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Edited version of your private ruling

Authorisation Number: 1011947009679

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Ruling

Subject: Fringe benefits tax: car benefits: car parking and reportable fringe benefits

Question 1

Will a car benefit arise under subsection 7(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) when a pool car is either applied to a private use by an employee, or is taken to be available for the private use of an employee under either subsection 7(2) or subsection 7(3) of the FBTAA?

Answer:

Yes

Question 2

Where a car fringe benefit arises in relation to a pool car and an election is made to use the cost basis in section 10 of the FBTAA to calculate the taxable value of the car fringe benefit, will the fee paid by you to the Car pool operator be the 'operating cost of the car during the holding period'?

Answer:

No, the fee paid will not be the 'operating cost of the car during the holding period' as the fee includes the estimated fuel costs and a car parking charge.

Although the fee charged will not be the same as the 'operating cost of the car during the holding period' the inclusion of the additional costs in the fee calculation means the fee may be more than the value that would be calculated by allocating the costs set out in subsection 10(3). In such a situation, the use of the fee will not result in an underpayment of tax.

Question 3

If in a particular year, a pool car gives rise to a car benefit for more than one employee of the particular employer will the benefits be excluded fringe benefits under regulation 3F of the Fringe Benefits Tax Regulations 1992?

Answer:

Yes.

Question 4

If in the year in which a car is transferred to the car pool, the car gives rise to a car benefit to:

· an employee during the period in which it was held by the employer; and

· a second employee during the period in which it is part of the car pool:

(a) will the benefits be excluded fringe benefits under regulation 3F of the Fringe Benefits Tax Regulations 1992; and

(b) will separate log book and odometer records be required for both periods for the purpose of determining the business use percentage?

Answer:

(a) Yes

(b) Yes

Question 5

If a pool car gives rise to a car benefit for an employee will the benefit be an excluded fringe benefit under regulation 3F of the Fringe Benefits Tax Regulations 1992 if a car benefit has arisen in relation to the use of the car by an employee of an associated employer in the same year?

Answer:

No.

Question 6

Will a car parking fringe benefit arise under section 39A of the FBTAA if an employee who has garaged a pool car at his or her residence returns the car to the Car pool operator car park where it is parked for more than four hours if the car is available for use by all employees of the associated employers and is not driven home by an employee on that day?

Answer:

Question 7

Answer:

Question 8

Will a car parking fringe benefit arise under section 39A of the FBTAA if an employee who has garaged a pool car at his or her residence returns the car to the Car pool operator car park where it is parked for more than four hours before it is driven home by the same employee if the car is available for use by all employees of the associated employers?

Answer:

A car parking fringe benefit will not arise unless there is a sufficient or material connection between the provision of the car park and the employment of the employee.

This ruling applies for the following period

Year ending 31 March 2011

Year ending 31 March 2012

Year ending 31 March 2013

Relevant facts and circumstances

A new arrangement in relation to the management of the pool cars that are used by your employees has been implemented.

Previous arrangement

Under the previous arrangement an entity provided all fleet vehicles to the employers.

New arrangement

The administration of the car pool arrangements has been transferred to a unit of an employer.

The services that will be provided by unit include:

· vehicle requirements analysis;

· acquisition of pool vehicles;

· maintenance of pool vehicles;

· pool vehicle insurance;

· pool vehicle disposal; and

· pool vehicle management and administration.

The vehicles transferred to the unit will be centrally managed and operated by the unit.

To use a vehicle in the car pool an employee will submit an electronic booking form 24 hours prior to the requested vehicle collection date and time.

Each booking must be approved by a relevant person. For example, the employee's manager must approve bookings of 14 days or less.

The employee's manager is responsible for advising the unit of the relevant cost code.

An employee who uses a pool vehicle is required to complete the relevant log book entries. This requirement is enforced by the unit's staff who check that the log book details have been completed when the vehicle is returned to the car pool.

