Edited version of your private ruling

Authorisation Number: 1012574367332

Ruling

Subject: Fringe benefits tax: car fringe benefits - business journey

Question 1

Is the employee's travel between their place of residence and various council office locations a 'business journey' for the purpose of calculating the taxable value of car fringe benefits under section 10 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No.

This ruling applies for the following period:

FBT year ended 31 March 20XX.

The scheme commences on:

1 April YY.

Relevant facts and circumstances

A local council employed an individual as general manager (the employee). The council has two main administrative buildings and various other council office sites. The General Manager is provided with an office at each of these work locations.

The employment contract (the contract) sets out various duties and responsibilities of the employee and includes schedules and performance measures in relation to those duties.

The Mayor provided a letter of clarification in relation to the duties and travel requirements for fringe benefits tax purposes.

As part of the employee's remuneration package the council provides a motor vehicle, which may also be used for private use.

In relation to the vehicle provided, the council has historically applied the statutory formula method under Section 9 of the FBTAA. However, for the FBT year ending 31 March 20XX the council calculated the motor vehicle fringe benefit value using the operating cost method in accordance with Section 10 of the FBTAA, which the employee has kept a log book for a 12 week period to determine the business use percentage of the vehicle.

The employee mainly works from allocated office space in each of the two main administration buildings. Travel to these offices varies from day to day and is dictated by the need to attend meetings with councillors, council staff and members of the public and business community.

Depending on commitments, the employee may travel to the most appropriate council office, which may be any one of the various council office locations within the employee's area of responsibility as general manager.

The employee also performs certain tasks from his place of residence, which the employee has a laptop docking station installed to enable connection via internet to council systems.

On each journey to a council office location the employee carries in the vehicle:

· A laptop computer and case, which is estimated to weigh 8kg.

· A storage container, which is estimated to weigh 50kg when full. It is estimated that the container is consistently between 80% - 100% of its capacity.

The container stores material relevant to the performance of the employee's duties, which include files, Council reports, Council meeting agendas and business related Council documents. Also, the employee undertakes significant amounts of reading at his place of residence and prefers to print documents and take them home.

In relation to the materials carried in the storage container:

· it is estimated that 80% of the materials are available electronically via the council webpage or other council systems

· it is estimated that 5% to 10% of the materials are only available in hard copy at the various council office locations

· the majority (80%) of the materials relate to council meeting agenda and minutes for the current and previous month's meetings. Meetings are held alternately between each of the main administration buildings each month

· printed materials are carried as the employee's working files for ease of reference in meetings

· it is estimated that 20% of the materials is for reference and could relate to any issue at any council office location. These materials include executive team agenda and minutes and staff procedure and policy documents.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986

Subsection 7(1)

Subsection 7(2)

Subsection 136(1)

Section 10.

Reasons for decision

Question 1

General discussion of the law

Subsection 7(1) of the FBTAA sets out the conditions for a car, owned or leased by an employer, being provided to an employee or an associate of the employee as a car benefit. For a car benefit to arise it must be:

· applied to a private use; or

· taken to be available for private use.

Subsection 7(2) of the FBTAA deems a car to be available for private use when it is garaged or kept at or near an employee's place of residence. A car fringe benefit will arise whenever a car is garaged at an employee's home.

However, in working out the value of the fringe benefit provided to an employee, an employer can elect to use the operating cost methods contained in section 10 of the FBTAA, which requires the employer to maintain a log book (for a minimum of 12 weeks) detailing all the business journeys undertaken in the car.

Calculating the taxable value 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.

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 a business kilometre is a kilometre travelled by the car in the course of a business journey.

Subsection 136(1) of the FBTAA defines business journey to mean:

(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;...

The term 'private use' is defined in subsection 136(1) of the FBTAA to mean, in relation to a motor vehicle, any use by the employee or associate 'that is not exclusively in the course of producing assessable income of the employee'.

Travel to and from work is normally private use, even if the employee does minor jobs such as picking up mail on the way. There are few circumstances where travel between home and work may count as work travel.

MT 2027 sets out the Commissioner's view on how to distinguish between business and private use of a car in circumstances where the car is being driven to or from the employee's home for fringe benefits tax purposes.

Travel while on stand-by duty

The Commissioner discusses in MT 2027 that an employee's travel to and from work in response to a call while on stand-by would not ordinarily alter the character of that travel, that is, it remains private travel.

However, it is different where it can be determined that the employee started duties when they received the call. In this case, the journey from home to the place of employment is undertaken, not to start work, but to complete employment duties already under way before the journey started. Therefore, the travel, including the return trip, would constitute business travel.

