Edited version of your written advice

Authorisation Number: 1051260725065

Date of advice: 31 July 2017

Ruling

Subject: Fringe benefits tax - Car parking benefits

Question 1

Will a car parking fringe benefit be provided to an employee when the employee uses a pool car that is parked in the fleet carpark while they are 'on-call’, or returns a pool car to the fleet carpark following a period of being 'on-call’?

Answer

No

Question 2

Will a car parking fringe benefit be provided to an employee when the employee uses a pool car that is parked in the fleet carpark to attend a work appointment outside of their normal working hours or returns a pool car to the fleet carpark after attending an appointment outside of their normal working hours?

Answer

No

This ruling applies for the following periods:

For a number of FBT years commencing in the year ended 31 March 2016

The scheme commences on:

In the year ended 31 March 2016

Relevant facts and circumstances

For the purposes of this Ruling a 'pool car’ is a fleet vehicle that is not allocated to a particular employee.

The pooled cars remain available for the use of all employees and are not allocated to individual employees.

The vehicles are available to be booked for use by authorised employees or they may be allocated to be used for a specific purpose.

When these cars are not being used during the day they are garaged in the fleet carpark. They are also generally garaged overnight in the fleet carpark.

The fleet carpark is located within one kilometre of a commercial parking station that charges members of the public an amount for all-day parking that is more than the car parking threshold.

An employee may garage a car at their residence for one night because:

● the employee is on-call overnight for either a single night or for consecutive nights of up to seven nights; or

the employee is required to attend a work appointment outside of their normal working hours either on their way home from work or on their way to work the following day

On-call employees

You have obligations that require you to respond to call outs and emergencies in a timely manner.

The call-outs or emergencies could occur at any time of the day or night and on any day of the week.

In order to meet these obligations you garage the pooled vehicles in a fleet carpark at or in the vicinity of your premises during regular working hours and when required (for example, nights and weekends) at the residence of an on-call employee.

When necessary the pooled vehicles contain any equipment required for the employee to respond to the call-out or emergency.

Employees are on call overnight for a minimum of one night or for consecutive nights of up to seven nights.

When the employee is on-call they will garage the car at their own home overnight.

It is a requirement of the employee’s employment that they can respond in a timely manner to call outs and the car must be parked in close proximity to the employee while they are on call.

On the first day of the on-call roster, the employee collects the vehicle from the fleet carpark and drives it home so they can respond to an emergency or call out. Following the single on-call night or after the final consecutive on-call night, the employee returns the car to the fleet-car park.

When the employee is on-call for consecutive nights the employee drives the on-call vehicle to their work location on their normal working day and returns the on-call vehicle to the fleet car park. The employee may take the same car home overnight on each of the nights or they may take a different car from the fleet of vehicles.

While on call, the on-call employee is entitled to use the car for home to work travel and for responding to a call out. Except for the home to work travel, no other private use is permitted outside of the employee’s regular working hours and no private use is permitted during their regular working hours.

The on-call employee does not have an ongoing entitlement to use the parking facilities in the fleet car park. They are entitled to use the parking facilities when returning the car to the fleet car park during the working day after they have garaged it at their home overnight whilst on-call.

Employee attending after-hours appointment

Your employees are required to work standard working hours.

There are occasions where you will require your employee to attend a work appointment outside of their regular working hours (either before or after their regular working hours commence or conclude).

The employee is paid for their attendance at these appointments.

When an employee has a work appointment they are required to attend after the conclusion of their regular working hours on a particular day the employee will drive a pool car from the fleet carpark at their regular place of employment to the appointment. Instead of returning the pool car to the fleet carpark following the appointment the employee will drive the car to their home and keep the car at their home overnight before driving it to work before the commencement of their regular working hours on their next regular working day.

When an employee is required to attend a work appointment prior to the commencement of their regular working hours on a particular day, after the conclusion of their regular working hours on the day prior to the day of the appointment they will drive a pool car from the fleet carpark at their regular place of employment to their home and keep the car at their home overnight. The following morning they will use the pool car to drive from their home to the appointment and then to their usual place of employment where they will return the car to the fleet car park.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 39A

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

Question 1

Will a car parking fringe benefit be provided to an employee when the employee uses a pool car that is parked in the fleet carpark while they are 'on-call’, or returns a pool car to the fleet carpark following a period of being 'on-call’?

