A housing benefit will arise under section 25 of the FBTAA where an employee is provided with a right to use a unit of accommodation and the lease or licence which grants that right exists at a time when the unit of accommodation is the usual place of residence of the employee.

A unit of accommodation is defined in subsection 136(1) of the FBTAA includes a caravan or other mobile home.

In this case we are looking at a bus that has been converted into a motor home and any lease or licence to use the motor home as accommodation is only given during the picking season. For the rest of the year the bus is parked and will not be used.

The accommodation provided is not the employees usual place of residence and given the nature that accommodation is provided it would be difficult to suggest that accommodation providing the bus would be a usual place of residence.

Therefore as the accommodation is not the employee's usual place of residence a housing benefit cannot arise.

Question 2

Summary

Subsection 47(5) of the FBTAA does not apply as the employees are travelling. However the taxable value of the benefit provided in respect of accommodation whilst picking is reduced to nil.

Detailed reasoning

Subsection 47(5) of the FBTAA provides an exemption will apply to accommodation provided to an employee where that employee is required to live away from their usual place of residence in order to perform the duties of their employment and is provided with the use of a unit of accommodation.

In addition the unit of accommodation cannot be provided to an employee travelling in the course of business. Paragraph 43 of Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses states:

Valerie is a fruit picker. She does not have a regular circuit, but organises her next job before completing the work at the current farm. Valerie normally works and lives at many properties before returning home, remaining at each farm for two to three weeks. Valerie is engaged in itinerant employment because:

(a) her employment has a web of work places; and

(b) there is continual travel from one farm to another before returning to her normal place of residence.

Paragraph 55 of TR 95/34 states:

Ian is a shearer who has agreements with various property owners and therefore travels on a circuit to the same farms each year returning home only periodically. When he finishes work at a property, he travels directly to the next property on his circuit. Although there is no uncertainty in Ian's employment pattern, his work is considered itinerant. This is because:

(a) travel is a fundamental part of his work;

(b) his work structure displays a 'web' of workplaces; and

(c) he continually moves from one place of work to another before returning home.

In this case one of these examples (depending on whether there is a regular circuit) will apply and the employees work is considered to be itinerant.

In respect of accommodation and itinerant workers the Reasons for Decision in ATO Interpretative Decision ATO ID 2003/125 uniform capital allowances Capital Allowances: Deduction for decline in value of a caravan states:

Generally expenditure incurred to provide accommodation expenses is private in nature and the use of a depreciating asset for accommodation would not be for a taxable purpose. An exception to this principle for expenses of a similar nature is where they are incurred by an employee whose work is itinerant.

In addition paragraph 39 of Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax : living-away-from-home allowance benefits states:

Travelling allowances are often paid for comparatively short periods, exceptions being allowances paid where the employment is inherently itinerant in nature or where travelling is a regular incident of the occupation, e.g., commercial travellers, travelling entertainers, etc. Academics studying on sabbatical leave have also been held to be travelling in the course of their employment rather than living away from home and thus could receive a travelling allowance over an extended period of time.

Therefore as the employees are considered to be itinerant workers they will be travelling in the course of business and subsection 47(5) of the FBTAA will not apply as the employees are travelling in the course of business.

However as per the otherwise deductible rule contained in section 52 of the FBTAA the is no fringe benefit tax payable as the taxable value of any benefit provided in respect of accommodation is reduced to nil. In order to apply the otherwise deductible rule each employee will have to complete a residual benefit declaration.

If the employee were not itinerant then subsection 47(5) of the FBTAA would have applied.

Question 3

Summary

There is no private use of the bus as a form of transport so subsection 47(6) of the FBTAA will apply to exempt the use of the bus as a form of transportation.

Detailed reasoning

The use of the motor vehicle may be an exempt benefit under subsection 47(6) of the FBTAA. It states:

Where:

(a) a residual benefit consisting of the provision or use of a motor vehicle is provided in a year of tax in respect of the employment of a current employee;

(aa) the motor vehicle is not:

(i) a taxi let on hire to the provider; or

(ii) a car, not being:

(A) a panel van or utility truck; or

(B) 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 motor vehicle 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 of the motor vehicle by the employee or an associate of the employee, being other use that was minor, infrequent and irregular;

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

A motor vehicle is defined in subsection 136(1) of the FBTAA to have the same meaning as that contained in subsection 995-1(1) of the Income Tax Assessment Act 1997 and means 'any motor powered road vehicle (including a 4 wheel drive vehicle)'. As a bus the motor home would meet that definition.

In respect of the private use of the 'bus' work-related travel is defined in subsection 136(1) of the FBTAA as

(a) travel by the employee between:

(i) the place of residence of the employee; and

(ii) the place of employment of the employee or any other place from which or at which the employee performs duties of his or her employment; or

(b) travel by the employee that is incidental to travel in the course of performing the duties of his or her employment.

A place of residence is also defined in subsection 136(1) of the FBTAA to mean

in relation to a person, means:

(a) a place at which the person resides; or

(b) a place at which the person has sleeping accommodation;

whether on a permanent or temporary basis and whether or not on a shared basis

Therefore the bus meets the definition of a motor vehicle and a place of residence within subsection 136(1) of the FBTAA but for the purposes of this exemption we are looking at the use of a motor vehicle which is the travel being undertaken.

In respect of transport costs and itinerant workers paragraph 10 of the TR 95/34 states:

A deduction is generally not allowable for the cost of transport between home and the normal work place. However, a deduction is allowable for the cost of travelling between home and work if an employee's work is itinerant.

As the employees are itinerant workers and the bus is only ever driven to, from and between picking sites none of the travel is private and therefore subsection 47(6) of the FBTAA applies to exempt the residual benefit provided in respect of using the bus as transport.

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