As a general rule, pool vehicles can not be used for private purposes. However, on occasions the employment duties may necessitate the use of a vehicle for private purposes. For example, an on-call employee may be required to take a pool vehicle home on a rotational basis.

When the vehicle is returned unit staff enter the log book details into an electronic data base which is used to issue a tax invoice to the employer.

The charge for the use of a pool vehicle is based on the period between the start of the booking until the keys are returned. However, an additional per kilometre rate is charged if the vehicle travels more than a specified distance in a day.

The daily rate is comprised of a variable and fixed component.

Simultaneous to the transfer of the pool vehicles to unit, any associated car parking spaces are to be transferred to the unit. Once the car parking spaces are transferred the unit will pay for the cost of the lease over the car parking space. This cost is recovered as part of the fixed component of the amount charged to the employer.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 5D

Fringe Benefits Tax Assessment Act 1986 section 5E

Fringe Benefits Tax Assessment Act 1986 subsection 7(1)

Fringe Benefits Tax Assessment Act 1986 subsection 7(2)

Fringe Benefits Tax Assessment Act 1986 subsection 7(3)

Fringe Benefits Tax Assessment Act 1986 subsection 7(7)

Fringe Benefits Tax Assessment Act 1986 section 10

Fringe Benefits Tax Assessment Act 1986 subsection 10(2)

Fringe Benefits Tax Assessment Act 1986 subsection 10(3)

Fringe Benefits Tax Assessment Act 1986 section 10A

Fringe Benefits Tax Assessment Act 1986 section 10B

Fringe Benefits Tax Assessment Act 1986 section 39A

Fringe Benefits Tax Assessment Act 1986 section 45

Fringe Benefits Tax Assessment Act 1986 section 58G

Fringe Benefits Tax Assessment Act 1986 subsection 132(2)

Fringe Benefits Tax Assessment Act 1986 Part XIC

Fringe Benefits Tax Assessment Act 1986 subsection 135U(1)

Fringe Benefits Tax Assessment Act 1986 subsection 135U(3)

Fringe Benefits Tax Assessment Act 1986 subsection 135U(5)

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Fringe Benefits Tax Assessment Act 1986 section 159

Fringe Benefits Tax Assessment Act 1986 section 162

Fringe Benefits Tax Assessment Act 1986 subsection 162(2)

Fringe Benefits Tax Assessment Act 1986 section 162G

Fringe Benefits Tax Assessment Act 1986 subsection 162G(1)

Fringe Benefits Tax Assessment Act 1986 subsection 162H(1)

Fringe Benefits Tax Assessment Act 1986 section 162K

Fringe Benefits Tax Assessment Act 1986 subsection 162K(2)

Fringe Benefits Tax Regulations 1992 Regulation 3F

Reasons for decision

Question 1

Summary

Under the proposed arrangement an employee will be provided with the use of a pool car. On occasions an employee who is provided with the use of a pool car will garage the car at his or her residence.

A car benefit will arise under subsection 7(1) of the FBTAA from the use of the car or the home garaging if the following conditions are satisfied:

(a) the car is held by a person (the provider);

(b) the car is applied to a private use by an employee (or an associate), or is taken to be available for the private use of an employee (or an associate); and

· the provider is the employer ( or an associate); or

· the car is so applied or available under an arrangement between the provider or another person and the employer (or an associate).

In considering these conditions:

· For the purposes of subsection 7(1) of the FBTAA, the pool cars are held by the Car pool operator.

· As the Car pool operator is a nominated State or Territory body it is treated as a company for the purposes of the FBTAA.

· As a company is a person, the Car pool operator is a person who holds the pool cars.

· When an employee garages a pool car at home, the car will be taken to be available for the private use of the employee and the journey to and from home may involve the private use of the car.

· The provider of the car for the purposes of subsection 7(1) will be:

o an associate when your employee uses the car.

As each of the requirements are satisfied, a car benefit will arise under subsection 7(1) when a pool car is either applied to a private use by an employee, or is taken to be available for the private use of an employee under either subsection 7(2) or subsection 7(3) of the FBTAA.