Summary

A car parking benefit will not arise as the parking facilities for the pool car are not in respect of the employment of the employee. Therefore a car parking fringe benefit will not be provided to the on-call employee.

Detailed reasoning

Subsection 136(1) of the FBTAA defines a 'car parking benefit’ as 'a fringe benefit that is a car parking benefit’.

The conditions that must be satisfied for a car parking benefit to arise are set out in subsection 39A(1) of the FBTAA which states:

If the following conditions are satisfied in relation to a daylight period, or a combination of daylight periods, on a particular day:

(a) during the period or periods, a car is parked on one or more premises of a person (the provider), where:

(i) the premises, or each of the premises, on which the car is parked are business premises, or associated premises, of the provider; and

(ii) a commercial parking station is located within a 1 km radius of the premises, or each of the premises, on which the car is parked; and

(iii) the lowest fee charged by the operator of any such commercial parking station in the ordinary course of business to members of the public for all-day parking on the first business day of the FBT year is more than the car parking threshold;

(b) the total duration of the period or periods exceeds 4 hours;

(c) any of the following applies:

(i) a car benefit relating to the car is provided on that day to an employee or an associate pf an employee in respect of the employment of the employee;

(ii) the car is owned by, or leased to, an employee or an associate of an employee at any time during the period or periods;

(iii) the car is made available to an employee or an associate of an employee at any time during the period or periods by another person, where:

the other person is neither the employer of the employee or an associate of the employer of the employee; and

(B) the other person did not make the car available under an arrangement to which the employer of the employee, or an associate of the employer of the employee, is a party;

(d) the provision of parking facilities for the car during a period or periods is in respect of the employment of the employee;

(e) on that day, the employee has a primary place of employment;

(f) during the period or period, the car is parked at, or in the vicinity of, that primary place of employment;

(g) on that day, the car is used in connection with travel by the employee between:

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

(ii) that primary place of employment;

(h) the provision of parking facilities for the car during the period or periods is not taken, under the regulations, to be excluded from this section;

(i) the day is on or after 1 July 1993;

the provision of parking facilities for the car during the period or periods is taken to constitute a benefit provided by the provided to the employee or the associate of the employee in respect of the employment of the employee.

Relevantly, a car parking benefit will arise from the parking of the pool vehicles if the parking facilities for the car are in respect of the employment of the employee (paragraph 39A(1)(d)).

Is the provision of the parking facilities for the pool car during the daylight periods the pool car is parked on the premises of the provider, in respect of the employment of the employee?

Subsection 136(1) of the FBTAA defines the phrase 'in respect of’ in relation to the employment of an employee to include 'by reason of, by virtue of, for or in relation directly or indirectly to, that employment’.

The meaning of the phrase 'in respect of’, was considered by the Full Federal Court in J & G Knowles v Federal Commissioner of Taxation [2000] 2000 ATC 4151; 96 FCR 402; 44 ATR 22 (Knowles). The Full Federal Court held that it is not sufficient for the purposes of the FBTAA to conclude that there is some causal connection between the benefit and the employment – the connection must be “material”, stating at 4156:

22. The words “in respect of”: have no fixed meaning. They are capable of having a very wide meaning denoting a relationship or connection between two things or subject matters. However the words must, as with any other statutory expression, be given a meaning that depends on the context in which the words are found…

23. The AAT was correct in stating that the phrase requires a “nexus, some discernible and rational link, between the benefit and employment”. That, however, does not take the matter far enough. For what is required is a sufficient link for the purpose of the particular legislation… It cannot be said that any causal relationship between the benefit and the employment is a sufficient link so as to result in a taxable transaction…

…

26. … Whatever question is to be asked, it must be remembered that what must be established is whether there is a sufficient or material rather than a, causal connection or relationship between the benefit and the employment. There is, in any event, a danger in placing too much emphasis on causation. As Lord Hoffman pointed out in Environment Agency v Empress Car Co Ltd [1999] 2 AC 22 at 29, an answer to the question of whether A has caused B will differ according to the purpose for which the question is asked.