For example, a medical practitioner, under the terms of employment with a hospital, is required to be accessible by phone to receive emergency calls and to give immediate treatment instructions before travelling to the hospital. Therefore, their responsibility for treating the patient starts when they receive the call. Although the travel taken in response to an emergency call is considered business travel, regular daily travel undertaken by the employee to and from work, and not in response to an emergency call, is still considered private.

This is different from the situation where an employee on stand-by duty is called on by the employer, but does not actually start duties until after they arrive at the place of employment (for example, a computer technician on stand-by duty who does not start duty until after arriving at the workplace).

Where an employee chooses to perform some of their work at home and, as a consequence, needs to respond to a call to attend to particular duties at the office or other usual workplace, travel to and from the office or other usual workplace is private.

Employment duties of an itinerant nature

In paragraph 25 of MT 2027 the Commissioner explains:

It has long been acknowledged that travel from an employee's home may constitute business travel where the nature of the office or employment is inherently itinerant (see, for example, the comments of Lords Wilberforce and Simon in Taylor v Provan (1975) AC 194 at pages 1213 and 1219 respectively). More recently, this issue was addressed in Australia in FCT v Wiener, 78 ATC 4006; 8 ATR 335, from which the following guidelines for the application of the principle have been adopted (see Taxation Ruling IT 2122). These are that travel will be indicated as business travel where the nature of the office or employment is such that -

(a) it is inherently itinerant;

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

(c) it is impractical for the employee to perform the duties without the use of a car;

(d) the terms of employment require the employee to perform duties at more than one place of employment;

(e) the nature of the job itself makes travel in the performance of duties essential; and

(f) 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.

Travel from an employee's home may be considered business travel where the nature of the office or employment is itinerant. Examples include commercial travellers and government inspectors whose homes are a base of operations, from which they travel to one of a number of locations throughout the day, over a continuing period.

Commonly, in these cases the employee works at the employer's office periodically (for example, once a week) to complete or file reports, pick up supplies or organise future trips. Travel between home and the office made in these limited circumstances is accepted as an ordinary incident of the business travel and, as such, is also treated as business travel.

Identifying whether an employee's work is of an itinerant nature is determined according to the individual's circumstances, which is explained in TR 95/34. At paragraph 7 of TR 95/34 the Commissioner states:

There have been a number of cases considered by the Courts, Boards of Review and Administrative Appeals Tribunal where deductions for transport expenses were allowed on the basis of the taxpayers' 'shifting places of work'. 'Shifting places of work' is another term for itinerancy. In these cases the obligation to incur the transport expenses arose from the nature of the taxpayers' work, such that they were considered to be travelling in the performance of their duties from the moment of leaving home. The following characteristics have emerged from these cases as being indicators of itinerancy:

(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 his or her usual place of residence…

(d) other factors that may indicate itinerancy (to a lesser degree) include:

(i) the employee has a degree of uncertainty of location in his or her employment (that is, no long term plan and no regular pattern exists)…

(ii) the employee's home constitutes a base of operations…

(iii) the employee has to carry bulky equipment from home to different work sites…

(iv) the employer provides an allowance in recognition of the employee's need to travel continually between different work sites…

Travel a fundamental part of the employee's work

At paragraph 22 of TR 95/34 the Commissioner explains:

Travel must be an essential feature of an employee's duties in order for that work to be classified as itinerant. In Taylor v. Provan [1975] AC 194 Lord Simon (discussing the rule established in Ricketts v. Colquhoun [1926] AC 1) said at 221:

'...the obligation to incur the expenses of travelling in question must arise out of the nature of the office or employment itself, and not out of the circumstances of the particular person appointed to the office or employed under contract of employment - two different classes of travelling expenses readily come to mind. The first is where the office or employment is of itself inherently an itinerant one. ...In such cases the taxpayer may well be travelling in the performance of the duties of the office or employment from the moment of his leaving home to the moment of his return there - a visit to any head office might well be purely incidental or fortuitous.'

Paragraph 23 of TR 95/34 refers to FC of T v. Wiener (1978) 78 ATC 4006; 8 ATR 335 (Weiner's case) where the teacher's travel was considered to be inherent in her employment as she was required to comply with a strict timetable that kept her on the move throughout each of the days; the transport remained at her disposal throughout each of those days.

Paragraph 24 of TR 95/34 refers to FC of T v. Genys (1987) 17 FCR 495; 87 ATC 4875; (1987) 19 ATR 356 (Genys case) and Northrop J's quotation of Brightman J's statement in Horton v. Young [1972] 47 TC 60: 1 Ch 157 at 164 describing a person as having no fixed place or places at which to carry on the profession or trade but moves continually from one place to another exercising that profession or trade.

