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Ruling

Subject: Exempt vehicle benefits

Question 1

Does a car benefit arise under section 7 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) where an employee conveys a family member, or other associate, in a motor vehicle, that is a 'car' for the purposes of the FBTAA, in the course of the employee's home to work travel?

Answer

Yes

Question 2

If the answer to Question 1 above is 'yes', does a car fringe benefit subsequently arise for the purposes of the FBTAA?

Answer

Yes, unless otherwise exempted under section 58P of the FBTAA.

Question 3

If the answer to Question 2 is 'yes', is the conveyance of an employee's family member, or other associate, in a car in the course of the employee's home to work travel a 'business journey' for the purposes of the 'operating cost method' when calculating the taxable value of a car fringe benefit under section 10 of the FBTAA.

Answer

No

Question 4

Does exemption under section 8 of the FBTAA apply where an employee conveys a family member, or other associate, in a motor vehicle, that is an exempt vehicle for the purposes of paragraph 8(2)(a) the FBTAA, in the course of the employee's home to work travel?

Answer

Yes

Question 5

Does exemption under subsection 47(6) of the FBTAA apply where an employee conveys a family member, or other associate, in a motor vehicle, that is designed to carry one tonne or more or to carry nine or more passengers, in the course of the employee's home to work travel?

Answer

Yes

This ruling applies for the following periods:

1 April 2012 to 31 March 2013

1 April 2013 to 31 March 2014

1 April 2014 to 31 March 2015

1 April 2015 to 31 March 2016

1 April 2016 to 31 March 2017

The scheme commences on:

On or after 1 January 2012

Relevant facts and circumstances

The employer maintains a car fleet which comprises many varied types of vehicles including:

The employees have varying start and finish times and are also on call and their work is carried out at many diverse work locations.

Car fleet vehicles carry various items of heavy equipment.

The relevant car fleet vehicles may be garaged, or kept near, the place of residence of the employee and, in such cases, the employee will travel to the various work locations and/ or the employer's offices directly to and from their homes.

The employer does not permit employees to use car fleet vehicles for any private use on the employee' days off.

However, the employer now proposes to allow employees to convey their family members, or other associates, in car fleet vehicles in the course of the employees' home to work travel provided such conveyance of family members, or other associates, only occurs on an infrequent and irregular basis.

Employees who do choose to convey their family members, or other associates, in car fleet vehicles in the course of the employee's home to work travel may leave or return sightly earlier or later than they normally would but, in any case, there will be no, or very little, deviation from the employee's normally expected home to work route.

The employer may elect to use the 'operating cost method', in section 10 of the FBTAA, to determine the taxable values of any car fringe benefits arising from the private use of a car by an employee.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 7.

Fringe Benefits Tax Assessment Act 1986 Subsection 7(1).

Fringe Benefits Tax Assessment Act 1986 Subparagraph 7(1)(a)(ii).

Fringe Benefits Tax Assessment Act 1986 Subsection 7(2).

Fringe Benefits Tax Assessment Act 1986 Section 8.

Fringe Benefits Tax Assessment Act 1986 Subsection 8(1).

Fringe Benefits Tax Assessment Act 1986 Subsection 8(2).

Fringe Benefits Tax Assessment Act 1986 Paragraph 8(2)(a).

Fringe Benefits Tax Assessment Act 1986 Paragraph 8(2)(b).

Fringe Benefits Tax Assessment Act 1986 Subparagraph 8(2)(b)(i).

Fringe Benefits Tax Assessment Act 1986 Subparagraph 8(2)(b)(ii).

Fringe Benefits Tax Assessment Act 1986 Section 10.

Fringe Benefits Tax Assessment Act 1986 Section 45.

Fringe Benefits Tax Assessment Act 1986 Subsection 47(6).

Fringe Benefits Tax Assessment Act 1986 Paragraph 47(6)(a).

Fringe Benefits Tax Assessment Act 1986 Paragraph 47(6)(aa).

Fringe Benefits Tax Assessment Act 1986 Paragraph 47(6)(b).

Fringe Benefits Tax Assessment Act 1986 Subparagraph 47(6)(b)(i).

Fringe Benefits Tax Assessment Act 1986 Subparagraph 47(6)(b)(ii).

Fringe Benefits Tax Assessment Act 1986 Section 58P.

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1).

Income Tax Assessment Act 1997 Subsection 995-1(1).

Reasons for decision

Issue 1

Question 1

Detailed reasoning

1. A car benefit occurs, under section 7 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), in respect of the employment of an employee on a day where a car is applied to a private use by the employee (or associate) or the car is taken to be available for the private use of the employee (or associate).

2. Section 7 of the FBTAA states (as relevant here):

3. Under subsection 7(2) of the FBTAA a car garaged or kept at or near the place of residence of the employee is taken to be available for the private use of the employee.

