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Edited version of your written advice
Authorisation Number: 1051211791251
Date of advice: 7 April 2017
Ruling
Subject: FBT - Car Fringe Benefits
Question 1
Will a car fringe benefit arise under section 7 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) where an employee is provided with a company car that is garaged at that employee's place of residence overnight?
Answer
Yes
Question 2
Will an FBT liability arise where the taxable value of the car fringe benefit is calculated using the operating cost method under section 10 of the FBTAA?
Answer
No
This ruling applies for the following periods:
1 April 2017 to 31 March 2018,
1 April 2018 to 31 March 2019,
1 April 2019 to 31 March 2020,
1 April 2020 to 31 March 2021.
The scheme commences on:
1 April 2017
Relevant facts and circumstances
The organisation provides health services to clients.
Health workers employed by the organisation will travel to clients' homes to provide the service.
Health workers will travel directly from their residence to a client's home in the morning, travel between the clients' homes during the day and go straight home after the last appointment for the day. They will generally visit 3-5 clients within a day.
The health workers may go to the office once a week for team meetings.
The organisation will provide company cars to the health workers to travel to clients' homes.
The health workers will park the cars at their home garages overnight.
There will be no private use of the cars permitted, as stated in internal policy.
Use of the cars will be monitored through the use of logbooks.
The operating cost method will be used to calculate the taxable value of any car fringe benefit.
Relevant legislative provisions
Fringe Benefits Tax Assessment Act 1986 Section 7 and
Fringe Benefits Tax Assessment Act 1986 Section 10.
Reasons for decision
Question 1
Summary
A car fringe benefit will arise under section 7 of the FBTAA where an employee is provided with a company car that is garaged at that employee's place of residence overnight.
Detailed reasoning
Subsection 7(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides that a car fringe benefit will arise on any day where a car, held by a provider (in this case the employer) is applied to a private use by an employee (or their associate) or is deemed to be available for their private use.
Subsection 7(2) of the FBTAA deems a car to be available for private use where the car is garaged or kept at or near the employee's place of residence.
In this case, the company cars will be parked in employees' home garages overnight, and will therefore be deemed to be available for their private use. This applies regardless of whether or not there will be any actual private use of the cars.
As the cars will be deemed to be available for private use, a car fringe benefit will arise under section 7 of the FBTAA on the days that the company cars are parked in employees' home garages.
Question 2
Summary
No FBT liability will arise where the taxable value of the car fringe benefit is calculated using the operating cost method under section 10 of the FBTAA.
Detailed reasoning
Taxable value of car fringe benefit - Operating Cost Method
Under section 10 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), the taxable value of a car fringe benefit is the total cost of operating the car during the FBT year calculated using the formula:
(C x (100% - BP)) - R
Where:
C = operating cost of the car
BP = business use percentage
R = the amount of any employee contribution
Therefore, the taxable value of the car fringe benefit will be reduced by the business use percentage applicable to the car during the period.
The business use percentage is a percentage of business travel compared to total travel of the car during the period.
Logbook and odometer records are required to be maintained for the purposes of calculating the business use percentage.
Business Use - Employment Duties of an Itinerant Nature
Travel between places of employment will generally be considered to be business travel, whereas travel from home to work is normally private travel.
However, Miscellaneous Taxation Ruling MT 2027 explains the situations where home to work travel is considered to be business travel. One of these situations is where the nature of the employee's employment is inherently itinerant.
Paragraph 25 of MT 2027 lists characteristics which indicate employment duties of an itinerant nature, including:
● Travel is a fundamental part of the employee's work;
● It is impractical for the employee to perform the duties without the use of a car;
● the terms of employment require the employee to perform duties at more than one place of employment;
● the nature of the job itself makes travel in the performance of duties essential; and
● 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.
Paragraph 7 of Taxation Ruling TR 95/34 also lists characteristics which indicate when an employee's work is itinerant, including:
● the existence of a 'web' of work places in the employee's regular employment, that is, the employee has no fixed place of work
● the employee continually travels from one work site to another. An employee must regularly work at more than one work site before returning to their usual place of residence.
An example provided in Taxation Ruling 95/34 is Wiener's case, where a teacher was required to teach at a minimum of four different schools each day, and comply with a strict timetable that kept her on the move throughout each of these days. It was concluded that travel was inherent in her employment because the nature of the job itself made travel in the performance of her duties essential.
In this case, the health workers will be required to travel to clients' homes to perform their duties, generally visiting a minimum of three clients per day, and the use of a car will be required to achieve this.
Based on the characteristics listed in MT 2027 and TR 95/34, it is accepted that the health workers will be performing employment duties of an itinerant nature.
As the nature of the health workers' employment is inherently itinerant, the travel from their home to client's homes will be considered to be business travel.
Paragraph 27 of MT 2027 accepts that an employee carrying out itinerant work may attend the employer's office periodically (e.g. once a week) to carry out administrative duties, and that this will still be treated as business travel.
It has been stated that there will be no further private use of the cars permitted.
Conclusion
The travel by the health workers from home to client's places, between client's places, and to the office for team meetings once a week will be treated as business travel. The business use percentage will therefore be 100%.
As the business use percentage will be 100%, the taxable value of the car fringe benefit will be reduced to nil.
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