Web of work places or employee has no fixed place of work

At paragraph 28 of TR 95/34 the Commissioner explains that an employee may earn income by performing his or her duties at several work sites. The location of those sites may make it necessary to travel to the various sites. If an employee performs work at a single site and then moves to other sites on a regular basis, it would be considered that a 'web' of work places exists. In Wiener's case, the taxpayer was required to attend four to five schools each day. This constituted a 'web' of work places.

Whereas at paragraph 29 of TR 95/34 the Commissioner explains:

In Case U97 87 ATC 584; AAT Case 68 (1987) 18 ATR 3491 (Case U97), the taxpayer was employed as a fireman. He was attached to a fire station located close to his home in a northern suburb of Sydney, but for some years worked as a relief fireman. In that capacity, he was commonly sent to other fire stations in the Sydney fire district. The only distinguishing feature of his claim was that he travelled to one outer station regularly for a number of days then another outer station for another period. In deciding that the taxpayer was not itinerant, Senior Member McMahon stated (ATC at 588; ATR at 3495-3496):

'There is not the web of workplaces that one looks for as a structure for the applicant's working life if that life is to be regarded as itinerant.'

As the explained at paragraph 31 of TR 95/34, although an employee may perform duties at more than one work location, this fact in itself may be insufficient to constitute a 'web' of work places for the purpose of itinerancy. Each work place may be regarded as a regular or fixed place of employment. If the teacher in Wiener's case had attended only one school each day, each school would be regarded as a regular place of employment.

Continual travel from one worksite to another

In paragraph 23 of MT 2027 the Commissioner states that travel directly between two places of employment, two places of business or a place of employment and place of business is generally accepted as business travel, where the person does not live at either of the places and they travel to engage in income-producing activities.

Also, paragraph 34 of TR 95/34 explains that in certain work situations continual unsettled travel from one work place to another is a common factor. In some instances, an employee's ongoing engagement may require him or her to attend various sites in different localities nominated by the employer. In most such cases the need to travel from place to place would be a necessary condition of employment.

Other factors

Degree of uncertainty of location in his or her employment

Paragraph 47 of TR 95/34 explains that the element of uncertainty of location is generally another distinct characteristic of itinerant employment. Unlike an ordinary worker who makes the daily journey to his or her regular place of work, the itinerant worker often cannot be certain of the location of their work sites.

Home is a base of operations

The Commissioner explains at paragraph 56 of TR 95/34 that an employee's home may constitute a base of operations if the work is commenced at or before the time of leaving home to travel to work and the responsibility for completing it is not discharged until the taxpayer attends at the work site. Whether an employee's home constitutes a base of operations depends on the nature and the extent of the activities undertaken by the employee at home.

Paragraph 57 of TR 95/34 refers to Taxation, Commissioner of (Cth) v. Collings (1976) 10 ALR 475; (1976) 76 ATC 4254; (1976) 6 ATR 476 (Collings case) where a highly trained computer consultant was required to be more than just being on stand-by duty. Her home and office were two separate but necessary places of work because of the special nature of her duties. She was provided with a portable terminal to use at home that was connected to the work computer. It was common for her to receive telephone calls at home and give advice to workers at the office. Her travel was at times when advice had been given but the computer was still not working.

In Taxation Ruling IT 112 Deductibility of travelling expenses between residence and place of employment or business, guidelines were provided in relation to various decisions of the Supreme Court, including the Collings case. Paragraph 21(c) of IT 112 states, in cases comparable with the Collings Case:

Although it is not anticipated that the same circumstances present in this case will arise very often in other cases … The journeys to and from home were made necessary by the special nature of the taxpayer's employment whereby she was engaged on a special assignment and was continuously on duty wherever she was…

Subparagraph 21(c)(ii) of IT 112 draws a distinction between the facts in the Collings Case and employees on stand-by duty at their homes and who are required to obey a summons to cope with some emergency. For example the mere fact an airline pilot on stand-by duty at home is not enough to conclude at those times the airline pilot's duties are itinerant.

Requirement to transport equipment

In TR 95/34 the Commissioner explains that:

63. 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.

64. A deduction is not allowable if a secure area for the storage of equipment is provided at the work place (see Case 59/94 94 ATC 501; AAT Case 9808 (1994) 29 ATR 1232).

In addition, at paragraph 37 of MT 2027 the Commissioner explains that in certain 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.

Guidelines for the application of this principle are discussed in paragraph 21(b) of IT 112 in the context of the decision in FCT v Vogt, 75 ATC 4073 (Vogt's case). Broadly, the 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.

This rule would not apply where, as a matter of convenience, the employee performs some work at home and transports papers, materials, etc., (whether bulky or not) between home and work for that purpose. In paragraph 38 of MT 2027 the Commissioner refers to Case Q1 83 ATC 1; Case 65 26 CTBR (NS) 469, where the use of a car by a school principal in such circumstances was treated as private use.