Detailed reasoning

Under section 7 of the FBTAA the application of a car to a private use by an employee, or the availability of the car for the private use of the employee will be a car benefit when the conditions specified in subsection 7(1) are satisfied.

Subsection 7(1) states:

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 an associate of the employee; or

(ii) is taken to be available for the private use of the employee or 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 associate in respect of the employment of the employee.

In applying this subsection, a car benefit will arise from the use of the car or the home garaging if the following conditions are satisfied:

(i) the car is held by a person (the provider);

(ii) the car is applied to a private use by an employee (or an associate), or is taken to be available for the private use of an employee (or an associate); and

(iii) either:

· the provider is the employer ( or an associate); or

· the car is so applied or available under an arrangement between the provider or another person and the employer (or an associate).

In considering whether these conditions are satisfied:

(i) Who holds the cars?

Subsection 7(1) requires the car to be held by a 'person'.

'Person' is defined in subsection 136(1) to include:

(a) a body politic;

(b) a body corporate;

(d) any other unincorporated association or body of persons; and

(e) a person in the capacity of trustee.

Under the arrangement the car pool will be managed by the unit which is part of the car pool operator. Neither the unit, nor the car pool operator comes within the categories listed in the definition of 'person'.

However, the car pool operator is an eligible State or Territory body which can be nominated as an employer for the purposes of the FBTAA. the car pool operator is a nominated body

As a consequence of the nomination, subsection 135U provides that the car pool operator will be treated as a company for the purposes of the FBTAA and will be a related company of:

· each of the other nominated State or Territory bodies of the relevant State or Territory;

· the relevant State or Territory; and

· each authority of the relevant State or Territory.

Companies and related companies are deemed to be associates of each other under section 159 of the FBTAA.

Therefore, the Car pool operator and yourself can be the 'person' that holds the car. As the unit is a part of an employer, it is not an eligible State or Territory body and will not be the 'person' that holds the car.

In determining which body holds the car, subsection 162(1) of the FBTAA states:

In this Act, unless the contrary intention appears, a reference to a car held by a person is a reference to

(a) a car owned by the person;

(b) a car leased to the person; or

The cars that are in the car pool will either be owned or leased. It is accepted that as a result of the nominations that have occurred, the car pool operator will be taken to be the owner or the lessee of the cars for the purposes of the FBTAA. Therefore, as the car pool operator is taken to either own or lease the cars it will be a 'person' that holds the cars.

As the car pool operator is a related company to you, the provider of the car for the purposes of subsection 7(1) will be:

· an associate when an employee of yours uses the car.

In considering whether the car is also held by yourself, it is necessary to distinguish between a situation where the car is made available to the employee by the car pool operator under an arrangement with yourself (the employer), as compared to a situation where the car pool operator provides the car to you who provides the car to the employee.

In the first situation, the car will not be held by you as it is not owned, leased or otherwise made available to you. By contrast, the car in the second situation will be held by you.

Under the arrangement, an employee of yours will book a car. The arrangement is the result of a decision by Government for all pool cars to be held by the one employer which has the responsibility for managing the car fleet. The manner in which the arrangement has been established indicates it is the car pool operator that provides the car to the employee.

Although, the booking (depending upon the period booked) is required to be approved by the relevant person, this fact by itself is not sufficient to conclude that the arrangement involves the provision of a car to yourself, rather than an employee. In approving a booking the relevant person is merely giving approval for a car from the pool to be provided to an employee on the understanding that you will be charged for the booking.

Support for this conclusion is provided by the operation of subsection 7(7) of the FBTAA which states:

A reference in this Division to a car held by a person (in this subsection referred to as the "provider") does not include a reference to:

(a) a taxi let on hire to the provider; or

(b) a car let on hire to the provider under an agreement of a kind ordinarily entered into by persons taking cars on hire intermittently as occasion requires on an hourly, daily, weekly or other short-term basis unless the car has been or may reasonably be expected to be on hire under successive agreements of a kind that result in substantial continuity of the hiring of the car.