27. Here the question whether there is a sufficient or material connection or relationship between a benefit and employment is assisted by having regard to the purpose or object of imposing FBT on employers. That purpose was stated by the then Treasurer, Mr Keating, in the Second Reading Speech (2 May 1986, Hansard, House of Representatives) at 3020 to be to “ensure that all forms of remuneration paid to employees bear a fair measure of tax…”

28. While the width of the definition of “fringe benefit” was designed to capture benefits that, in truth, were other than remuneration, the stated purpose suggests that asking whether the benefit is a product or incident of the employment will be helpful. If it is not then the benefit is likely to be extraneous to the employment and will not bear FBT, notwithstanding that the employment might have been a causal factor in the provision of the benefit. In particular, the fact that a benefit is provided to a director because it was authorised by that director will not, of itself, be sufficient to characterise the benefit as one which is “in respect of” the employment. Without more, it is not a product or incident of that office.

29. To put the matter another way, although the process of characterising the benefit provided in a particular case can involve questions of fact and degree, it is not sufficient for the purposes of the Act merely to enquire whether there is some causal connection between the benefit and the employment: see FC of T v Rowe 95 ATC 4691 at 4703 and 4710; (1995) 60 FCR 99 at 114 and 123. Although Brennan, Deane and Gaudron JJ observed in Technical Products (at Aust Torts Reports 68, 622; CLR 47), that the requisite connection will not exist unless there is “some discernible and rational link” between the two subject matters which the statute requires to be linked, as was pointed out by Dawson J (at Aust Torts Reports 68, 624; CLR 51), the connection must be “material”

In Starrim Pty Ltd v Federal Commissioner of Taxation [2000] FCA 952; 2000 ATC 4460; 44 ATR 487 (Starrim), Lindgren J. further considered the phrase “in respect of” in this context. In considering whether benefits provided to a husband and wife who were the only shareholders and directors of a private company were provided in respect of their employment as directors, Lindgren J said at ATC 4470:

Fourthly, the decision of the full court in Knowles establishes that the required relationship between the provision of a benefit and the employment is not established merely by the existence of some or a causal relationship, and, in particular that it is not established by nothing more than the fact that the employee has been able to cause the benefit to be provided to him by reason of his or her office as a director of the employer. There must be a “sufficient” or “material” relationship between the employment and the provision of the benefit.

You have obligations that require you to respond to call outs and emergencies in a timely manner. These obligations are either statutory obligations, or set out in your enterprise bargaining agreement or in internal policy and procedure documents. The call-outs or emergencies could occur at any time of the day or night and on any day of the week.

In order to meet these obligations you have pooled vehicles garaged in a fleet carpark at or in the vicinity of your premises during regular working hours and when required (for example nights and weekends), at the residence of an on-call employee. When necessary the pooled vehicles contain any equipment required for the employee to respond to the call-out or emergency.

Your employees are required by you to be on-call for either a single night or for consecutive nights of up to seven consecutive nights.

On the first day of the on-call roster, the employee collects the vehicle from the fleet carpark and drives it home so they can respond to an emergency or call out. Applying the decisions in Knowles and Starrim, there is not the necessary connection with the employment for the provision of the parking facilities on this first day to be considered as being provided in respect of the employment of the employee as at the time the car is parked in the car parking facility, the employee does not have:

● control or use of the car; or

● an ongoing entitlement to use the parking facility.

Similarly, when the employee returns the car after being on-call for one night or on the last day of the roster after the employee has been on-call for multiple consecutive nights, at the time the car is parked in the fleet carpark, the necessary connection does not exist between the provision of the parking facilities and the employment of the employee.

On the second to sixth days of a consecutive day roster period, the employee has restricted use of the car as the car can only be used for home to work travel and for responding to a call-out. No other private use is permitted. Although the employee can be said to have control or use of the car during this period and a car fringe benefit will arise from the home to work travel and the home garaging, these factors by themselves do not provide the necessary connection between the parking facility and the employee’s employment for a car parking benefit to arise.

In reaching this conclusion, it is relevant to note that the employees do not have an ongoing entitlement to use the parking facilities, they do not have an ongoing right to use the cars or the car parking space during the normal working day and the car that they use over the consecutive nights they are on-call may not necessarily be the same car. Depending on the reason for the employee being on-call, the car may be fitted out with necessary equipment to respond to the call-out or emergency. It is necessary that the employees are able to respond to a call-out or emergency in a timely matter outside of working hours, the call-out response cannot be delayed until the next working day and therefore it is necessary for the cars to be parked in close proximity to the employee. These factors indicate that the parking facility is provided because of either or both, the nature of the car and to enable your obligations to be fulfilled, not because of the employee’s employment.

Therefore, the provision of the parking facilities for the pool car during the daylight periods the pool car is parked on the premises of the provider is not in respect of the employment of the employee.

