Edited version of your written advice

Authorisation Number: 1051240057226

Date of advice: 21 June 2017

Ruling

Subject: Fringe Benefits tax

Question

Is travelling between an employee’s residence and their client’s home considered to be business travel under the operating cost method of valuing car fringe benefits and therefore an employer’s aggregate non-exempt amount under subsection 5B(1E) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)

Answer

Yes.

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

The scheme commences on

2008

Relevant facts and circumstances

You are a Public Benevolent Institution (PBI) that cares for disadvantaged members of society by providing nursing and personal care services to clients in their homes as part of your aged care services.

Duties of personal carers, physiotherapists, occupational therapists and nurses

The duties performed by the employees perform the following duties but not limited to:

1. Personal Carer

● personal/hygiene care (showering/dressing)

● assistance with meals

● domestic duties including shopping

● assistance with transport for medical appointments

● social activities

● in home respite care

● access to other services or aids

● any other tasks as stated in the care plan

2. Physiotherapist (P)

● assess physiotherapy and equipment needs of clients

● development of individual care plans for clients assessed as needing physiotherapy and/or mobility aids

● provide instruction to other staff (where necessary) on methods of fulfilling the care plan

3. Occupational Therapists (OT)

● accurate assessment of the occupational therapy needs of clients

● provide occupational therapy services for community clients referred for remedial action

● development of individual care plans which fill the needs of clients

● provide instruction to other staff (where necessary) on methods of fulfilling the care plan

4. Registered Nurses (RN)

● provide nursing care, including clinical practice and administration of medications to allocated clients

● undertake comprehensive assessments, develop, implement, monitor and review care plans to meet the health care needs of clients and to promote quality of life; and

● monitor, support and supervise care given by personal carers.

5. Enrolled Endorsed Nurses (EEN)

● assist in the delivery of nursing care to clients

● observe, monitor, and interpret, document and report signs, symptoms and changes in the status of clients

● administer schedule 2, 3 and 4 medications under the supervision of a Registered Nurse

● contribute to the formulation and implementation of care plans

● undertake procedures within the scope of knowledge and ability

● support and as appropriate direct other members of the nursing and Allied Health team

6. Clients may overlap the groups listed above depending on the needs of the client.

7. Clients in each group change from day to day depending on any cancellations or other variables.

Daily routines

1. Employees do not perform any employment or business duties at their homes.

2. The employees’ roster varies constantly due to many factors e.g. staff calling in sick, clients going to hospital or unexpected appointments, family outings, etc. Personal carers are advised of their roster daily.

3. Most staff call into the base every day. Most carers go to the base to collect client meals or meet with senior staff or collect equipment needing to go to the client.

4. Each work car has a storage box in which personal protective equipment is kept, along with a spill kit, first aid box and wounds kit. All cars are kept locked.

5. Equipment collected from the base includes:

● PCs – continence pads as required and eskies with meals as required

● RNs – dressings, catheters etc. as required for that particular’s visit

● OTs – equipment/aids e.g. commodes, walking frames, wheelchairs etc

Most equipment can be picked up a day before the visit.

Employees often travel between their home residence and employer’s base and between their home residence and home of clients. Personal use is kept to an absolute minimum and staff are asked not to use cars for private use unless it is an emergency.

Recordkeeping

All staff complete log books electronically which is interfaced with the client community care program, this is accessed using a portable device.

In some instances manual logbooks/log sheets are completed.

Copies of the electronic logbook can be provided to the ATO upon request.

