Edited version of private advice

Authorisation Number: 1052309864102

Date of advice: 17 December 2024

Ruling

Subject: FBT - novated lease

Question

Is the car taken to be available for private use under section 7 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), when the employee leaves their novated lease car at the employer's designated car park, which is not on the employer's business premises, and surrenders the keys while travelling on work?

Answer

Yes, the car is at all times taken to be available for private use of the employee when parked in a designated carpark, which is not on the employer's business premises.

This ruling applies for the following periods:

1 April 20XX to 31 March 20XX

1 April 20XX to 31 March 20XX

1 April 20XX to 31 March 20XX

1 April 20XX to 31 March 20XX

The scheme commenced on:

1 April 20XX

Relevant facts and circumstances

The employer is introducing a digital lock box solution for employees that involves parking their novated lease vehicle at a car parking location designated by the employer (one of which is not on employer's business premises) during extended periods of travel for work/training and surrendering their car keys in a digital key drop/collection machine.

Use of the proposed solution will also include other criteria that employees need to meet in order to elect the option to surrender keys:

•                     Key deposit facility not available for employee-owned vehicles;

•                     Novated lease vehicle must be parked on premises designated by the employer;

•                     Key deposit facility must only be used for periods of work and not used for leisure travel;

•                     Employee must be travelling away from home for 2 or more nights (one full day away from their home base between the hours of midnight on two successive nights);

•                     Employee must surrender their keys to the digital storage facility;

•                     No other person, including an associate of the employee, may use the novated lease vehicle during the time the key is surrendered;

•                     Employee must recover the key from the digital facility at the end of the work trip;

•                     Employee and/or associate of the employee acknowledges that the control and custody of the novated lease vehicle is removed while it is parked on the designated premises;

•                     A direct manager can access the digital machine at any point in time to determine a key has been deposited after assessing digital records to check who currently has keys deposited in digital storage; and

•                     Employee is responsible for ensuring any relevant employee declaration/claim for days not available for private use that is submitted to the vehicle leasing provider has sufficient information to support the claim.

•                     Employees breaching company policy or procedures may be subject to disciplinary action.

•                     The proposed solution is purposely not programmed to set the number of days for key deposit and retrieval.

•                     The solution records a digital date/time stamp, that is maintained on file by the employer, each time an employee deposits and recovers the key.

•                     By design, it is possible for employees to access the keys before the planned retrieval date given the nature of the work undertaken by an employee.

Relevant legislative provisions

Income Tax Assessment Act of 1997 subsection 995-1(1)

Fringe Benefits Tax Assessment Act 1986 section 7

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 subsection 162(1)

Reasons for decision

These reasons for decision accompany the Notice of private ruling for the organisation.

This is to explain how we reached our decision. This is not part of the private ruling.

Detailed reasoning

Car fringe benefit is defined in subsection 995-1(1) of theIncome Tax Assessment Act of 1997 (ITAA 1997) as having the meaning given by subsection 136(1) of the FBTAA. Subsection 136(1) provides that 'car fringe benefit' means a fringe benefit that is a car benefit referred to in section 7 of that act. Section 7 sets out the circumstances in which a car benefit is provided. Subsection 7(1) provides that at any time of a day, a car is made available to an employee (or an associate) in respect of their employment and is applied for private use or is taken to be available for private use by the employee (or an associate), that private use or its availability for private use is a benefit provided by the employer.

Subsections 7(2) and 7(3) deal with circumstances under which a car is taken to be available for the private use of an employee or an associate. Subsection 7(2) specifically applies to situations where the car is garaged or kept at or near a place of residence of the employee or of an associate of the employee, which is not relevant for the purposes of this ruling. Subsections 7(3) and 7(4) of the FBTAA are relevant in determining whether a car is taken to be available for private use when it is not garaged at or near employee's residence.

Under subsection 7(3) of the FBTAA:

Where, at a particular time, the following conditions are satisfied in relation to an employee of an employer:

(a)          a car is held by a person, being:

                          (i)                the employer;

                          (ii)                an associate of the employer; or

                          (iii)                a person (other than the employer or an associate of the employer) with whom, or in respect of whom, the employer or an associate of the employer has an arrangement relating to the use or availability of the car;

(b)          the car is not at business premises of:

                          (i)                the employer;

                          (ii)                an associate of the employer; or

                          (iii)                a person (other than the employer or an associate of the employer) with whom, or in respect of whom, the employer or an associate of the employer has an arrangement relating to the use or availability of the car;

(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.

