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Edited version of your written advice
Authorisation Number: 1051387420567
Date of advice: 19 June 2018
Subject: Fringe benefits tax - car benefits- taxable value - car operating cost method
Question 1
Is the travel undertaken by employees between various job locations considered to be a business journey for the purposes of section 10 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
Answer
Yes
Question 2
Is the travel undertaken by employees between their homes and their places of work considered to be a business journey for the purposes of section 10 of the FBTAA?
Answer
Yes
This ruling applies for the following periods:
Year ended 31 March 20XX
Year ended 31 March 20XX
Year ended 31 March 20XX
Year ended 31 March 20XX
Year ended 31 March 20XX
The scheme commences on:
20XX
Relevant facts and circumstances
The employer provides certain services and the employees that undertake duties in providing these services.
The employees are expected to undertake the majority of their work at various offsite work locations.
The employees undertake work activities at home and must have a home office which is compliant with the relevant legislation and industrial award requirements is required to be established as part of the employer’s policy.
It is expected that the employees will perform a wide range of work related tasks at home both prior and subsequent to working at various locations.
The employees regularly attend multiple locations on the same day. However, where a specific location requires, the employees can spend multiple succeeding days attending the same location. Work locations for the employees are typically known several weeks in advance.
Attendance at head office is only required on an ad hoc basis for group meetings or corporate support (including information technology and human resources support). There is no requirement for the employees to attend the office on a daily basis.
They are not allocated permanent desks in the head office.
The employees are provided with a car for business use purposes. They use the car to travel between their home and different places of work and to travel between different places of work on the same day.
The employees’ usual hours of work (for which they are paid wages) commence before and end after their periods of travel to various locations.
The employer advises each employee where they are required in order to carry out work.
Relevant legislative provisions
Fringe Benefits Tax Assessment Act 1986, section 10
Fringe Benefits Tax Assessment Act 1986, subsection 136(1)
Reasons for decision
All references made in these reasons for decision are to the Fringe Benefits Tax Assessment Act 1986 unless otherwise stated.
Questions 1 and 2
Summary
The travel undertaken by employees between various job locations and between their homes and their places of work is considered to be business journeys for the purposes of section 10.
Detailed reasoning
Where an employer elects to apply section 10, the taxable value of car fringe benefits will be calculated to take into account the business use percentage applicable to the car for the holding period where the applicable record keeping requirements have been met.
To determine the business use percentage it is necessary to determine the number of business kilometres travelled by the car during the holding period. A business kilometre is defined in subsection 136(1) in relation to a car to mean ‘a kilometre travelled by the car in the course of a business journey’.
A business journey in relation to section 10 is defined in subsection 136(1):
(a) for the purposes of the application of Division 2 of Part III in relation to a car fringe benefit in relation to an employer in relation to a car – a journey undertaken in a car otherwise than in the application of the car to a private use, being an application that results in the provision of a fringe benefit in relation to that employer;…
Private use is defined in subsection 136(1) as follows:
in relation to a motor vehicle, in relation to an employer or an associate of an employee, means any use of the motor vehicle by the employee or associate, as the case may be that is not exclusively in the course of producing the assessable income of the employee.
Travel directly between two places of employment, two places of business or a place of employment and place of business is generally accepted as business travel where the person does not live at either of the places and they travel to engage in income-producing activities.
A journey between home and work is normally private travel however where the nature of an employee’s employment is itinerant travel between the employee's home and work place is generally considered to be business journey.
Commonly, in these cases the employee works at the employer's office periodically (for example, once a week) to complete or file reports, pick up supplies or organise future trips. Travel between home and the office made in these limited circumstances is accepted as an ordinary incident of the business travel and, as such, is also treated as business travel.
The employees display a number of characteristics that are indicators of an itinerant worker:
● Travel is a fundamental part of the employee's work
Travel must be an essential feature of an employee’s duties in order for that work to be classified as itinerant.
The employees are required to travel to various locations in order to undertake their duties of employment. They are provided with cars in order to do so.
The employees’ paid hours of work commence before and end after their periods of travel to various locations.
● The existence of a web of workplaces in the employee's regular employment - that is, the employee has no fixed place of work
The employees attend head office on an ad hoc basis and there is no requirement for them to attend the office on a daily basis. They travel to several workplaces throughout the day in order to undertake their duties.
● 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).
They regularly attend multiple locations on the same day. Even if they do spend multiple succeeding days at the same location, paragraph 37 of Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work – deductions, allowances and reimbursements for transport expenses, explains that:
Continual travel refers to the frequency with which an employee moves from one work site to another. It envisages that the employee regularly works at more than one work site before returning to his or her usual place of residence. If an employee stays at a particular work site for a short period (e.g., several days or a few weeks) they may still be regarded as engaged in itinerant employment provided their usual pattern of work involves continual travel to more than one work site before returning to their usual place of residence.
Other factors that may indicate itinerancy (to a lesser degree) includes:
● the employee has a degree of uncertainty of location in his or her pattern of employment (that is, no long term plan and no pattern exists)
● the employee’s home constitutes a base of operations
There is a degree of uncertainty for the employees as they usually know several weeks in advance where they will be doing their work.
Paragraph 56 of TR 95/34 explains that:
An employee’s home may constitute a base of operations if the work is commenced at or before the time of leaving home to travel to work and the responsibility of completing it is not discharged until the taxpayer attends the worksite. Whether an employee’s home constitutes a base of operations depends on the nature and extent of the activities undertaken by the employee at home.
The employees are required to undertake a number of substantial tasks at home both before and after undertaking work at other locations.
They are also required to have a home office which is compliant with the relevant legislation and industrial award requirements.
The facts lend weight to the conclusion that the duties undertaken by the employees are of an itinerant nature. Consequently, any travel between home and a place of work and any travel between various job locations is a business journey for the purposes of section 10.
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