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Ruling

Subject: Home to work travel

Question 1

Is the travel between the employee's home office and testing sites considered to be a business journey for the purposes of calculating a car fringe benefit in accordance with section 10 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

This ruling applies for the following periods:

Year ended 31 March 2012

Year ended 31 March 2013

Year ended 31 March 2014

The scheme commences on:

1 April 2011.

Relevant facts and circumstances

Background

The employer has a class of employees who work from home offices and are not required to work in the employer's office.

The employer provides a vehicle to each of these employees and only one of these employees lives in a locality near the employers business premises.

These employees are unique from the employers other employees and have separate employment conditions.

The following documents were provided:

· Collective Employment Agreement

· Employer's Working from Home Policy

· Employer's Working from Home Procedure

· Documents explaining the employee's duties and procedures they follow.

The employer stipulates that their vehicles are not to be used for private purposes under any circumstances.

Relevant legislative provisions

FBTAA section 7

FBTAA section 9

FBTAA section 10

FBTAA subsection 136(1)

Reasons for decision

Summary

After applying the characteristics of an itinerant worker contained in paragraph 7 of TR 95/34 with the employment conditions of these employees', employment is considered to be itinerant in nature.

Therefore travel from home to a work location or from a work location home is considered to be business journeys.

Detailed reasoning

Section 7 of the FBTAA details when a car benefit will arise under the FBTAA and under subsection 7(2) of the FBTAA a car benefit will arise where a car is garaged or kept at or near an employee's place of residence.

In addition, although the employees are required to work from home and, there are no other employer's business premises available for some of these employees to work from, an employee's places of residence are specifically excluded from the definition of 'business premises' contained subsection 136(1) of the FBTAA.

Therefore for the purposes of the FBTAA the employee's home is not business premises of the employer and on the days an employer provided car is garaged at the employee's home a car benefit will arise. A car fringe benefit will have to be calculated using the statutory formula under section 9 of the FBTAA or if the employer so elects using the operating cost method under section 10 of the FBTAA.

In order to use section 10 of the FBTAA a logbook has to be kept for a minimum of 12 weeks detailing the business journeys undertaken in that car. The substantive issue in this case is whether the trip from the employees' homes to a work site (of from a work site back home) is a business or private journey. If they are considered to be business journeys then they will need to be recorded as such when the logbook records are being kept.

Generally journeys that start or end at an employees home are private. However there are exceptions to this and in this case, we should examine Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses to see if the employees carry out itinerant work. If so then the trips between their homes and testing sites will be business journeys.

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 (paragraphs 22 to 27 below);

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 (paragraphs 28 to 33 below);

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 (paragraphs 34 to 45 below);

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) (paragraphs 47 to 55 below);

(ii) the employee's home constitutes a base of operations (paragraphs 56 to 62 below);

(iii) the employee has to carry bulky equipment from home to different work sites (paragraphs 63 to 71 below);

(iv) the employer provides an allowance in recognition of the employee's need to travel continually between different work sites (paragraphs 72 to 75 below).

It is the above characteristic that we need to look at to determine whether the nature of the work is itinerant.

Is travel is a fundamental part of the work?

As stated in paragraph 22 of TR 95/34 'Travel must be an essential feature of an employee's duties in order for that work to be classified as itinerant .

In this case the employees must travel to various work sites and the employee has no input where that site is.

Therefore travel is a fundamental part of the work as they cannot perform their work without travelling.

Is there a web' of work places in the regular employment?

Paragraph 28 of TR 95/34 states:

An employee may earn income by performing his or her duties at several work sites. The location of those sites may make it necessary to travel to the various sites. If an employee performs work at a single site and then moves to other sites on a regular basis, it would be considered that a 'web' of work places exists. In Wiener's case, the taxpayer was required to attend four to five schools each day. This constituted a 'web' of work places.

The employees maintain a home office and work from that office. However they travel to the work locations and once there set up temporary places of work. In effect this means that the work site becomes the employee's work place and then once the work is completed at that location they move to another location.

Overall this could be seen as a 'web' of work places.

Do the employees continually travel from one work site 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.

In this case the employees are required to attend different locations as nominated and as required by their employer.

Do any of the other factors apply?

Paragraph 47 of TR 95/34 states:

The element of uncertainty of location is generally another distinct characteristic of itinerant employment. Unlike an ordinary worker who makes the daily journey to his or her regular place of work, the itinerant worker often cannot be certain of the location of their work sites.

There is uncertainly in the work locations as the employees travel to the location as directed and chosen by the employer.

Paragraph 56 of TR 95/34 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.

The employees are required to maintain a home office and do all their administration there. In addition completed work is collected from the homes for transportation for further work. The home office could be seen as a base of operations.

Paragraph 63 of TR 95/34 states:

A deduction may be allowable if the transport costs can be attributed to the transportation of bulky equipment rather than to private travel between home and work. If the equipment is transported to and from work by the employee as a matter of convenience or personal choice, it is considered that the transport costs are private and no deduction is allowable.

A special allowance is paid to these employees.