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Edited version of your written advice
Authorisation Number: 1012846398670
Date of advice: 29 July 2015
Ruling
Subject: Fringe benefits tax - exempt benefits, public transport using Green card
Question 1
Does subsection 47(6) of the FBTAA apply to exempt the fringe benefits provided under a salary sacrifice arrangement where employees use a transport card where the private use is restricted to home to work travel?
Answer
Yes
This ruling applies for the following periods:
1 April 2015 - 31 March 2016
1 April 2016 - 31 March 2017
1 April 2017 - 31 March 2018
1 April 2018 - 31 March 2019
The scheme commences on:
01 April 2015
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
A State Government Department (the Department), is an authority of the State Government, which is responsible for bringing together infrastructure for social and economic development in the State. In particular, the Department is responsible for the development of policy for transport services and the management of contracts for delivering bus services.
Entity A is a state-owned company. The State Government funding is provided to Entity A by the Department.
Entity A provides suburban transport services, in the major population areas of the State and payment for these services can be made through the use of a transport cards. These cards are similar to debit charge cards where an amount is deposited onto the card and then the fare for riding the bus is deducted from the balance.
The Department wishes to continue to provide their employees with FBT exempt bus travel on Entity A services only under the following salary sacrifice arrangement (SSA).
The employees can salary sacrifice an amount to be placed on a transport card to use for travel between home and work. Use of the transport card will be restricted to travel between home and work only, and employees will be required to sign a "no private use" declaration (other than for travel between home and work). In instances where the transport card is used outside these terms the Department will adjust the employee's salary and pay as you go (PAYG) withholding accordingly.
The transport cards will be issued in the Department's name and will have a unique number identifier as a suffix.
Where a transport card is lost the unused balance will be transferred to the replacement transport card.
The employee will prospectively elect an annual amount to salary sacrifice. This amount will be paid periodically over the number of pay periods in the financial year.
The Department will undertake an annual reconciliation of the program for each employee and any unused balance will be rolled forward to the next financial year for continuing employees or cashed out with the appropriate adjustment to salary and PAYG withholding for employees not continuing the scheme.
Entity A will cancel the transport card and refund any unexpended credit to the Department when notified by the Department that an employee has ceased employment. Unused bonus credits will not be refunded and there will be a small administration charge applicable to credit funds. Unused bonus credits refer to an additional X% credit that is added to the transport cards when they are topped up. Therefore, the terminating employee will be refunded the amount of any unused salary sacrifice.
When the transport cards are cancelled and excess credits refunded, the appropriate adjustments will be made to salary and PAYG withholding.
The Department has incorporated into its existing salary sacrifice policies, the rules and accountabilities applicable to packaging the transport arrangements. The policies are enforced in accordance with the employer's other employment conditions and any breaches of the policy are effectively enforced.
The Department made a nomination under Part XIC of the FBTAA to be treated as the employer for the purposes of the FBTAA.
Relevant legislative provisions
Subsection 47(6) of Fringe Benefits Tax Assessment Act 1986 (FBTAA).
Subsection 136(1) of Fringe Benefits Tax Assessment Act 1986 (FBTAA).
Reasons for decision
Question 1
Does subsection 47(6) of the FBTAA apply to exempt the fringe benefits provided under a salary sacrifice arrangement where employees use a transport card where the private use is restricted to home to work travel?
Summary
Subsection 47(6) of the FBTAA will apply to exempt the benefits provided to employees as private use is limited to work related travel.
Detailed reasoning
Subsection 47(6) of the FBTAA states:
Where:
(a) a residual benefit consisting of the provision or use of a motor vehicle is provided in a year of tax in respect of the employment of a current employee
(aa) the motor vehicle is not:
(i) a taxi let on hire to the provider; or
(ii) a car, not being:
(A) a panel van or utility truck; or
(B) any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers); and
(b) there was no private use of the motor vehicle 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 of the motor vehicle by the employee or an associate of the employee, being other use that was minor, infrequent and irregular.
the benefit is an exempt benefit in relation to the year of tax.
Work related travel is defined in subsection 136(1) of the FBTAA as:
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.
The benefit being provided is a residual benefit and as it is being made under a SSA it is being provided to a current employee.
ATO Interpretative Decision ATO ID 2001/313 Fringe benefits tax Fringe Benefits Tax : Exempt Residual Benefit concluded that travel on a bus involves the use of a motor vehicle. So this condition is satisfied.
In addition the facts to ATO Interpretative Decision ATO ID 2009/140 Fringe Benefits Tax Exempt benefits: free travel on bus - private use which looked at the application of subsection 47(6), state in part:
. . .The employee is provided with free transport on the buses under the employment arrangement. The employment arrangement is facilitated through the employer providing the employee with the use of a pre-paid ticket. The tickets and credits on each ticket are purchased by the employer from the third party entity, remain the property of the employer, and are held in the employer's name.
Under the employment arrangement the employee is only permitted to use this ticket for travel between the employee's place of residence and the employee's place of employment (between home and work). Any other form of use, including any use by an associate of the employee, is expressly prohibited. . . .
In ATO ID 2009/140 it was concluded that subsection 47(6) of the FBTAA would apply and the facts in DSG's arrangement with its employees are similar to those in the ATO ID being:
• Private travel is restricted to home to work trave (which is work-related travel as defined)l;
• employees will be required to sign a "no private use" declaration (other than for travel between home and work); and
• employees will be made to reimburse the employer if they use the card for any trips outside of home to work travel.
Therefore based on the decisions in both ATO ID 2001/313 and ATO ID 2009/140 subsection 47(6) of the FBTAA applies to exempt the benefits being the use of the employer's transport cards where the private use is restricted to home to work travel.
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