As the provision of the parking is not in respect of the employee’s employment, paragraph 39A(1)(d) of the FBTAA is not met and a car parking benefit will not arise when an on-call employee parks the on-call vehicle in the fleet carpark.

As a car parking benefit will not arise, according to the definition of 'car parking fringe benefit’ in subsection 136(1) of the FBTAA, a car parking fringe benefit will not be provided.

Question 2

Summary

A car parking fringe benefit will not be provided as any car parking benefit is not provided to an identifiable employee or associate of an identifiable employee.

Detailed reasoning

As discussed in question one above, subsection 136(1) of the FBTAA provides that a 'car parking fringe benefit’ is 'a fringe benefit that is a car parking benefit’.

A benefit will be a car parking benefit when the requirements of subsection 39A(1) of the FBTAA are met. It is possible for these requirements to be met on a day that:

● an employee keeps a pool car at home so they can travel to an appointment from home the next day; or

● returns a pool car to the car fleet car park in the morning after keeping the car at home as a result of attending an after-hours appointment.

The definition of 'fringe benefit’ is set out in subsection 136(1) of the FBTAA and states:

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) …

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

(f) …

Therefore, in order for a car parking fringe benefit to arise, the benefit must be provided to the employee or an associate of the employee.

The definition of a fringe benefit and the need to identify a particular employee was considered by the Full Federal Court in FC of T v Indooroopilly Children Services (Qld) Pty Ltd [2007] FCAFC 16; 2007 ATC 4236; 65 ATR 36. Edmonds J at ATC 4253 said:

… I would incline to the views of Kiefel J in Essenbourne and Hill J in Walstern that the references to "the employee" throughout the definition are references to a particular employee who has been identified as "an employee" of the employer in terms of the opening words of the definition. Once identified as an employee of the employer by reference to the opening words of the definition, the terms of the definition which follow are to be applied by reference to the particular employee so identified.

…

A benefit may only be a "fringe benefit" if it is provided by one of four possible "providers" to one of two possible "recipients" - the employee or an "associate" of the employee. Even then, the benefit will only be a fringe benefit if it is in respect of the employment of an employee.

In applying this decision it is necessary to be able to identify a particular employee to whom the benefit relates.

Your employees are required to work standard working hours, however on occasion you will require your employees to attend work appointments outside of their regular working hours (either before or after their regular working hours commence or conclude).

When an employee is required to attend a work appointment after the conclusion of their regular working hours on a particular day, the employee will drive a pool car from the fleet carpark at their regular place of employment to the appointment. Instead of returning the pool car to the fleet carpark following the appointment, the employee will drive the car to their home and keep the car at their home overnight before returning the car to the fleet carpark before the commencement of their regular working hours on their next regular working day.

When an employee is required to attend a work appointment prior to the commencement of their regular working hours on a particular day, after the conclusion of their regular working hours on the day prior to the day of the appointment they will drive a pool car from the fleet carpark at their regular place of employment to their home and keep the car at their home overnight. The following morning they will use the pool car to drive from their home to the appointment and then to their usual place of employment where they will return the car to the fleet carpark.

Your employees take the pool cars home in accordance with your direction and guidelines and do so for operational purposes and necessity. They park the car in the fleet carpark because this is where the car is kept when not being used to conduct your business.

In either of these scenarios your employee is not able to be identified as the person who received the benefit as the employee’s only role is to park the pool car they have been using in the fleet carpark.

The only benefit that can be identified as being provided to the particular employee is the use of the car to drive to or from work. This is a separate benefit.

The employee ceases to receive a benefit once the car is parked. From that point it is the employer who received the benefit of having its car parked in the fleet carpark in the vicinity of its premises.

When the employee uses the car to travel from their primary place of employment to their residence, so as to be able to travel directly to a work appointment the next morning the parking benefit occurs before the employee received the use of the car.

This situation can be distinguished from a situation where an employee drives a car to and from work and received the benefit of having a car parking space in which to park the car. In such a situation, the particular employee can be seen to be receiving a benefit from the provision of the car parking facility for the car.

Therefore, although a car parking benefit may arise when an employee keeps a pool car at their home overnight or returns a pool car to the fleet carpark they have kept overnight so they can attend a work appointment outside of their regular working hours, the benefit will not be a car parking fringe benefit as the benefit is not a benefit provided to an employee (or their associate).

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