Edited version of your written advice

Authorisation Number: 1012693177845

Ruling

Subject: Income tax

Question 1

Is the employee's journey between their workplace and their home and back an exempt car benefit pursuant to section 8(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No

Question 2

To the extent that the answer to question one is no, is the employee's journey between their workplace and their home and back a business journey pursuant to section 136 of the FBTAA?

Answer

Yes

This ruling applies for the following periods

Fringe Benefits Tax year ended 31 March 2015

Fringe Benefits Tax year ended 31 March 2016

Fringe Benefits Tax year ended 31 March 2017

The scheme commences on

1 April 2014

Relevant facts and circumstances

The Taxpayer is in the business of providing services throughout Australia.

Taxpayer employees drive to a different work site every day and regularly work at more than one site before returning to their usual place of residence.

All the tasks relating to the site visit are undertaken at the site. No work is undertaken from home.

Employees attend their employers' office every 2 to 3 weeks.

Employees are provided with a schedule of site visits.

The make and model of motor vehicles provided to employees were provided.

Equipment carried in the cars weigh approximately 40kg.

A car allowance is not provided to employees.

An accommodation allowance is provided to employees on the rare occasion where employees are required to stay overnight because of the distance travelled to arrive at a site.

The employees' private use of the vehicle is limited to non-work related use that is minor, infrequent and irregular.

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 8(2)

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

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision

Question 1

Is the employee's journey between their workplace and their home and back an exempt car benefit pursuant to section 8(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No

Car Fringe Benefit

The General Rule

A car benefit arises when a car that is held by an employer is made available for the private use of an employee under subsection 7(1) of FBTAA.

A car is taken to be made available for private use by an employee on any day that:

• it is actually used for private purposes by the employee; or

• the car is not at the employer's premises, and the employee is allowed to use it for private purposes.

In applying these rules, a car that is garaged at an employee's 'place of residence' is deemed as being available for the private use of the employee regardless of whether or not the employee has permission to use it privately under subsection 7(2) of the FBTAA.

Section 136(1) of the FBTAA defines "place of residence" as:

(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".

The definition of a place of residence includes sleeping accommodation on a temporary basis and therefore overnight stays at a hotel/ motel by employees would be classified as a 'place of residence' for that night.

Therefore, as the cars of the taxpayer are garaged at the homes of employees or at a hotel/motel on their overnight trips, a car fringe benefit will arise under section 7(1) of the FBTAA, unless the benefit is an exempt benefit.

Exempt Benefits

There are circumstances in which the private use of a car may be exempt from fringe benefits tax.

Under sub-section 8(2), a vehicle may qualify for the exemption if, while classified as a car for the purposes of the FBTAA, it is a taxi, panel van, utility truck or any other road vehicle that, while designed to carry a load of less than one tonne, is not designed for the principal purpose of carrying passengers and there was no private usage of the vehicle other than:

• between the employee's residence and place of employment;

• use which is incidental to travel in the course of duties of employment; and

• non-work-related use that is minor, infrequent and irregular

The following types of vehicles (including four-wheel drive vehicles) are cars:

• motor cars, station wagons, panel vans and utilities (excluding panel vans and utilities designed to carry a load of 1 tonne or more);

• all other goods carrying vehicles with a designed carrying capacity of less than 1 tonne;

• all other passenger-carrying vehicles with a designed carrying capacity of fewer than 9 occupants.

Vehicles which are not classified as cars may qualify for the exemption under sub-section 47(6) if the private use of such vehicles is restricted to the use which is outlined above.

As the cars that are provided to the employees of the Taxpayer are not a taxi, panel van, utility or other commercial vehicle they can only be exempt if the design of the cars is not for the principal purpose of carrying passengers.

The cars supplied by Taxpayer to the employees are designed for the principal purpose of carrying passengers; therefore this exemption will not apply.

Consequently, the use of the cars will give rise to taxable fringe benefits under section 7 of the FBTAA.

The FBTAA provides two alternative methods of valuing such benefits:

• the statutory formula method

• the operating cost method

The statutory formula method under section 9 of the FBTAA is the default method.

To use the operating cost method under section 10 of the FBTAA the taxpayer needs to elect to only use this method.

Where the employer elects to use the operating cost method the taxable value will be reduced to nil where the "business use percentage" is 100 precent.