Application of the law

Travel while on stand-by duty

In these circumstances, the employee does not commence their duties at home prior to undertaking the journey to a work office location, at which those duties would be completed. Instead, the employee may choose to work from any work office location that is appropriate, given priorities and obligations for the day in question.

Also, whilst the employee is expected to be available to attend to council matters 24 hours a day, 7 days a week, the employee is not required or compelled to undertake particular tasks at their place of residence or any work office location. The mere possibility that the employee may be called upon to perform his duties is not sufficient to demonstrate that the employee is perpetually on stand-by duty.

Therefore, in these circumstances, it is considered that the nature of the employee's duties is not consistent with being on stand-by duty and travel between the employee's place of residence and various work office locations is private.

Employment of an itinerant nature

The employee is provided with communications technology including an iPhone, iPad, laptop and home computer connections to enable him to perform his work obligations in most locations.

The employee mainly works from office space allocated for the employee's use in the two main administrative buildings. The employee also conducts certain work related activities at their place of residence.

Analysis of the circumstances indicates that the employer:

· does not specify how the employee is to perform their duties or meet the particular performance criteria (as agreed separately)

· does not specify a place of employment for work each day

· does not set standard working hours for the employee

· does not specify a requirement for the employee to travel and attend particular work office locations in any particular pattern or regularity in carrying out their duties.

In relation to the need to travel from time to time, including alternate work office locations, rather than paying an allowance the employer provides the use of a vehicle. However, there is no apparent requirement to travel continually between the employee's place of residence and the various council office locations. This indicates that travel is not fundamental to the performance of the employee's work and the employee is not required to regularly travel between a web of work places.

Whilst it is evident that travel may be necessary from time to time, the employee may choose to work from any work office location that is appropriate, given priorities and obligations for the day in question. However, the fact that priorities may change, such that the employee may revise their travel schedule, is not sufficient to demonstrate a recurrent uncertainty as to which work office location the employee will attend.

In review of the circumstances, the employee chooses to structure and attend to activities in a particular way, for example responding to emails from home rather than upon arrival at a work office location. The employee is not required or compelled to undertake particular tasks at their place of residence. It is considered that the employee's schedule of activity on any given day is largely a matter of choice and convenience. This indicates that the employee's home does not constitute a base of operations.

In review of the circumstances, with regard to the indicators described in MT 2027 and TR 95/34, it is considered that:

· travel is not a fundamental part of the employee's work

· there is not a web of work places in the employee's regular employment

· the employee does not continually travel from one work site to another

· the employee does not have a sufficient degree of uncertainty of location in their employment

· the employee's home does not constitute a base of operations.

Therefore, the employee's employment is not inherently of an itinerant nature.

Transportation of bulky equipment

Whilst the employee carries in the vehicle a storage container that holds various materials relevant to performing the employee's duties, the council does not require the employee to carry those materials. The employee prefers to read and utilise printed material.

In review of the circumstances, 80% of the materials transported are otherwise available in electronic form. Also, it is estimated that 5% to 10% of the materials are only available in hard copy at council office locations.

It is stated that 80% of the materials relate to council and business meetings, which are conducted alternately at each of the two main administrative buildings. As the employee has an allocated office in each of the two main administrative buildings, it is reasonable to expect that the employee would have sufficient space to store or print as necessary such documents in preparation for those meetings.

In these circumstances, it is considered that the transport of these materials is largely for convenience and reference from time to time as the need arises. There is insufficient evidence to demonstrate that all materials are required to be transported between the employee's place of residence and each work office location, or between work office locations, for each and every journey.

Also, whilst the employee transports a laptop computer and case, it is considered that these do not constitute bulky equipment.

Therefore, with regard to factors described in MT 2027 and TR 95/34, it is considered that travel between the employee's place of residence and a council office location, or between any council office locations, is not attributable to the transport of bulky material.

Conclusion

As discussed in MT 2027 and TR 95/34, there may be circumstances that arise where a journey from the employee's home to a council office location may constitute a business journey. This must be determined by an examination of the facts relating to any such journey as they arise.

In these circumstances, the employee is not required to work at any particular place by their employer, the employee may choose which council office location to attend at any given time and there is insufficient evidence to demonstrate that the employee's duties commence at the time of receiving a phone call to attend to a particular council matter. In addition, it is considered that the employee's employment is not of an itinerant nature and travel does not arise from the requirement to transport bulky equipment.

With regard to the factors described in MT 2027 and TR 95/34, it is considered that the nature of travel from the employee's place of residence to the various work office locations is private.

Therefore, the employee's travel between their home and various work office locations is not a business journey and the distance travelled is considered not to be business kilometres for the purpose of calculating the taxable value of car fringe benefits under section 10 of the FBTAA.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).