4. Therefore, a car benefit will arise, for the purposes of section 7(1) of the FBTAA, on any day that a car is garaged at, or kept near, the place of residence of an employee (or associate) irrespective of whether the employee is entitled to use car to transport a family member, or other associate, in the course of the employee's home to work travel on that particular day.

5. It is considered that the above view is not altered by the extent any actual private use of the car by the employee on the relevant days.

Question 2

Detailed reasoning

1. 'Car fringe benefit' is defined in subsection 136(1) of the FBTAA as meaning a fringe benefit that is a car benefit. In basic terms, a fringe benefit, as defined in subsection 136(1) of the FBTAA, is a benefit provided to an employee (or associate) by an employer (or associate) or a third party under an arrangement with the employer (or associate) in respect of the employee's employment where such benefit is not otherwise exempted.

2. The meaning of the phrase 'in respect of the employment of the employee' was considered in J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; 44 ATR 22 (Knowles). It was found in Knowles that the words 'in respect of' must be given a meaning that depends on the context in which they are used. In the case of the FBTAA, this means that there must be a sufficient or material relationship or connection between the provision of the benefit and the employee's employment. The establishment of a mere causal link between the benefit and the employee's employment is not necessarily enough.

3. The authorisation for cars to be garaged at, or kept near, the place of residence of an employee (or associate) is only given by the employer to those employees who are currently engaged on work for the employer.

4. It is considered that such an authorisation by the employer to an employee demonstrates a sufficient or material relationship or connection between the provision of the car benefits, determined in Question 1, and the employee's employment.

5. Consequently, the relevant car benefits will also constitute the provision of car fringe benefits (unless otherwise exempted) on each of the relevant days.

6. However, section 58P of the FBTAA provides exemption for certain 'minor benefits'. Taxation Ruling TR 2007/12 provides the following guidance on what is required for a benefit to be exempt under section 58P of the FBTAA (as relevant here):

8. A minor benefit is an exempt benefit under section 58P where:

7. Whether exemption under section 58P of the FBTAA does, in fact, apply where a car benefit arises in respect of an employee depends on whether the individual circumstances of the particular case meets all the necessary requirements of that aforementioned section.

8. It may be noted that TR 2007/12 provides guidance specifically relating to car benefits and car fringe benefits at paragraphs 73 to 79 inclusive, paragraphs 180 to 186 inclusive, dot point 4 of paragraph 245 and paragraphs 246 to 261 inclusive.

Question 3

Detailed reasoning

1. Calculating the aggregate taxable values of car fringe benefits under the operating cost method in section 10 of the FBTAA requires, amongst other things, a determination of the 'business use percentage' applicable to the car.

2. Under the definition of 'business use percentage' in subsection 136(1) of the FBTAA, the percentage is dependant, in part, on the number of business kilometres travelled by the car. The definition of 'business kilometre', in subsection 136(1) of the FBTAA, is 'a kilometre travelled by the car in the course of a business journey'.

3. Subsection 136(1) of the FBTAA defines 'business journey' to mean (as relevant here):

4. Miscellaneous Taxation Ruling MT 20271 provides guidance on the distinction between business and private use of a car in circumstances where the car is being driven to and from the employee's home. Paragraph 25 of MT 2027 sets out that travel from an employee's home may constitute business travel where the nature of the employment is inherently itinerant.

5. As it is considered that the employee's duties of employment are inherently itinerant in nature, the employee's usual unaccompanied journey in the car from home to work would, therefore, be considered to be business travel in accordance with an application of the guidance provided by MT 2027.

6. Nonetheless, subsection 136(1) of the FBTAA defines the term 'private use' as follows:

7. It is considered the transport of the employee's family member, or other associate, in a car during the employee's journey from home to a work location is a private use of that car because the relevant journey is not being made exclusively in the course of producing the employee's assessable income.

8. Therefore, that portion of the employee's home to work journey whilst transporting their family member, or other associate, does not meet the definition of 'business journey' in subsection 136(1) of the FBTAA.

9. Consequently, it also falls for consideration whether the entire journey from the employee's home to the employee's work location does not meet the definition of 'business journey' or whether only that portion of the journey where the car was applied to a private use by the transport of the employee's family member, or other associate, is excluded from being a 'business journey'.

10. The FBTAA does not specify what is to be regarded as a 'journey'. The Macquarie Dictionary 2009, rev. 5th edn, The Macquarie Library Pty Ltd, NSW provides the following definition for the term 'journey':

11. It is considered that a course of travel in a vehicle from one place to another may include stops, diversions, or changes in the number of occupants in the vehicle and it will still satisfy the definition of a 'journey'.

