Edited version of your written advice

Authorisation Number: 1012716052158

Ruling

Subject: Fringe benefits tax - exempt benefits

Question 1

Where you provide an employee with a specific dual cab vehicle, subject to a car use policy and monitoring, will the provision of the car be an exempt benefit where the car use policy and monitoring is adhered to and enforced?

Answer

Yes

Question 2

Where you provide an employee with registration, insurance, repairs and fuel in respect of the vehicle referred to in question 1, will the provision of the registration, insurance, repairs and fuel be exempt benefits, where the car use policy and monitoring is adhered to and enforced?

Answer

Yes

This ruling applies for the following periods:

For a number of FBT years commencing in the year ending 31 March 2015

The scheme commences on:

In the year ended 31 March 2015

Relevant facts and circumstances

You intend to enter into a salary sacrifice arrangement with an employee for a specific dual cab vehicle ('the vehicle').

The salary sacrifice arrangement will include a novated lease arrangement for the vehicle, insurance in respect of the vehicle, repairs, maintenance and registration of the vehicle and fuel for the vehicle.

The employee is required to use the vehicle in the course of performing the duties of their employment.

The employee will use the vehicle to travel from their home to your office and back.

The employee will also use the vehicle for other work related travel each week.

Vehicle specifications

The vehicle manufacturer provides relevant specifications for the vehicle on their website.

Car use policy and monitoring

For the period of the arrangement the employee will be subject to a car use policy and monitoring, enforcing the following:

• the vehicle is permitted to be used for work related purposes

• the vehicle is permitted to be used for the employee to travel to and from the employee's residence to your office

• private travel will generally not be permitted and if required, must be of a minor and infrequent use

• the employee must notify you of any private travel

• the employee will provide signed odometer readings with a statement to the effect that private travel was nil or minor during the period

Disciplinary measures will be included in the policy and enforced. Should continual breaches of the policy occur, the salary sacrifice arrangement may be terminated or any fringe benefits tax (FBT) payable by you will become payable by the employee and included in the salary sacrifice amount.

Assumptions

The arrangement is an effective salary sacrifice arrangement in accordance with the meaning provided by Taxation Ruling TR 2001/10 Income tax: fringe benefits tax and superannuation guarantee: salary sacrifice arrangements.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 7

Fringe Benefits Tax Assessment Act 1986 subsection 8(2)

Fringe Benefits Tax Assessment Act 1986 section 53

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision

Question 1

Where you provide an employee with a specific dual cab vehicle, subject to a car use policy and monitoring, will the provision of the car be an exempt benefit where the car use policy and monitoring is adhered to and enforced?

You intend to enter into a salary packaging arrangement with an employee to provide specific dual cab vehicle to the employee under a novated lease arrangement.

The relevant employee is required to use their vehicle in the course of performing the duties of their employment.

The vehicle will be available to the employee to travel to and from their home to your office. The employee will also use the vehicle for work related travel during the working week and for occasional non-work related (private) use.

Subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides the following definition of a 'fringe benefit':

fringe benefit, in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit:

(a) provided at any time during the year of tax; or

(b) provided in respect of the year of tax;

being a benefit provided to the employee or to an associate of the employee by:

(c) the employer; or

(d) …

in respect of the employment of the employee, but does not include:

…

(g) a benefit that is an exempt benefit in relation to the year of tax; or

…

If you provide the vehicle to the employee in accordance with the arrangement, you will be providing the employee with a benefit that will be a fringe benefit if it is not an exempt benefit.

In order to determine whether the benefit will be an exempt benefit, it is necessary to initially consider the type of benefit that is provided. The FBTAA is divided into 13 types of benefits and exemptions apply differently to the different categories of benefits.

Division 2 of Part III of the FBTAA applies to car benefits. Section 7 of the FBTAA sets out the circumstances in which the provision of a motor vehicle will give rise to a car benefit. Section 7 states:

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

(a) at any time on a day, in respect of the employment of an employee, a car held by a person (in this subsection referred to as the "provider"):

(i) is applied to a private use by the employee or an associate of the employee; or

(ii) is taken to be available for the private use of the employee or an associate of the employee; and

(b) either of the following conditions is satisfied:

(i) the provider is the employer, or an associate of the employer, of the employee;

(ii) the car is so applied or available, as the case may be, under an arrangement between:

(A) the provider or another person; and

(B) the employer, or an associate of the employer, of the employee;

that application or availability of the car shall be taken to constitute a benefit provided on that day by the provider to the employee or associate in respect of the employment of the employee.

For this subsection to apply the vehicle must be a car.