In applying this subsection, you will not hold the car in the instance where an employee who has the use of a pool car for a short period of time.

(ii) Is the car applied to a private use by an employee (or an associate), or is taken to be available for the private use of an employee (or an associate)?

Subsections 7(2) and 7(3) set out circumstances in which a car will be taken to be available for the private use of an employee or an associate of the employee.

Subsection 7(2) provides that a car that is held by the employer, or an associate of the employer will be taken to be available for the private use of an employee when it is garaged or kept at or near a place of residence of the employee or of an associate of the employee.

Subsection 7(3) provides that a car that is held by the employer, or an associate of the employer will be taken to be available for the private use of an employee when the car is not at business premises of the employer or an associate of the employer if:

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

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

On occasions a pool car will be applied to a private use by an employee (for example when an on-call employee drives the car to and from work), or will be taken to be available for the private use of an employee.

(iii) Will the provider be the employer or an associate of the employer?

As concluded above, the provider of the car for the purposes of subsection 7(1) will be:

· an associate when your employee uses the car.

Conclusion

Question 2

Where a car fringe benefit arises in relation to a pool car and an election is made to use the cost basis in section 10 of the FBTAA to calculate the taxable value of the car fringe benefit, will the fee paid by you to the car pool operator be the 'operating cost of the car during the holding period'?

Summary

In using the cost basis in section 10 of the FBTAA to calculate the taxable value of the car fringe benefit that arises from a particular car the employer needs to determine:

· the operating cost of the car during the holding period;

· if the requirements of section 10A or 10B are met, the business use percentage applicable to the car during the holding period; and

· the amount (if any) of the recipient's payment.

Holding period

The first two dot points are determined by the holding period. In accordance with subsection 162(2) of the FBTAA, the holding period for the purposes determining the operating costs and the business use percentage will be the period for which the car was booked by the employee that received a car fringe benefit. It will not be the period for which the car was held by the Car pool operator.

The operating costs

The operating costs that are used to calculate the taxable value of the car during the holding period are set out in subsection 10(3) of the FBTAA.

For the pool cars, these costs will be:

· any car expenses (other than insured repair expenses or expenses in respect of registration and insurance) relating to the car that were incurred during the holding period;

· registration and insurance in respect of the car that is attributable to the holding period; and

· leasing costs that relate to the holding period.

There are practical difficulties in determining the costs that relate to the holding period as each car may be used by employees of multiple employers.

The FBTAA does not specify a method to be used to determine the operating costs that relate to a particular holding period where car benefits arise for multiple employers while the car is being held by the one provider.

To overcome the identified practical difficulties, you asked whether the fee paid by yourself can be used for the 'operating cost of the car during the holding period'.

The fee involves an allocation of the estimated annual costs of holding and using the year on the basis of the period for which the car was booked with an adjustment if the car travels more than a specified distance in the day.

The costs that are allocated are:

· the estimated fuel costs;

· the service costs which are prepaid at the time the car is acquired;

· the estimated costs of cleaning and tolls;

· the annual lease cost which includes insurance and registration; and

· the annual cost of the car parking space.

Only some of these costs will be the same as the operating cost components defined in subsection 10(3). For example, the lease costs are common to both calculations.

However, there are also some differences. For example the calculation of the fee includes:

· estimated fuel costs, rather than the actual costs; and

· car parking costs which are not included in the subsection 10(3) operating cost definition.

In view of these differences, the fee paid by yourself will not be the same as the amount of the 'operating cost of the car during the holding period'.

The business use percentage

The business use percentage will be nil if the requirements of sections 10A and 10B are not met.

Section 10A sets out the requirements to be met in a log book year.

Section 10B sets out the requirements to be met in a year that is not a log book year.

The first year in which a car benefit arises as a result of an employee of yours booking a car will generally be a log book year of tax for that car. However, a year may be a non log book year even though it is the first year in which a car benefit arises for yourself from the use of a particular car, if the car is a replacement car.