Itinerant travel

The nature of travelling performed by the employees is inherently itinerant. Relevant factors include:

● travel is fundamental part of the employee’s work

● the terms of employment require the employee to perform duties at more than one place of 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 his or her usual place of residence

● 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)

● it is impractical for the employee to perform the duties without the use of a car

● the nature of the job itself makes travel in the performance of duties essential

● the employee is travelling in the performance of the employment duties from the time of leaving home, that is, the employee’s home constitutes a base of operations

● the employee has to carry bulky equipment and/or meals that are used when visiting patients

Additional information

1. The number of vehicles kept at the employee’s private residence on average during the year:

You provide the use of motor vehicles to your staff who are personal carers (PCs), physiotherapists, occupational therapists (OTs), enrolled endorsed nurses (EENs) and registered nurses (RNs). There would be approximately X staff in this area and up to Y vehicles are home garaged.

2. Approximate number of nights per year the employer’s vehicle is kept at an employee’s private residence:

● employees that salary package their cars - 365 nights.

● employees that work in rural areas, 25 to 30 due to security issues at their business premises

● remainder of employees - nil

3. An employee generally visits 6 to 10 client workplaces, but varies from service type.

4. An average of 12,000 to 15,000 kms (based on 2015/2016 figures) is travelled by each vehicle per year.

5. The total cost of running the vehicle for is $X per annum.

6. Employees travel approximately 5 to 20 kms from their residences to the clients’ homes. It can be up to 30 kms.

7. Approximate distance from employees residences to their workplaces varies from office to office but on average it is 9 to 30 kms.

8. Employees often transport bulky equipment in the vehicles such as wheelie walkers, wheelchairs, continence pads and meals to clients.

9. The percentage of trips where the vehicle is used to transport clients is 30 per cent.

10. Non-work related private use of vehicles (personal use) is kept to an absolute minimum unless it is an emergency.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 57A

Fringe Benefits Tax Assessment Act 1986 Subsection 5B(1E)

Fringe Benefits Tax Assessment Act 1986 Subsection 5B(1D)

Fringe Benefits Tax Assessment Act 1986 Subsection 5E(2)

Reasons for decision

You are a PBI that provides cars to your employees which are garaged at their place of residence. You also provide cars through salary packaging. The availability of these cars for private use is a benefit.

Benefits provided to an employee of a PBI are exempt from fringe benefits tax (FBT) under section 57A of the FBTAA up to the $30,000 capping threshold. If an employee is provided with fringe benefits above the capping threshold, then the PBI will be subject to FBT on those fringe benefits.

An employer that is a PBI must determine its fringe benefits tax liability, if any, for each year of tax. To do this the employer needs to calculate its fringe benefits taxable amount which is the amount on which the employer must pay FBT.

For a PBI, the employer's fringe benefits taxable amount is increased by the employer's aggregate non-exempt amount for the year of tax under subsection 5B(1D) of the FBTAA.

The employer's aggregate non-exempt amount is worked out in accordance with subsection 5B(1E) of the FBTAA. This is done by determining each employee's individual grossed-up non-exempt amount which is effectively the amount of any fringe benefits above the capping threshold.

In order to determine each employee's individual grossed-up non-exempt amount, the employer must work out the amount that would be each employee's individual fringe benefit amount. To do this each benefit must be treated as if it were a fringe benefit where:

● it is provided in respect of the employment of the employee

● it is exempt because of section 57A, and

● apart from section 57A would be a fringe benefit.

Under subsection 5E(2), an employee's individual fringe benefits amount is the sum of the employee's share of the taxable value of each fringe benefit that relates to the year of tax other than an excluded benefit.

In order to determine the individual fringe benefit amount for an employee who is using an employer’s car, you need to calculate the taxable value as if that benefit were a fringe benefit.

In your case, you have maintained log books to determine the business use of cars. Employees travel between their home residence and employer’s base and between their home residence and home of clients. They generally visit 6 to 10 clients per day.

Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel (explains the situations where home to work travel may constitute business travel).

One of these situations, as listed in paragraph 25 of MT 2027, is where the nature of the employee’s employment is inherently itinerant.

Guidelines for determining whether an employee is carrying out itinerant work are provided by Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses.

Paragraph 7 sets out the following characteristics as being indicators of itinerancy:

a). travel is a fundamental part of the employee’s work …;

b). the existence of a 'web’ of work places in the employee’s regular employment …;

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….