Is the vehicle a 'car' for the purposes of the FBTAA?

The meaning of the term 'car' in this context is defined in subsection 136(1) of the FBTAA as follows:

car has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997.

Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines 'car' as:

car means a *motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers.)

The ITAA 1997 defines 'motor vehicle' in subsection 995-1(1) as:

motor vehicle means any motor-powered road vehicle (including a 4 wheel drive vehicle).

Therefore, the vehicle will be a car if it is:

• a motor-powered road vehicle (including a 4 wheel drive vehicle);

• not a motor cycle or similar vehicle; and

• is designed to carry a load of less than 1 tonne and fewer than 9 passengers.

Miscellaneous Taxation Ruling MT 2024 Fringe benefits tax: dual cab vehicles eligibility for exemption where private use is limited to certain work-related travel (MT 2024) provides guidance on how the designed load capacity of a motor vehicle is to be determined. By applying this guidance, it is accepted the vehicle satisfies all of the requirements.

Therefore, the vehicle is a 'car' for the purposes of the FBTAA.

As the vehicle is a 'car', a car benefit will arise on a day when:

• the car is used for a private purpose (including travelling between home and work); or

• is garaged at home.

Will the car benefits be exempt benefits?

A car benefit will be an exempt benefit when the conditions of subsection 8(2) of the FBTAA are met. Subsection 8(2) states:

SECTION 8 EXEMPT CAR BENEFITS

…

8(2) [Exempt vehicles] A car benefit provided in a year of tax in respect of the employment of a current employee is an exempt benefit in relation to the year of tax if:

(a) the car is:

(i) a taxi, panel van or utility truck, designed to carry a load of less than 1 tonne; or

(ii) any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principle purpose of carrying passengers); and

(b) there was no private use of the car during the year of tax and at a time when the benefit was provided other than:

(i) work-related travel of the employee; and

(ii) other private use by the employee or an associate of the employee, being other use that was minor, infrequent and irregular.

That is, a car benefit will be an exempt benefit where the following conditions are met:

(1) the vehicle is:

• a taxi, panel van or utility truck designed to carry a load of less than one tonne

or,

• any other road vehicle designed to carry a load of less than one tonne (other than a vehicle designed for the principle purpose of carrying passengers);

and

(2) any private use of the car during the year of tax and at the time the benefit is provided is:

• work-related travel of the employee

or,

• other private use of the employee or an associate of the employee that is minor, infrequent and irregular

(1) Is the vehicle a taxi, panel van or utility truck designed to carry a load of less than one tonne or a road vehicle designed to carry a load of less than one tonne (other than a vehicle designed for the principle purpose of carrying passengers)?

As discussed above, the vehicle is designed to carry less than one tonne.

The vehicle is a dual cab vehicle which is not a taxi or a panel van. In considering whether it is a utility truck MT 2024 states:

2. …Broadly, dual cabs are variants of conventional goods vehicles under which additional seating positions are provided behind the driver and front-passenger seats. They share a common chassis to which the single or dual passenger cab and alternate tray sections may be fitted.

…

6. Dual cabs, particularly those of lesser load capacities, are commonly fitted with styles steel well bodies and are often referred to as "utes" in advertising material. An initial question to be determined therefore in deciding the eligibility of dual cabs for the work-related use exemption is whether they qualify as "utility trucks" within the meaning of sub-section 8(2). If dual cabs are in fact utility trucks within the meaning of sub-section 8(2), it follows that they would qualify for the concession afforded by that sub-section irrespective of their load or passenger carrying design features.

7. The meaning of utility truck as was expressed at former subsection 82AF(2) of the Income Tax Assessment Act 1936 was considered in Case M10, 80 ATC 77; Case 92, 23 CTBR (NS) 869. Based on that decision, the term utility truck as used in subsection 8(2) is seen as being restricted to derivatives of motor cars. Crew cabs could not be so described…

Therefore, the vehicle is not a utility truck.

Is the vehicle designed for the principle purpose of carrying passengers?

Guidance for determining whether a vehicle is designed for the principle purpose of carrying passengers is provided by paragraphs 14 to 17 of MT 2024 which state:

14. As previously mentioned, a dual cab that has a designed load carrying capacity of less than one tonne may still qualify for the work-related use exemption, under sub-section 8(2), if the vehicle is not designed for the principle purpose of carrying passengers. It is considered that the appropriate basis for determining this issue is whether or not the majority of the designed load capacity is attributable to passenger carrying capacity. It is understood that this approach is consistent with that adopted under the Australian Design Rules in determining what is a passenger vehicle.

