Edited version of private advice

Authorisation Number: 1051658167584

Date of advice: 29 April 2020

Ruling

Subject: Fringe benefits tax - car fringe benefits

Question

Is travelling from an outreach employee's home to their first client, and from the last client to the outreach employee's home considered business use for the purposes of section 10 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

This ruling applies for the following periods

Year ended 31 March 2021

Year ended 31 March 2022

Year ended 31 March 2023

Year ended 31 March 2024

The scheme commenced on

1 April 2020

Relevant facts

The employer is a recognised public benevolent institution.

The employer supports the recovery of people living in the community with health issues.

The employer operates outreach services in most Australian states.

As part of its operations, the employer conducts an outreach service whereby its employees (outreach employees) are employed to make regular home visits to its clients.

The role of an outreach employee is to visit clients at their place of residence. An outreach employee may also take clients out shopping and to various appointments the client may have, including medical appointments.

The employer owns a fleet of motor cars which it makes available to outreach employees to enable them to fulfil their employment duties.

The employer currently services clients throughout metropolitan and regional areas.

Outreach employees travel extensively around their designated area in the company car provided to them to visit clients.

Depending on the time spent with each client, an outreach employee could visit a minimum of three clients per day. An outreach employee is generally allocated 12 clients at any given time.

The sample provided of log book entries shows occasional days when only one client was visited.

The employer requires all outreach employees in all Australian States and Territories to garage company cars at their home, travel directly from their home to a client, and from the client to home, and generally only visit the office once per week for team meetings.

When company cars are garaged at the home of the outreach employee after hours, outreach employees do not have the right to any personal use of the car after hours. A document sets out the following conditions for use of an employer vehicle:

·   There is no private use of the vehicle

·   Travel is restricted to journeys between home and customers/clients and return for service delivery, and other business travel such as attendance at training and business meetings

·   A log book is to be completed for each trip undertaken for compliance with the employer's policies, the Australian Taxation Office, and state Department of Transport requirements

·   The vehicle is to be returned to the nearest employer's Office or to the Fleet department for temporary reallocation during your absence where you are on annual leave, and other paid leave excluding personal leave, and when you are on unpaid leave.

Outreach employees generally only visit the employer's office once per week to attend meetings. The average time spent at the employer's office each week is 1.15 hours.

Outreach employees do not have a designated desk space at the office and instead operate under a 'hot desk' system. While these employees are required to attend an office of the employer for meetings and supervision, their main role is to make home visits to clients. Outreach employees are provided with portable technology such as phones, tablets and laptops which provide them with the ability to log in and upload data directly from their vehicles which further limits the time spent in the office.

Travel is a fundamental part of each outreach employee's employment with the employer. Outreach employees are not paid a travel allowance.

The employer requires all outreach employees to maintain vehicle log books and make entries directly in the employer's Client Information Management System to evidence their visits to clients. As part of the procedures to ensure employees are complying with record keeping requirements regarding the log book record of car use:

·   triannual checks are undertaken on company cars. This is completed by service managers who also check the log books as part of the inspection;

·   managers check the odometer readings on company cars to ensure the vehicle is not being for non-work purposes;

·   the fleet department of the employer checks the reports from fuel companies and performs a reasonable test to ensure there is no excessive use of petrol;

·   regular internal client file audits are undertaken to ensure that information recorded or entered by employees is up to date and accurate;

·   reconciliation between the employer's data base and log books can be performed to confirm that travel is work related; and

·   when employees go on leave for extended periods, company cars are parked at the employer's offices.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 7

Fringe Benefits Tax Assessment Act 1986 Section 10

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision

Section 7 of the FBTAA sets out the circumstances in which the use of a car will be a taxable fringe benefit. Subsection 7(1) of the FBTAA provides that where a car is made available to an employee (or associate) in respect of their employment and is applied for private use or is available for private use by the employee (or associate), the private use or availability is a benefit provided by the employer.

Subsection 7(1) of the FBTAA states:

[Car applied to, available for employee's private use] Where:

(a) at any time on a day, in respect of the employment of an employee, a car held by a person (in this subsection referred to as the provider):

(i) is applied to a private use by the employee or associate of the employee; or

(ii) is taken to be available for the private use of the employee or of an associate of the employee; and

(b) either of the following conditions is satisfied:

(i) the provider is the employer, or an associate of the employer, of the employee:

(ii) the car is so applied or available, as the case may be, under an arrangement between:

(A) the provider or another person; and

(B) the employer, or an associate of the employer, of the employee; that application or availability of the car shall be taken to constitute a benefit provided on that day by the provider to the employee or an associate in respect of the employment of the employee.