Log book year of tax

In a log book year, the business use percentage will be nil unless:

· log book records and odometer records are maintained for the applicable log book period (generally the holding period for a pool car);

· odometer records are maintained for the holding period(s);

· the employer specifies the employer's estimate of the number of business kilometres travelled by the car during the holding period(s); and

· the employer specifies the business use percentage applicable to the car for the holding period(s).

Non log book year of tax

In a non log book year of tax the business use percentage for the period the car is booked by an employee will be nil unless:

· odometer records are maintained for the holding period(s);

· the odometer records are given to the employer before the declaration date;

· the employer specifies the employer's estimate of the number of business kilometres travelled by the car during the holding period(s); and

· the employer specifies the business use percentage applicable to the car for the holding period(s).

Business use percentage

If the applicable log book and odometer records are kept, in calculating the business use percentage you will need to:

· estimate the number of business kilometres travelled by the car during the holding period; and

· determine the total number of kilometres travelled by the car during the holding period.

Detailed reasoning

In general terms, an employer can make an election to use the cost basis to calculate the taxable value of a car fringe benefit.

The formula for calculating the taxable value of a car fringe benefit using the cost basis is contained within subsection 10(2) of the FBTAA.

Subsection 10(2) of the FBTAA states:

Subject to this Part, where an election is made under subsection (1), the taxable value, or the aggregate of the taxable values, as the case requires, of the car fringe benefits in relation to the employer in relation to the year of tax that relate to the car while it was held by a particular person (in this section referred to as the "provider") during a particular period (in this section referred to as the "holding period") in the year of tax is the amount calculated in accordance with the formula:

(C × (100% - BP)) - R

where:

C is the operating cost of the car during the holding period;

BP is:

(a) if, under section 10A or 10B, the employer is not entitled to a reduction in the operating cost of the car on account of business journeys undertaken in the car during the holding period - nil; or

(b) (Omitted by No 145 of 1995)

R is the amount (if any) of the recipient's payment.

In applying this formula to a particular car the employer needs to determine:

· the operating cost of the car during the holding period;

· if the requirements of section 10A or 10B are met, the business use percentage applicable to the car during the holding period; and

· the amount (if any) of the recipient's payment.

The holding period

Both the operating cost and the business use percentage are calculated by reference to the 'holding period'.

'Holding period' is defined in section 162C which states:

Unless the contrary intention appears, a reference in this Act to a period in a year of tax during which a person held a car is a reference to the period that:

(a) commences on whichever of the following times is applicable:

(i) if the person held the car at the time of commencement of the year of tax - that time;

(ii) in any other case - the time in the year of tax when the person commenced to hold the car; and

(b) ends at whichever of the following times is applicable:

(i) if the person continued to hold the car until the time of the end of the year of tax - that time;

(ii) in any other case - the time in the year of tax when the person ceased to hold the car.

However, for the purposes of the application of section 10, this definition is subject to subsection 162(2) which states:

For the purposes of the application of section 10 in relation to car fringe benefits in relation to an employer in relation to a particular car, the car shall be taken to be held by a particular person if, and only if, the car is held by the person for use in providing those fringe benefits (whether or not the car was used for any other purpose while it was so held).

In explaining the application of subsection 162(2) the Explanatory Memorandum to Taxation Laws Amendment (Fringe Benefits and Substantiation) Bill 1987 stated:

… the car will be "held" only if it is for use in providing car fringe benefits … . The effect is that if a car is not used by an employer throughout the year to provide fringe benefits … the operating costs of the car for calculating the taxable value of a section 10 car fringe benefit will be those applicable to the period when it was so used,

Therefore, for the purpose of using the cost basis to calculate the taxable value of a car fringe benefit that arises from the use of a pool car, the holding period will be the part of the year that the car was used to provide a fringe benefit. This will be the period for which the car was booked by the employee.

