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Ruling

Subject: FBT - Car Fringe Benefit

Question 1

Are the duties of the employees itinerant in nature and hence their travel between home and work will be considered to be business travel for the purposes of section 10 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer Yes.

Question 2

Where the employer uses Statutory Formula Method, does a car benefit arise under subsection 7(1) of the FBTAA where the employee garages the employer's car overnight at the employee's residence?

Answer Yes.

This ruling applies for the following periods:

Year ended 31 March 2014

Year ended 31 March 2015

Year ended 31 March 2016

The scheme commences on:

1 April 2013

Relevant facts and circumstances

1.   The employer

· is a non profit organisation providing primary care and community health services

· provides specialised care services to target groups of the community, (for example, persons with disabilities; frail aged; carers; family and risk of residential care), and

· its case managers (the employees) administer several separate community care services programs

2.   The employment duties of case managers included:

· may travel between multiple local areas

· visit on average three clients per day

· are responsible for the care planning, co-ordination and budgeting of services

· are the main contact point for clients, carers and service providers

· predominately visit and provide care management services to the clients at home, and

· assist target groups in their daily activities, (that is, shopping, showering, modify home structures) and transporting for social or appointments.

3.   Employees' cars and travel journeys

· they garage the employer's car at their residences after working hours, and

· a typical day scenario (see below) requires them to travel to the employer's office everyday to perform duties such as pick up medication, authorise invoices and check appointments on computerised diary system.

Example of a 'typical' day for the case managers:

· arrive at work

· check emails

· respond to client inquiries

· travel to hospital for discharge planning meeting

· hospital discharge planning meeting

· travel to store room to pick up continence aids for client

· travel to client's home

· client home visit to drop off aids and review current care plan

· lunch

· respond to client crisis - attend client home following call re client fall

· travel to client review meeting at council offices

· client review meeting

· travel to client home

· assist client with guardianship board meeting

· transport client and belongings to residential care facility and assist with stressful transitional change

· travel home

4. The employer's motor vehicles currently provided to case managers are a range of makes and models.

5.   Equipment carried in the cars by the employees

· the medical supplies and equipment are normally stored at the employer's premises

· the equipment is sometimes carried by the employees when visiting clients or they are delivered direct from the supplier to the client's premises, and

· the type of equipment that maybe carried in the employer's cars included fold up tables, oxygen stands, walking frames, wheel chairs and medicine box, (that is, medication, syringes, incontinence items, first aid kit)

 6.   No Stand by duty

The employees are not required to be 'on call' and it is at the employees' discretion to visit the clients or not after office hours, generally they do not.

 7.   Employees do not receive any travel or motor vehicle allowances for the travels undertaken in their assigned cars.

 8.    Employees may take client's folders home to review case studies to plan for daily appointments and also study and keep abreast with technical and legislative changes.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 7

Fringe Benefits Tax Assessment Act 1986 Section 9

Fringe Benefits Tax Assessment Act 1986 Section 10

Fringe Benefits Tax Assessment Act 1986 Section 10A

Fringe Benefits Tax Assessment Act 1986 Section 10B

Reasons for decision

Question 1

Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel (MT 2027) explains the situations where home to work travel is considered to be business travel. One of these situations is where the nature of the employees' employment is inherently itinerant.

Paragraph 25 of MT 2027 lists the characteristics which indicate employment duties of an itinerant nature: These are:

· it is inherently itinerant;

· travel is a fundamental part of the employee's work;

· it is impractical for the employee to perform the duties without the use of a car;

· the terms of employment require the employee to perform duties at more than one place of employment;

· the nature of the job itself makes travel in the performance of duties essential; and

· it can be said of the employee that he or she is travelling in the performance of the employment duties from the time of leaving home.

Paragraph 7 of Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses (TR 95/34) also contains a list of characteristics which indicate when an employee's work is itinerant. These are:

a) travel is a fundamental part of the employee's work;

b) the existence of a 'web' of work places in the employee's regular employment, that is, the employee has no fixed place of work;

c) the employee continually travels from one work site to another. An employee must regularly work at more than one work site before returning to their usual place of residence; and

d) other (less significant) factors that may indicate itinerancy including

I. the employee having a degree of uncertainty of location in their employment,

II. the employee's home constitutes a base of operations,

III. the employee is required to carry bulky equipment from home to different work sites, and

IV. the employee is provided with an allowance from his/her employer in relation to any travel that is undertaken.

Paragraph 8 of TR 95/34 states that no single factor, in itself, will necessarily determine whether employment can be regarded as being itinerant. A finding that the employment is itinerant requires that several of the above characteristics are satisfied.

The following discussion is an examination of the above itinerant factors listed in paragraph 7 of TR 95/34, to the employee's 'typical travel day' scenario provided in the PBR:

(a)  Travel is a fundamental aspect of the employment

Based on the 'typical day' scenario provided, travel can be characterised as an essential feature of the employee duties. Once employees have completed their administration duties in the Office, they undertake continuous travel to perform other duties, such as visiting clients' homes and attending meetings or appointments throughout the day. 

(b)  The taxpayer is required to travel to a 'web' of work places

Paragraph 28 of TR 95/34 requires that, for a 'web' of workplaces to exist, the employee performs work at a single site and then moves to other sites on a regular basis. In FC of T v Wiener 78 ATC 4006; (1978) 8 ATR 335 (Wiener's case), a school teacher was treated as travelling to a 'web' of work places, because she had to attend five separate schools each day and she did not have an office or other fixed place of employment to carry out her work.