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) …;

(ii) the employee's home constitutes a base of operations …;

(iii) the employee has to carry bulky equipment from home to different work sites …;

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

In applying these characteristics to your employees:

● Travel is a fundamental part of their work as they are required to visit several clients each day in order to provide nursing and personal care in the client’s homes.

● Employees are required to travel to perform their duties at more than one place of employment. Hence they are travelling in the performance of their employment duties when they travel to visit their clients for the day.

● Most employees call into the base every day to collect client meals, meet with senior staff or collect equipment needed to go to the client.

● Employees do not commence their duties when they leave their homes to travel directly to the work base.

● Employees do not perform any employment or business duties at their homes. Employees’ homes do not constitute a base of operations.

● Employees are required to carry equipment and/or meals that are used when visiting the clients. Equipment including bulky equipment such as wheelchairs, walking frames and commodes are collected from the work base and not taken from home.

As most of your employees call into the work base quite frequently to collect client meals or meet with senior staff or collect equipment needed to go to the client, they are considered to have a fixed place of work.

Having a fixed place of work, the journey between an employee’s home residence and their work base each day would be considered to be travel to work rather than on work and therefore, private travel.

Employees do not perform any employment or business duties at their homes. Employees’ homes do not constitute a base of operations.

Therefore, your employees would not satisfy the criteria that the nature of their employment is inherently itinerant.

Although the employees’ nature of employment is not inherently itinerant, the journey may be considered business where the circumstances are akin to those described in paragraphs 28 to 36 of MT 2027.

Paragraphs 30-33 of MT 2027 states:

30. The position may, however, be less clear where the employee travels from home directly to the client's, etc., premises and then on to the office. Such travel may be undertaken in a variety of circumstances, for example -

● the client's premises may be located at a point on or close to the normal route travelled by the employee to the office;

● alternatively, the employee may be required to travel in the opposite (or a markedly different) direction to the normal work route;

● in some cases, the distance travelled to reach the client's premises will be substantially greater than the direct route to the office; even to the extent that the employee may need to devote the whole day to the visit;

● the visit to the client may be the first of a number made before travelling to the office.

31. Such travel is distinguishable from the general position determined in Lunney's case which, to use the words of Dixon C.J. at page 405, deals with travel undertaken "by ordinary people to enable them to go day by day to their regular place of employment or business and back to their homes".

32. The present examination deals with situations where an employee who has a regular place of employment travels to an alternative location which, for the period of the visit, constitutes a place of employment., Further, they involve trips to a destination that, if made from the office or other normal work place, would constitute business travel…

33. In essence, the question to be determined when, as a practical alternative, an employee travels to a client's premises directly rather than travelling to the office and then to those premises, is whether the travel should similarly be treated as business travel.

Paragraph 34 further clarifies that,

34. While the position is not free from doubt and is perhaps clearer in some of the instances cited in paragraph 30 than in others, it has been decided that the total journey from the employee's home to the client's premises and on to the office should be accepted as business travel. This approach is to be adopted where -

● the employee has a regular place of employment to which he or she travels habitually;

● in the performance of his or her duties as an employee, travel is undertaken to an alternative destination which is not itself a regular place of employment (i.e., this approach would not apply, for example, to a plant operator who ordinarily travels directly to the job site rather than calling first at the depot or to an employee of a consultancy firm who is placed on assignment for a period with a client firm); and

● the journey is undertaken to a location at which the employee performs substantial employment duties.

Therefore, in your circumstances, employees travelling directly from home to a client’s home where they perform substantial employment duties are undertaking business travel, as the client’s home is considered to be an alternative work place. Where return travel of this kind is undertaken from the employees’ alternative work place, this would also be considered business travel.

Employees travelling directly between home and their work base (their regular place of employment), would be private travel as in the decision in Lunney and Hayley v GCT (1958) 100 CLR.

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