Subsection 136(1) of the FBTAA defines "business use percentage" as the number of business kilometre travelled by the car during the holding period divided by the total number of kilometres travelled by the car during the holding period.

Under particular circumstances travel to and from work can be treated as business related e.g. where the taxpayer's job is itinerant.

In relation to your circumstances, this issue is considered below at question two.

Question 2

To the extent that the answer to question one is no, is the employee's journey between their workplace and their home and back a business journey pursuant to section 136 of the FBTAA?

Answer

Yes

Detailed reasoning

Generally a journey that starts or ends at an employee's home are private. However there are exceptions to this and in this case, we should examine Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses to determine whether the employees carry out itinerant work.

Paragraph 7 of TR 95/34 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 (paragraphs 22 to 27 below);

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 (paragraphs 28 to 33 below);

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 (paragraphs 34 to 45 below);

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) (paragraphs 47 to 55 below);

(ii) the employee's home constitutes a base of operations (paragraphs 56 to 62 below);

(iii) the employee has to carry bulky equipment from home to different work sites (paragraphs 63 to 71 below);

(iv) the employer provides an allowance in recognition of the employee's need to travel continually between different work sites (paragraphs 72 to 75 below).

It is the above characteristics that we need to look at to determine whether the nature of the employees work is itinerant.

While the above characteristics are not exhaustive, they provide guidelines for determining whether an employee's work is itinerant.

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.

Is travel a fundamental part of work?

As stated in paragraph 22 of TR 95/34 'Travel must be an essential feature of an employee's duties in order for that work to be classified as itinerant…'

In this case, travel is accepted to be a fundamental part of work as employees are only able to undertake their duties by driving to the various locations.

Is there a 'web' of work places in the employees regular employment?

Paragraph 28 of TR 95/34 states:

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.

In this case, a 'web' of workplaces exists. The employees are required to work at different locations on a daily basis to undertake their duties.

Do the employees continually travel from one work site to another?

Paragraph 34 of TR 95/34 states:

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.

The employees are required to attend various locations, as nominated by the employer, on a daily basis. There is more than one location attended in a day and they travel from one location to another on a daily basis. It is therefore accepted that the employees continually have to travel from one work site to another.

Do any of the other factors apply?

Paragraph 47 of TR 95/34 states:

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.

In this case, the employees are considered to have a high degree of uncertainty because they are not able to determine where they are to travel to prior to being given the weekly schedule of visits that they are to undertake.

Paragraph 56 of TR 95/34 states:

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.

This factor is not applicable to employees of the Taxpayer as they do not have any tasks that are commenced at or before the time of leaving home to travel to work. This is because all the work is prepared and completed on site by the employees. Employees also attend their employers' office every two to three weeks to attend to any administrative tasks.

Paragraph 72 of TR 95/34 states:

Official recognition by an employer may indicate that travelling is a necessary element of the employment. However, receipt of an allowance does not, in itself, indicate that the employee's work is of an itinerant nature or that the travel is deductible. A particular employer may pay an allowance irrespective of whether the employee is required to travel in the course of their duties. Alternatively, an allowance may be paid to compensate the employee for the time or distance involved in travelling to and from work, the lack of public transport or for travel at inconvenient times. The payment of an allowance in such circumstances would not indicate that the employment is itinerant in nature.

Employees are not provided with car allowances for the motor vehicle travels undertaken. However, an accommodation allowance is provided on the rare occasion when employees are required to stay overnight because of the distance travelled to arrive at a site.

Conclusion

After reviewing the various criteria it is considered that the employees' duties should be regarded as being itinerant in nature. 

Since these employee duties are regarded as itinerant in nature, journeys between their home and various locations will be business journeys for the purposes of section 10 of the FBTAA.

NOTE:

The answer provided for question 2 will only be of use where you elect to use the Operating Cost Method to calculate the car fringe benefit that arise in respect of the cars subject to this ruling.

Should you make the election to use the Operating Cost Method you will have to apply the formula set out in section 10 of the FBTAA to each car.

In applying this formula you need to determine a business use percentage which is established using the log book records for each car.

In maintaining your log book the journeys between home and work will be recorded as business journeys.

Should the log books not be maintained the FBTAA considers that the business use percentage will be 0%.

Reportable Fringe Benefits

From 1 April 1999 employers are required to record the grossed up taxable value of fringe benefits on the group certificates of any employee who receives relevant benefits with a total taxable value exceeding $1000.

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