15. For this purpose the designed passenger carrying capacity is to be determined by multiplying the designed seating capacity (including the driver's) by 68 kg, which is the figure adopted for the purposes of the application of the Australian Design Rules.

16. If the total passenger weight so determined exceeds the remaining "load" capacity, the vehicle is to be treated as being designed for the principal purpose of carrying passengers and as such ineligible for work-related use exemption.

17. By way of illustration, if a vehicle has a gross vehicle weight of 2,000 kgs, a basic kerb weight of 1,400 kgs, and has a designed seating capacity of five, the vehicle would be considered to be a vehicle designed principally for the carriage of passengers. This is because the total load capacity is 600 kgs of which the majority, 340 kgs, would be absorbed by its designed passenger carrying capacity.

In applying this guidance it can be concluded the vehicle is not designed for the principal purpose of carrying passengers.

Therefore, the vehicle is a road vehicle designed to carry a load of less than one tonne and is not designed for the principle purpose of carrying passengers and the requirements of paragraph 8(2)(a) of the exemption are met.

(2) Is the private use of the vehicle restricted to work-related travel of the employee, or other private use of the employee or an associate of the employee that is minor, infrequent and irregular?

Work-related travel

'Work-related travel' in this context is defined in subsection 136(1) of the FBTAA as follows:

work-related travel, in relation to an employee, means:

(a) travel by the employee between:

(i) the place of residence of the employee; and

(ii) the place of employment of the employee or any other place from which or at which the employee performs duties of his or her employment; or

(b) travel by the employee that is incidental to travel in the course of performing the duties of his or her employment.

Travel by the employee from their place of residence to your office or to a worksite (being a place at which the employee performs the duties of their employment) will fall within the meaning of work-related travel.

Minor, infrequent and irregular

The FBTAA does not define what us meant by 'minor', 'infrequent' and 'irregular' in the context of private use of a motor vehicle. ATO Interpretative Decision ATO ID 2012/98 Fringe Benefits Tax Exempt car benefits: excepted private use (ATO ID 2012/98) provides some guidance about how these terms should be interpreted. ATOID 2012/98 discusses the meaning of the words specifically in the context of whether the transportation of an employee's child to school by the employee on their way to a work location is minor, infrequent and irregular private use however the discussion can still provide guidance in your situation. ATOID 2012/98 states:

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.

The Macquarie Dictionary 2009, rev. 5^th edn, The Macquarie Library Pty Ltd, NSW provides the following definitions for each of the terms:

minor

adjective

1. lesser, as in size, extent, or importance…

infrequent

adjective

1. happening or occurring at long intervals or not often…

2. not constant, habitual, or regular…

irregular

adjective

not characterised by any fixed principle, method, or rate: irregular intervals

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

The transportation of the employee's child to school during the employee's journey from home to a work location was a one-off occasion and there was no other private use of the car.

In these circumstances, the transporting of the employee's family member is an excepted 'private use' for the purposes of subparagraph 8(2)(b)(ii) as the use of the car for this purpose is minor, infrequent and irregular.

Fringe benefits tax - a guide for employers (FBT guide for employers)(NAT 1054) provides examples to demonstrate acceptable private use for the purposes of the exemption. Chapter 20 of the FBT guide for employers states:

20.2 Transport exemptions

Cars

…

There are circumstances in which private use of a car may be exempt from FBT.

An employee's private use of a taxi, panel van or a utility designed to carry less than one tonne, or any other road vehicle designed to carry a load of less than one tonne (that is, one not designed principally to carry passengers) is exempt if their private use of such a vehicle is limited to:

• travel between home and work

• travel that is incidental to travel in the course of performing employment-related duties

• non-work related use that is minor, infrequent and irregular - for example, occasional use of the vehicle to remove domestic rubbish.

Example: Exempt use

An electrical company employee takes the company van (carrying capacity of less than one tonne) home each night because there is no security at the company premises. The only non-work-related use during the FBT year was a trip to pick up some furniture and take it to the employee's home - this use of the van would be exempt from FBT.

If the use of the vehicle exceeds the limits set out above, it is a car fringe benefit.

…

Example: Non-exempt use

A council employee takes a utility (carrying capacity of less than one tonne) home each night and on the weekends. Although the utility is clearly marked as a council vehicle, the employee uses it for shopping and other private purposes during the week and often for country trips on the weekends.