Subsection 7(4) of the FBTAA further provides that:

For the purposes of subsection (3), where a prohibition on the application of a car, or on the application of a car for a private use, by a person is not consistently enforced, the person shall be deemed to be entitled to use the car, or to apply the car to a private use, notwithstanding the prohibition.

Additionally, TD 94/16 - Fringe benefits tax: where an employee is provided with a car by the employer and the car is kept in safe storage (e.g. in a commercial garage) while the employee is travelling, under what circumstances is that car taken to be available for private use under section 7 of the Fringe Benefits Tax Assessment Act 1986 ? (TD 94/16) further clarifies that if the custody and control of the vehicle is not removed from an employee when it is kept in safe storage away from the employee's place of residence, and if the employee/associate remains entitled to apply the car to a private use, the car will be taken to be available for private use.

TD 94/16 allows a reduction in the number of days the car is taken to have been 'available for private use' and hence the taxable value of a car benefit when:

•                    the employer's car is kept in safe storage away from the employee's place of residence

•                    the employer's car is not at the employer's business premises

•                    the custody and control of the car has been removed from the employee and from the associates of the employee, and

•                    the employee is not entitled to use the car for private purposes and an associate of the employee is not entitled to use the car.

Paragraph 3 of the TD 94/16 clarifies that:

A prohibition against the private use of a car must be made in clear and unequivocal terms. A general instruction or understanding between an employer and employee would not be sufficient. Employees would need to be made aware that the prohibition is genuine and will be reinforced, for example with disciplinary measures if breached. Consistent enforcement is also required and may comprise of regular checks of odometer readings against business kilometres claimed to have been travelled by employees.

As per example 1 of TD 94/16, it is not sufficient for the car to be left at the storage facility. The employer must ensure that the custody and control of the car is removed from the employee or associate by enforcing a prohibition on the private use of the car for it to be considered 'not available for private use' in accordance with subsections 7(3) and 7(4) of the FBTAA.

Application to your situation

Subsection 7(3) of the FBTAA considers the availability of a car for private use where the car is not at the business premises of an employer:

Paragraph 7(3)(a) - Is the car held by the employer?

Under subsection 162(1) of the FBTAA, a car is 'held' by a person if the car is owned by the person; leased to the person (or let on hire); or otherwise made available to the person by another person. In this case, you are taken to have held the car as you are a party to the novated lease arrangement. Therefore, paragraph (a) of subsection 7(3) is satisfied.

Paragraph 7(3)(b) - Is the car at the business premises of the employer?

You advised that the employees park their novated lease vehicle at a car parking location designated by you, one of which is on your business premises. Where your employees park their vehicles at a car park not on your business premises, paragraph (b) is satisfied.

Paragraph 7(3)(c) - Is the employee or an associate entitled to apply the car to a private use or is the employee not performing duties of employment and has custody or control of the car?

If an employee meets any of the conditions in paragraph (c), then the car will be taken to be available for private use.

It must be determined:

•                     who has custody and control of the vehicle, and

•                     whether the employee or an associate is entitled to use the car for private purposes during that period.

You have stated that implementation of the digital key storage requires your employees signing up to the facility to agree to the terms and conditions of use including for employees breaching company policy or procedures that may be subject to disciplinary action.

Your response to our further information request states that:

•                     The proposed solution is purposely not programmed to set the number of days for key deposit and retrieval.

•                     The solution records a digital date/time stamp, that is maintained on file by you, each time an employee deposits and recovers the key.

•                     By design, it is possible for employees to access the keys before the planned retrieval date given the nature of the work undertaken by the employee.

Accordingly, the employee can access the car at any time i.e. if their shift is cancelled or they return early. The lockbox simply tracks when the employee is not using the car and records the times when an employee deposits and recovers the key. Given employees can retrieve their keys at any time, the lockbox does not prevent or enforce a prohibition on the employees having physical custody and control of the vehicle. Given the employee can retrieve their keys at any time and access their car, the employee is entitled to apply the car to a private use. Therefore subsection (c) is satisfied.

Consequently, the car is at all times available for private use of the employee when the employee parks the car at the designated carpark mandated by the employer, which is not at the business premise, while travelling on work.

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