 Whilst accepting that the decision in Wiener's case was relevant to this concept, the ATO considered that the decision in FC of T v Genys (1987) 19 ATR 356; (1987) FCR 495; (1987) 77 ALR 527, which involved a nurse working relief shifts at various suburban hospitals, was not. In that regard, the decision seems to have been made that a work site must be more than temporary.

In this case, while employees visit clients and attend various meetings at different locations, they also attend daily the employer's office to perform administration duties. It is considered that the employees do not have a web of workplaces, as they have a regular place of employment, ie the office. In that regard, each of the locations they visit and perform some duties are not considered to be a fixed place of employment, given the limited amount of time spent at each location, (ie 30 mins to 2 hours etc).

(c)  There is continual travel from one work site to another

Paragraph 37 of TR 95/34 provides guidelines on the meaning of continuous travel:

Continual travel refers to the frequency with which an employee moves from one work site to another. It envisages that the employee regularly works at more than one work site before returning to his or her usual place of residence. If an employee stays at a particular work site for a short period (eg., several days or a few weeks) they may still be regarded as engaged in itinerant employment provided their usual pattern of work involves continual travel to more than one work site before returning to their usual place of residence

 Based on the facts provided, the employees travel continuously to different locations to visit clients at their homes, attend specific meetings and pick up supplies etc throughout the day. It is considered that the employees are required to undertake continuous travel from one work location to another.

(d) Other factors that may indicate the employees' duties are itinerant in nature

The factors listed in paragraph 7(d) of TR 95/34 are not satisfied in this case for the following reasons.

First, in this case, employees have a low degree of uncertainty of location in their employment. There is certainty for these employees to visit clients and attend specific meetings as per the daily planned schedule of the employer's.

Second, the 'base of operations' factor does not apply to employees in this case. The Court found in FC of T v Collings 76 ATC 4254; 6 ATR 476, that a computer consultant on 24 hours call has commenced her duties, when she provided computer instruction over the telephone to other workers in the office, before travelling to work. It was ruled that the employee's home was a base of operations for her duties. In this case, since employees are not on stand by duty and they visit the employer's office daily, their home cannot be considered a base of operations. The mere fact that they may undertake some duties at home at various times does not mean that their home to work travels can be characterised as business journeys.

Third, in this case, employees do not need to carry bulky equipment from home to various work sites. MT 2027 states that in certain limited circumstances the use of a car may be attributed to the necessary carriage of equipment rather than travel to and from work and, as such, accepted as business travel. This approach should be followed where the employee performs duties at a number of places, requiring the transport and use of equipment of substantial bulk such as to justify the need for a motor vehicle to transport it and where there are sound reasons for keeping the equipment at home.

Based on the facts provided, it is not disputed that the employees travel to different locations to visit clients; attend meetings or perform other duties. However, the other two elements of this bulky equipment test have not been satisfied. First, the equipment/supplies are normally stored at the employer's premise, rather than at the employee's residence. Second, the transport of the equipment/supplies is not considered to be bulky, because they are only carried sometimes by the employees for their duties. Therefore it is considered that the employees are not required generally to carry bulky equipment for their duties.

Fourth, in this case, employees are not provided with a travel or car allowances for the motor vehicle travels undertaken.

 Therefore, the 'other factors' referred to in paragraph 7(d) of TR 95/34 point to the employee's duties not being regarded as itinerant in nature. However, because these are regarded as less significant than the factors listed in paragraphs 7(a-c), these factors are by no means decisive.

Conclusion

Two of the three significant factors have been satisfied. Therefore, the employee duties should be regarded as itinerant in nature, notwithstanding that there are some factors that indicate otherwise. Since these employee duties are regarded as itinerant in nature, they will be regarded as business journeys for the purposes of section 10 of the FBTAA.

Question 2

Detailed reasoning

Under the Statutory Formula Method (section 9 of the FBTAA), the taxable value is calculated by applying a statutory percentage to the original cost of the car to the employer and is apportioned according to the number of days on which the car is used or available for the private use of employees. This statutory percentage varies with the total distance travelled by the car during the FBT year, regardless of whether or not it is private travel. The greater the distance travelled, the lower will be the taxable value.

A car benefit can arise, under subsection 7(1) of the FBTAA, in circumstances where:

· a car, held by an employer, is applied to a private use an employee; or

· a car, held by an employer, is taken to be available for the private use an employee.

Paragraph 6 of MT 2027 ruling provides further guidance:

....a fringe benefits tax liability will arise where a car is garaged at an employee's home notwithstanding that the home to work travel may have been accepted as business travel. This result would need to be recognised by an employer when deciding whether to elect the operating cost basis of valuation in relation to a car.

This means that where the employee garages the car after the business trips, at the employee's residence, then FBT would apply. The FBT law deems that the car is treated as being made available for private use of an employee, irrespective of the fact that there may have been no actual private use of the car on that day or there is an employer's prohibition on the employee's private use.

If the employer does not make an election to use the Operating Cost Method, then the Statutory Formula Method must be used. It is noted that the Statutory Formula Method has no regards to whether the travels undertaken in the car were private or business kilometres.

Where an election has been made to use the operating cost method for determining the taxable value of a car fringe benefit under section 10 of the FBTAA, the taxpayer is only entitled to a reduction in the operating costs where a log book or odometer records are kept (according to sections 10A and 10B of the FBTAA).

Conclusion

Since the employees travel daily to and from home to the employer's office and garage the employer's car at their residences, a car benefit arises under subsection 7(1) of the FBTAA.

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