This use of the utility would not be exempt from FBT and would be treated as a car fringe benefit…

As the arrangement has not yet been entered into we cannot be conclude that the private use by the employee (other than the 'work-related travel') is minor, infrequent and irregular. However, Miscellaneous Taxation Ruling MT 2021 Fringe benefits tax : response to questions by major rural organisation (MT 2021) provides some guidance about how an employer can ensure that any private use meets the requirement of being minor, infrequent and irregular. MT 2021 states:

3. CAR FRINGE BENEFITS

…

QUESTION 20

What constitutes a prohibition against private use of a car and what is required for it to be consistently enforced?

Answer

There would need to be a situation where an express prohibition had been made by the employer in clear and unequivocal terms. Employees would also need to be made aware that the prohibition was genuine and would be reinforced, if necessary, by disciplinary measures for its breach. Consistent enforcement could comprise regular checks of odometer readings against business kilometres claimed to have been travelled by employees. In short, it would not be sufficient for an employer to issue the instruction either on the general understanding that it would be honoured in the breach, or without establishing a system of review to detect and deter breaches.

You have stated that the employee's use of the car will be subject to a car use policy permitting use of the vehicle for work related purposes, for the employee to travel to and from their residence to your office or a worksite and for private travel that is of a minor and infrequent nature. The employee will be required to notify you of any private travel and provide signed odometer readings at either the start of each quarter or six month period along with a statement to the effect that private travel was nil or minor during the period. Disciplinary measures will be included in the policy and enforced. Should continual breaches of the policy occur, the salary sacrifice arrangement may be terminated or any FBT payable by you will become payable by the employee and included in the salary sacrifice amount.

If the arrangement is carried out as specified above and the policy is enforced then we will accept that the only private use of the vehicle is work-related travel of the employee or other private use of the employee or an associate of the employee that is minor, infrequent and irregular.

Conclusion

If the employee complies with the car usage policy and uses the car only for work related purposes, for travel to and from their residence to your office or other place of employment and for private travel that is minor, infrequent and irregular, the car benefits that arise in relation to the provision of the car will be exempt car benefits according to subsection 8(2) of the FBTAA.

Question 2

Where you provide an employee with registration, insurance, repairs and fuel in respect of the vehicle referred to in question 1, will the provision of the registration, insurance, repairs and fuel be exempt benefits where the car use policy and monitoring is adhered to and enforced?

In addition to providing the vehicle to the employee under the proposed arrangement, you intend to allow the employee to salary sacrifice the following costs related to the use of the car:

• fuel for the vehicle

• registration of the vehicle

• insurance in respect of the vehicle

• repairs and maintenance of the vehicle

Refer to the discussion of the meaning of 'fringe benefit' at question 1 above. As with the provision of the car, the provision or payment of the car expenses listed above will constitute benefits that will be fringe benefits if they are not exempt benefits.

Section 53 of the FBTAA sets out the circumstances when the provision of certain car expenses will be exempt benefits. Section 53 states:

SECTION 53 MOTOR VEHICLE FRINGE BENEFIT FUEL ETC. TO BE EXEMPT IN CERTAIN CASES

53(1) [Benefits provided when car fringe benefit provided] For the purposes of this Act:

(a) a car expense payment benefit;

(b) a car property benefit; or

(c) a car residual benefit;

in respect of a car, being a benefit that is attributable to a period when a car fringe benefit was provided, or would but for subsection 8(2) have been provided, in relation to the car is an exempt benefit.

…

53(3) [Definitions] In this section:

"car expense payment benefit" means an expense payment where the recipients expenditure is a car expense;

"car property benefit" means a property benefit where, if the recipient had incurred expenditure in respect of the provision of the recipients property, that expenditure would have been a car expense;

"car residual benefit" means a residual benefit where, if the recipient had incurred expenditure in respect of the provision of the recipients benefit, that expenditure would have been a car expense.

The meaning of 'car expense' in this context is set out in subsection 136(1) of the FBTAA as follows:

car expense, in relation to a car, means an expense incurred in respect of:

(a) the registration of, or insurance in respect of, the car;

(b) repairs to or maintenance of the car; or

(c) fuel for the car.

That is, where the use of a motor vehicle gives rise to a car fringe benefit, or would give rise to a car fringe benefit if the car benefit was not exempt under subsection 8(2) of the FBTAA, the provision of registration, insurance, repairs and fuel in respect of the car are exempt benefits in accordance with section 53 of the FBTAA.

As concluded in question one above, the provision of the vehicle is a benefit that would be a car fringe benefit if the benefit was not exempt under subsection 8(2).

Therefore, the provision of fuel for the car, registration of the car, insurance in respect of the car and repairs and maintenance of the car under the arrangement will be exempt benefits under section 53 of the FBTAA.

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