The operating cost of the car during the holding period

Under subsection 10(3) of the FBTAA the operating cost of the car during the holding period is the sum of:

(a) any car expenses (other than insured repair expenses or expenses in respect of registration and insurance) relating to the car incurred during the holding period, not including, in a case where the car is leased to the provider, any car expenses incurred by the lessor pursuant to the lease agreement;

(b) so much of any expense paid or payable in respect of the registration of, or insurance in respect of, the car as is attributable to the holding period;

(d) if the car is owned by the provider and a non-business accessory was fitted to the car during the period the car was owned by the provider which remained fitted to the car during the holding period the deemed depreciation and interest that relates to the holding period; and

(e) if the car is leased to the provider the leasing charges that relate to the holding period.

In accordance with the extract from the Explanatory Memorandum to Taxation Laws Amendment (Fringe Benefits and Substantiation) Bill 1987 quoted above, the calculation of the taxable value of a pool car using the cost basis will require a calculation of the operating costs that are applicable to the period in which the car was used to provide a fringe benefit.

However, as set out in your application, there are practical difficulties in determining the costs that relate to each particular holding period as during the year each pool car may be used by employees of multiple employers.

The FBTAA does not specify a method to use in a situation such as this where car benefits arise for multiple employers while the car is being held by the one provider.

There are a number of methods that could be used to determine the costs that relate to a particular holding period including:

· using the costs that were incurred during the holding period;

· a time based apportionment in which the costs are allocated on the basis of the relative period of the year for which the car was booked; and

· a distance based apportionment in which the costs are allocated on the basis of the relative distance travelled by the car during the period in which it was booked by the employee as compared to the total distance travelled during the year;

However, there are practical difficulties with each of these methods as:

· an allocation of costs according to whether a particular employer was enabling an employee to use the car at the time the costs were incurred may not accurately reflect the operating costs for the relevant period. For example, if an employee of one employer was to return the car with an empty fuel tank, applying all the fuel cost to the employer which is the employer of the employee who fills the tank would lead to a distortion of the value of the benefit provided to the employee who returned the car as compared to the benefit provided to the employee who filled the tank. Similarly, it is possible that many of the operating costs may not be incurred during the period in a car benefit arises from the use of the car. For example, it is possible the maintenance and fuel expenses will be incurred after the car has been returned to the car pool.

· Although a time based approach may be appropriate for costs charged on a periodic basis such as registration, insurance and leasing charges, it may not provide a true reflection of the repair, maintenance and fuel costs that relate to the holding period.

· Similarly, while a distance based apportionment may be appropriate for the costs that relate to the distance travelled during the holding period, it may not provide a true reflection of the holding costs that relate to the holding period.

To overcome these practical difficulties, in your application you asked whether the fee paid by you can be used for the 'operating cost of the car during the holding period'.

The costs that are allocated are:

· the estimated fuel costs;

· the service costs which are prepaid at the time the car is acquired;

· the estimated costs of cleaning and tolls;

· the annual lease cost which includes insurance and registration; and

· the annual cost of the car parking space.

Only some of these costs will be the same as the operating cost components defined in subsection 10(3). For example, the lease costs are common to both calculations.

However, there are also some differences. In view of these differences, the fee paid by the department will not be 'the operating cost of the car during the holding period'.

However, the inclusion of these additional costs in the calculation of the fee means the fee is unlikely to be less than the value that would be calculated by allocating the costs set out in subsection 10(3). Consequently, the amount of tax paid using a calculation based on the fee paid by yourself is unlikely to be less than the amount of tax that would be paid using a calculation based on the costs set out in subsection 10(3).

The business use percentage applicable to the car during the holding period

Under subsection 10(2) of the FBTAA the business use percentage will be nil if the requirements of section 10A or 10B are not met. Section 10A applies to a year of tax that is a log book year of tax, whereas section 10B applies to a year of tax that is not a log book year.

When will a year be a log book year of tax?

