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Edited version of your written advice

Authorisation Number: 1012659955718

Ruling

Subject: Car benefits

Question 1

Will a car fringe benefit arise when a regional employee garages your car at their residence?

Answer

Yes

Question 2

In calculating the taxable value of the car fringe benefits that arise from a car that has been garaged at the residence of a regional employee, can the journeys between home and work be treated as a business journey?

Answer

Yes

This ruling applies for the following period:

Year ended 31 March 2013

The scheme commenced on:

1 April 2012

Relevant facts and circumstances

You provide a range of services including counselling in people's homes and education seminars.

For such services to be supplied in regional areas, you have acquired a number of cars for use by the employees located in the regional areas.

Some of these cars are taken home by employees on the basis that:

Local police have stated it would not be safe to leave the motor vehicle overnight on the street outside of the regional offices.

You provided the Duty Statements for the employees.

To perform their duties, the regional employees are required to transport a range of equipment to their work locations.

During the year ended 31 March 2013 logbooks were kept for a 12 week period for each of the cars based in regional offices that were taken home.

You provided a summary of these logbooks and advised the number of annual kilometres travelled by each of the regional motor vehicles.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Subsection 7(1)

Fringe Benefits Tax Assessment Act 1986 Subsection 7(2)

Fringe Benefits Tax Assessment Act 1986 Subsection 10(2)

Fringe Benefits Tax Assessment Act 1986 Section 10A

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 Section 162F

Fringe Benefits Tax Assessment Act 1986 Section 162G

Reasons for decision

1. Will a car fringe benefit arise when the employees located in regional areas garage your cars at their residence?

A car benefit is discussed in section 7 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) as follows:

7(1) [Car applied to, available for employee's private use] Where:

Therefore, a car fringe benefit will arise whenever an employee uses the car for a private purpose, or the car is taken to be available for the private use of the employee.

Subsection 7(2) of the FBTAA sets out when a car will be taken to be available for the private use of the employee. Subsection 7(2) states:

You allow certain of your regional employees to garage a car held by you, at or near their residence. The car is taken to be available for private use of the employee and therefore a car fringe benefit will arise on any day when the car is garaged at the home of an employee.

As set out in ATO Interpretative Decision ATO ID 2003/613 Fringe Benefits Tax Car fringe benefits: car taken to be available for private use under the statutory formula method (ATO ID 2003/613) the fact that the employer's vehicle is garaged at or near an employee's residence to protect the car from theft or vandalism will not alter this conclusion. Similarly, the fact that the employees may require the car to go to a meeting on the way to or from work and is required to carry equipment that is used at the meeting will not alter the outcome.

However, where the home garaging occurs as a result of an employee who is classified as an itinerant employee garaging the car at their home, the taxable value of the car fringe benefits that arise from the car can be reduced to reflect the business use of the car if an election is made to use the operating cost method to calculate the taxable value and the necessary records are kept.

The calculation of the taxable value of a car fringe benefit using the operating cost method

The taxable value of a car fringe benefit under the operating cost method is stated in subsection 10(2) of the FBTAA as follows:

(C x (100% - BP) - R

where:

C is the operating cost of the car during the holding period;

BP is:

R is the amount (if any) of the recipient's payment.

For a reduction in the operating costs to be claimed under the operating cost method it is necessary for the requirements of either section 10A or 10B of the FBTAA to be met. Section 10A applies where the year of tax is a logbook year and section 10B applies in a year that is not a logbook year.

In general terms, section 162G of the FBTAA provides that a year will be a logbook year of tax if a logbook is kept for the car during the year, or none of the previous four years was a log book year of tax for the employer in relation to the car.

The summary of logbook records indicates that the logbooks for each of the cars were kept during the year ended 31 March 2013. Therefore, the year ended 31 March 2013 was a logbook year of tax and the business use percentage will be 0% if the requirements of section 10A of the FBTAA were not met.

Section 10A of the FBTAA states:

In considering these requirements:

Logbook and odometer records were maintained for a 12 week period. Therefore, the requirements of paragraph 10A(a) were met.

It is not clear whether odometer records were kept for the period of the year for which the car was held. However, it is noted that you advised the annual kilometres travelled for each of the cars. Provided this fact is based on the odometer readings on the first and last days of the period of the year for which the car was held, the requirements of paragraph 10A(b) were met.

As the employer was the provider it is not necessary to consider paragraph 10A(c).

Paragraph 10A(d) requires the employer to estimate the number of business kilometres travelled by the car during the holding period. Section 162F requires this estimate to be made having regard to all relevant matters including any log book records, odometer records or other records that have been maintained and any variations in the pattern of use of the car.

From the information provided, it is not clear whether this process occurred. The information provided indicates you have determined the total number of kilometres travelled during the holding period and the number of business kilometres travelled by the car during the logbook period. However, it is not clear whether you estimated the number of business kilometres travelled during the holding period.

Paragraph 10A(e) requires the employer to specify the business use percentage for the holding period. In making this estimate the definition of business use percentage in subsection 136(1) provides that the business use percentage means the percentage worked out using the following formula:

Number of business

kilometres travelled by the

car during the holding

period x 100%

Total number of kilometres

travelled by the car during the holding period

This calculation uses the information kept for the purposes of paragraphs 10A(b) and 10A(d).

A business kilometre is defined in subsection 136(1) to mean 'a kilometre travelled by the car in the course of a business journey'.

Business journey is defined in subsection 136(1) of the FBTAA as follows:

In your ruling application you advised that the employees in keeping the logbooks had treated the journeys between home and work as business journeys and requested a ruling as to whether this was the appropriate treatment of the journeys.

2. In calculating the taxable value of the car fringe benefits that arise from the cars garaged at the residence of a regional employee, can the journeys between home and work be treated as a business journey?

Guidance for determining whether the journey between home and work is a business journey is provided in Taxation Ruling No. MT 2027 Fringe Benefits Tax: Private use of cars: home to work travel (MT 2027).

The general rule for considering this issue is set out in paragraphs 14 and 15 of MT 2027. Paragraphs 14 and 15 of MT 2027 state:

In applying these paragraphs, the journeys will be private unless one of the following exceptions apply:

In your ruling application, you contended the employment duties are of an itinerant nature. The circumstances in which this exception will apply are discussed at paragraphs 25 to 27 of MT 2027.

Employment Duties of an Itinerant Nature (Commercial Travellers, etc.)

Further guidance is provided in Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses (TR 95/34).

Paragraph 7 of TR 95/34 lists the following characteristics as being indicators of itinerancy:

In considering these factors:

These factors indicate:

On the basis of these factors it is accepted the employment duties are of an itinerate nature and the journeys between home and the first and last places of work on the day are business journeys.


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