12. In this case the course of travel in the car from the employee's home to the employee's work location is the relevant journey that needs to meet the definition of 'business journey'. The transport of the employee's family member, or other associate, during the course of that journey is part of the relevant journey and not a separate journey.

13. There is no mechanism in the FBTAA to allow the apportionment of the total distance travelled in a journey where the journey would otherwise be considered a 'business journey' but it includes an application of the car to a private use.

14. Accordingly, where a journey would be considered to be a 'business journey', other than the fact that it includes an application of the car to a private use which results in the provision of a fringe benefit in relation to the employer, the entire journey does not meet the definition of 'business journey'.

15. In this case, where the employee's journey from home to the employee's work location includes the transport of the employee's family member, or other associate, the entire journey does not meet the definition of 'business journey' in subsection 136(1) of the FBTAA.

Question 4

Detailed reasoning

1. Section 8 of the FBTAA provides exemption from fringe benefit tax for car benefits provided in respect of certain types of cars that have limited private use as specified within that section. Section 8 of the FBTAA states (as relevant here):

2. The relevant employees are current employees of the employer and the panel vans are the required types of cars for the purposes of paragraph 8(2)(a) of the FBTAA.

3. Nonetheless, for exemption under section 8 of the FBTAA to apply in this case there must also be no private use of the panel vans other than for the specific purposes listed in paragraph 8(2)(b) of the FBTAA.

4. Paragraph 8(2)(b) of the FBTAA provides for no private use of those cars other than:

Subparagraph 8(2)(b)(i) - 'work-related travel' of the employee

5. For similar reasons that it was determined above, at paragraph 7 of Question 3, that the transport of the employee's family member, or other associate, during the employee's journey from home to one of the employee's work locations is an application of a car to a private use, it is considered that a panel van used in the same circumstances will be an application of that type of vehicle also to a private use.

6. However, subparagraph 8(2)(b)(i) of the FBTAA exempts the private use of the relevant types of cars where such private use is in respect of 'work-related travel of the employee'.

7. The term 'work-related travel' is defined in subsection 136(1) of the FBTAA as follows:

8. The words 'travel by the employee' in paragraph (a) of the definition of 'work-related travel' in subsection 136(1) of the FBTAA make it clear that the paragraph only applies to the employee's travel between home and a work location.

9. Similarly, the words 'travel by the employee' in paragraph (b) of the definition of 'work-related travel' in subsection 136(1) of the FBTAA make it clear that the paragraph only applies to the employee's travel that is incidental to travel in the course of performing their employment duties.

10. Travel by someone other than the employee, such as travel by a member of the employee's family, is not the type of travel which falls into either paragraph (a) or (b) of the definition of 'work-related travel' in subsection 136(1). Therefore, the travel by the employee's family member, or other associate, does not meet the definition of 'work-related travel'.

11. Accordingly, the transportation of the employee's family member, or other associate, on the employee's way to a work location is not work-related travel for the purposes of subparagraph 8(2)(b)(i) of the FBTAA. In these circumstances, subparagraph 8(2)(b)(i) of the FBTAA does not except the private use of the panel van by the employee.

Subparagraph 8(2)(b)(ii) - other private use that is minor, infrequent and irregular

12. However, car benefits can also be exempt if the private use of the car is confined to private use by the employee (or associate) that is 'minor, infrequent and irregular' under subparagraph 8(2)(b)(ii) of the FBTAA.

13. The FBTAA does not specify what is meant by the terms 'minor', 'infrequent' and 'irregular' in relation to private use and, therefore, each of those terms will take their ordinary meaning in the context in which they are used.

14. The Macquarie Dictionary 2009, rev. 5th edn, The Macquarie Library Pty Ltd, NSW provides the following definitions for each the terms 'minor', 'infrequent' and 'irregular':

15. For the purposes of subparagraph 8(2)(b)(ii) of the FBTAA all three of the above conditions must be satisfied.

16. Therefore, for example, where a panel van is habitually used during the relevant fringe benefits tax year to convey a family member, or other associate, of the employee such regular or repeated private use would not be considered to be 'minor, infrequent and irregular' and, consequently, the car benefits resulting from the conveyance of that family member's, or other associate's, travel would not fall within the exemption afforded by section 8 of the FBTAA.

17. However, it is noted that the employer now proposes to allow its employees to convey their family members, or other associates, in car fleet vehicles in the course of their home to work travel provided such conveyance of family members, or other associates, only occurs on an infrequent and irregular basis.

18. Therefore, where a panel van is used to transport an employee's family member, or other associate, strictly in accordance with the proposed conditions to be imposed by the employer, during the employee's home to work travel it is considered that this will be a private use falling within subparagraph 8(2)(b)(ii) of the FBTAA.