Subsection 7(2) of the FBTAA provides that where a car is garaged ta or near an employee's (or associate's) residence, the car is taken to be available at that time for the private use of the employee (or associate).

Additionally, under subsection 7(3) of the FBTAA, where the car is not garaged at the business premises of the employer (or an associate of the employer or with whom the employer has an arrangement) and

(c) any of the following conditions is satisfied:

(i) the employee is entitled to apply the car to a private use;

(ii) the employee is not performing the duties of his or her employment and has custody or control of the car;

(iii) an associate of the employee is entitled to use, or has custody or control of, the car:

the car shall be taken, for the purposes of this Act, to be available at that time for the private use of the employee or associate, as the case may be.

Where a contract or agreement between the employee and employer prohibits the application of the car to private use, subsection 7(4) of the FBTAA provides that unless the prohibition is consistently enforced, the employee shall be deemed to be entitled to use the car for private use notwithstanding the prohibition.

Outreach employees garage company cars at their residence. Outreach employees are required to sign an agreement which confirms that there is no private use of the vehicle, travel is restricted to journeys between home and customers/clients, and a log book is completed for each trip undertaken. There are also triannual checks conducted by service managers checking log books, checking odometer readings, fuel company reports, regular internal client file audits, and reconciliation between the employer's data base and log books.

It is accepted that prohibition of the private use of a car is consistently enforced, and a car garaged at an outreach employee's home will not be available for private use under section 7 of the FBTAA.

The term 'private use' is defined in subsection 136(1) of the FBTAA to mean, in relation to a motor vehicle, any use by the employee or associate 'that is not exclusively in the course of producing assessable income of the employee'.

Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel (MT 2027) explains the relationship between private use and business use for fringe benefits tax purposes. The guidelines are drawn from established income tax principles.

Paragraph 14 of MT 2027 explains the general rule:

As discussed in Taxation Ruling IT 112, the decision in Lunney and Hayley v FCT (1958) 100 CLR affirmed the position that travel between home and a person's regular place of employment or business is ordinarily private travel.

There are exceptions to the general rule which include:

·   travel while on stand-by duty

·   travel between places of employment/business

·   employment duties of an itinerant nature

·   business trip on way to or from work

·   travel incorporating the transport of equipment and

·   certain sportsmen and shearers.

Paragraph 25 of MT 2027 states:

It has long been acknowledged that travel from an employee's home may constitute business travel where the nature of the office or employment is inherently itinerant (see, for example, the comments of Lords Wilberforce and Simon in Taylor v Provan (1975) AC 194 at pages 1213 and 1219 respectively). More recently, this issue was addressed in Australia in FCT v Wiener, 78 ATC 4006; 8 ATR 335 (Wiener's case), from which the following guidelines for the application of the principle have been adopted (see Taxation Ruling IT 2122). These are that travel will be indicated as business travel where the nature of the office or employment is such that:

(a) it is inherently itinerant;

(b) travel is a fundamental part of the employee's work;

(c) it is impractical for the employee to perform the duties without the use of a car;

(d) the terms of employment require the employee to perform duties at more than one place of employment;

(e) the nature of the job itself makes travel in the performance of duties essential; and

(f) 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.

Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses (TR 95/34), provides further guidance as to when an employee's work is itinerant.

Paragraph 7 of TR 95/34 states:

There have been a number of cases considered by the Courts, Boards of Review and Administrative Appeals Tribunal where deductions for transport expenses were allowed on the basis of the taxpayers' 'shifting places of work'. 'Shifting places of work' is another term for itinerancy. In these cases the obligation to incur the transport expenses arose from the nature of the taxpayers' work, such that they were considered to be travelling in the performance of their duties from the moment of leaving home. The following characteristics have emerged from these cases 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, that is, the employee has no fixed place of work...;

(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...

Paragraphs 8 and 9 of TR 95/34 consider that the above characteristics are:

·   not exhaustive

·   no single factor on its own is decisive

·   the individual's occupation or industry does not determine if they are engaged in itinerant work, it is the nature of the individual's duties that determines it, and

·   itinerant work may be permanent or temporary in an employee's duties.

The characteristics mentioned in MT 2027 and TR 95/34 are considered in your case as follows:

Travel a fundamental part of employee's work

The ATO publication Fringe benefits tax: a guide for employers in Chapter 7.5 considers employment duties of an itinerant nature and states:

Travel from an employee's home may be considered business travel where the nature of the office or employment is itinerant. Examples include commercial travellers and government inspectors whose homes are a base of operations, from which they travel to one of a number of locations throughout the day, over a continuing period.

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 supples 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.

On the basis that outreach employees do not travel to the same locations each day and are required to visit several locations during a day, visiting a minimum of three clients per day from a case load of 12 clients, and visit the office once a week to attend meetings, demonstrates the nature of the job requires travel. It is impractical for them to perform all of their duties without the use of a vehicle.

This requirement is satisfied.

'Web' of work places or employee has no fixed place of work

A web of work places exists where the employee performs duties at several work sites in a day.

Paragraph 28 of TR 95/34 refers to Wiener's case for an example of a 'web' of work places where a teacher was required to instruct pupils at four to five different schools each day.

Outreach employees generally visit at least three clients a day, and there is no degree of certainty about where outreach employees may be physically located on any given day. The nature of work requires outreach employees to travel to several workplaces which would be considered to be a 'web' of workplaces.

The sample of log book entries, that you have provided, shows occasional days when only one client was visited. Outreach employees will only be accepted as itinerant when they visit more than one client in a day. Travel to and from a single client in a day is considered to be ordinary home to work travel, and is private travel.

This requirement is satisfied on days when more than one client is visited.

Continual travel from one worksite to another

Paragraph 34 of TR 95/34 states:

In certain work situations continual unsettled travel from one work place to another is a common factor. In some instances, an employee's ongoing engagement may require him or her to attend various sites in different localities nominated by the employer. In most such cases the need to travel from place to place would be a necessary condition of employment.

As outreach employees attend to several different clients in a typical day, it is considered their travel is continually unsettled.

This requirement is satisfied.

Other factors

(i) Uncertainty of location

TR 95/34 refers to Case T106 86 ATC 1192; AAT Case 17 (1987) 18 ATR 3093 (case T106) where an 'off-sider' in the building industry was required to be continually dispatched to sites at various locations as an example of a taxpayer's employment being of an itinerant nature.

On the basis that outreach employees attend to several clients in a typical day, it is considered they would not have the continual certainty of the places to which they are directed to travel.

This requirement is satisfied.

(ii) Home as a base of operations

TR 95/34 at paragraph 56 states:

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 for completing it is not discharged until the taxpayer attends at the work site. Whether an employee's home constitutes a base of operations depends on the nature and the extent of the activities undertaken by the employee at home.

As outreach employees most likely conduct various administrative duties at home in a typical day such as making appointments and reviewing case studies, it is considered that their home is a base of operations.

This requirement is satisfied.

(iii) Requirement to carry bulky equipment

Paragraph 63 of TR 95/34 explains that if the transport of bulky equipment is the necessary reason for incurring transport costs, rather than any private reasons, then those costs may be allowable as deductions.

It is not known whether outreach employees carry bulky equipment although it would be assumed that it is not likely.

This requirement is not satisfied.

(iv) The employer provides an allowance

The employer does not provide any travel or motor vehicle allowances as outreach employees are provided with the exclusive use of company cars.

This requirement is not satisfied.

Paragraph 72 of TR 95/34 confirms that the payment of an allowance would not by itself indicate that travelling is a necessary element of employment. The payment or absence of an allowance is just one of the many factors to be considered when determining whether the employment is itinerant in nature.

Therefore, the absence of an allowance neither supports nor denies a conclusion that the duties are itinerant in nature.

Conclusion

It is considered that the use of the vehicles by outreach employees satisfies the majority of the characteristics mentioned in MT 2027 and TR 95/34 as outlined above. Therefore, the duties of the outreach employees have been found to be of an itinerant nature when more than one client is visited in a day.

As outreach employees are considered itinerant employees, the private travel, that is, the journeys to and from home to work will be considered business journeys in accordance with the principle discussed in Wiener and MT 2027. Each journey is a 'business journey' as defined in subsection 136(1) of the FBTAA.

The term 'business journey' is defined in subsection 136(1) of the FBTAA as:

business journey means:

(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 the employer, ...

For the purposes of calculating the taxable value of car fringe benefits under the cost basis method pursuant to section 10 of the FBTAA, the employer can classify those journeys as business journeys.

For the purposes of section 10 of the FBTAA, travel to and from the home of a client by an outreach employee is a business journey. As a result, all travel undertaken by the outreach employee in the company car is classified as being a business journey.

The FBTAA provides two alternative methods of valuing the benefit. It is common to both methods that private use of the car by employees (or their associates) be identified.

Under the cost basis method of valuation established by section 10 of the FBTAA, the value of the benefit is determined by apportioning the total operating cost (as specified in that section) according to the proportion that the private kilometres travelled by employees in the car bears to the total kilometres travelled in the car. For these purposes the number of private kilometres is determined by subtracting from the total kilometres travelled in the car the number of kilometres travelled on business journeys as evidenced by log book entries.

In terms of the formula in section 10 of the FBTAA, the number of business kilometres travelled by the car during the holding period and the total number of kilometres travelled by the car during the holding period is the same so that the business use percentage is 100%.

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