19. It is also considered that the above view is not altered by whether the employee may leave or return sightly earlier or later than they normally or there was a slight deviation from the employee's normally expected home to work route.

Conclusion on section 8 exemption for employee's family member's, or other associate's, conveyance in a panel van

20. The panel vans meet the requirements of paragraph 8(2)(a) of the FBTAA.

21. Subparagraph 8(2)(b)(i) of the FBTAA, regarding work-related travel of an employee, has no application in this particular case.

22. Where the panel vans are used to transport an employee's family members, or other associates, in the course of the employee's home to work travel, strictly in accordance with the proposed conditions to be imposed by the employer, this will meet the requirements of subparagraph 8(2)(b)(ii) of the FBTAA and, consequently, such transport will be exempt under section 8 of the FBTAA.

Question 5

Detailed reasoning

1. The definition of the term 'car' falling within both subsection 136(1) of the FBTAA and subsection 995-1(1) of the ITAA 1997 means a 'motor vehicle' (except a motor cycle or similar vehicle) designed to carry a load of less than one tonne and fewer than nine passengers.

2. Therefore, the one-tonne utes are not 'cars' for the purposes of the FBTAA as they are motor vehicles designed to carry one tonne or more or to carry nine or more passengers, as applicable.

3. As the one-tonne utes are not 'cars' for the purposes of the FBTAA their provision or use for private purposes cannot constitute the provision of 'car benefits'.

4. Section 45 of the FBTAA states that a residual benefit is one that is not a benefit by virtue of any provision of Subdivision A of Divisions 2 to 11 inclusive of the FBTAA. Therefore, in basic terms, a residual benefit is a benefit that does not fall within one of the other more specific benefit types contained in the FBTAA.

5. It is considered that as section 7 of the FBTAA does not apply to the one-tonne utes nor does any other provision of Subdivision A of Divisions 2 to 11 inclusive of the FBTAA apply to such motor vehicles, the provision or use of the one-tonne utes for private purposes will constitute the provision of residual benefits.

6. However, subsection 47(6) of the FBTAA provides exemption for residual benefits arising from the provision or use of motor vehicles designed to carry one tonne or more or to carry nine or more passengers. Subsection 47(6) of the FBTAA states:

7. The employees are current employees of the employer and the one-tonne utes are the required types of motor vehicles for the purposes of paragraphs 47(6)(a) and 47(6)(aa) respectively of the FBTAA.

8. Nonetheless, for exemption under subsection 47(6) of the FBTAA to apply in this case there must also be no private use of the one-tonne utes other than for the specific purposes listed in paragraph 47(6)(b) of the FBTAA.

9. Paragraph 47(6)(b) of the FBTAA provides for no private use of those cars other than:

Subparagraph 47(6)(b)(i) - 'work-related travel' of the employee

10. For similar reasons as those used above (at paragraph 11 of Question 4) in relation to the panel vans, where a one-tonne ute is used to transport an employee's family member during the employee's home to work travel, it is considered that subparagraph 47(6)(b)(i) of the FBTAA has no application.

11. Accordingly, the transportation of the employee's family member, or other associate, on the employee's way to a work location is not work-related travel for the purposes of subparagraph 47(6)(b)(i) of the FBTAA. In these circumstances, subparagraph 47(6)(b)(i) of the FBTAA does not except the private use of the one-tonne ute by the employee.

12. Accordingly, the transportation of the employee's family member, or other associate, on the employee's way to a work location is not work-related travel for the purposes of subparagraph 47(6)(b)(i) of the FBTAA.

Subparagraph 47(6)(b)(ii) - other private use that is 'minor, infrequent and irregular'

13. For similar reasons as those used above (at paragraph 18 of Question 4) in relation to the panel vans, where a one-tonne ute is used to transport a employee's family member, or other associate, strictly in accordance with the proposed conditions to be imposed by the employer, during the employee's home to work travel it is considered that this will be a private use falling within subparagraph 47(6)(b)(ii) of the FBTAA.

14. It is also considered that the above view is not altered by whether the employee may leave or return sightly earlier or later than when they usually would or whether there was a slight deviation from the employee's normally expected home to work route.

Conclusion on subsection 47(6) exemption for employee's family member's, or other associate's, conveyance in a one-tonne ute

15. The one-tonne utes meet the requirements of subparagraph 47(6)(aa)(ii) of the FBTAA.

16. Subparagraph 47(6)(b)(i) of the FBTAA, regarding work-related travel of an employee, has no application in this particular case.

17. Where the one-tonne ute is used to transport an employee's family members, or other associates, in the course of the employee's home to work travel, strictly in accordance with the proposed conditions to be imposed by the employer, this will meet the requirements of subparagraph 47(6)(b)(ii) of the FBTAA and, consequently, such transport will be exempt under subsection 47(6) of the FBTAA.

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