Section 162G sets out when a year will be a log book year of tax. Subsection 162G(1) states:

For the purposes of the application of section 10 in relation to a car fringe benefit in relation to an employer in relation to a particular car while it was held by a particular person (in this subsection called the ``provider'') during a particular period (in this subsection called the ``holding period'') in a year of tax (in this subsection called the ``current year of tax''), the current year of tax is a log book year of tax of the employer in relation to the car if, and only if:

(a) none of the previous 4 years was a log book year of tax of the employer in relation to the car;

Note:

This paragraph will apply if it is the first year that the employer uses the cost basis method.

(b) the employer elects that the current year of tax be treated as a log book year of tax of the employer in relation to the car; or

(c)-(g) (Omitted by No 145 of 1995)

(h) the Commissioner causes a notice in writing to be served on the employer before the commencement of the current year of tax requiring the employer to treat the current year of tax as a log book year of tax of the employer in relation to the car.

In applying this definition, a year of tax will be a log book year of tax for you in relation to a particular car if:

· it is the first year in which the car was used to provide a car benefit to an employee while it was held by the provider;

· none of the previous four years was a log book year of tax for you in relation to the car;

· the employer elects that the year be treated as a log book year of tax; or

· the Commissioner serves a notice in writing requiring the employer to treat the year as a log book year of tax for the car.

Record keeping requirements in a log book year of tax

As set out above, section 10A applies to a year of tax that is a log book year of tax Section 10A states:

Where one or more car fringe benefits in relation to an employer in relation to a year of tax relate to a car while it was held by a particular person (in this section called the ``provider'') during a particular period (in this section called the ``holding period'') in a year of tax that is a log book year of tax of the employer in relation to the car, the employer is entitled to a reduction in the operating cost of the car on account of business journeys undertaken in the car during the holding period if, and only if:

(a) log book records and odometer records are maintained by or on behalf of the provider for an applicable log book period in relation to the car; and

(b) odometer records are maintained by or on behalf of the provider for the holding period; and

(c) if the provider is not the employer - those log book records and odometer records are given to the employer before the declaration date; and

(d) the employer specifies the employer's estimate of the number of business kilometres travelled by the car during the holding period; and

(e) the employer specifies a percentage as the business use percentage applicable to the car in relation to the provider for the holding period.

In applying subsection 162(2), section 10A provides that if the year of tax is a log book year of tax in relation to a particular car for you, the business use percentage for the period the car is booked by an employee will be nil unless:

· log book records and odometer records are maintained for an applicable log book period;

· odometer records are maintained for the holding period;

· the log book records and odometer records are given to the employer before the declaration date;

· the employer specifies the employer's estimate of the number of business kilometres travelled by the car during the holding period; and

· the employer specifies the business use percentage applicable to the car for the holding period.

Log book records

The definition of 'log book records' in subsection 136(1) of the FBTAA requires certain details to be kept for each 'business journey' under taken during the relevant 'log book period'.

'Business journey' is defined in subsection 136(1) to mean:

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

'Log book records' is defined in subsection 136(1) to mean:

a daily log book or similar document in which, in respect of each business journey:

(a) that is undertaken in the car during the period; and

(b) that the holder, or a person acting on behalf of the holder, chooses to record in the document for the purpose of demonstrating the pattern of use of the car during the period;

an entry setting out particulars of:

(d) the respective odometer readings of the car at the beginning and end of the journey; and

(e) the number of kilometres travelled by the car in the course of the journey; and

(f) the purpose or purposes of the journey;

(g) (Omitted by No 145 of 1995)

(h) (Omitted by No 145 of 1995)

(j) (Omitted by No 145 of 1995)

is made in the English language at, or as soon as reasonably practicable after, the end of the journey.

An applicable log book period is defined in subsection 162H(1) of the FBTAA which states:

For the purposes of the application of section 10 in relation to a car fringe benefit in relation to an employer in relation to a car while it was held by a particular person during a particular period (in this subsection called the ``holding period'') starting or ending in a year of tax, a reference to the applicable log book period is a reference to:

(a) if the holding period is a period of less than 12 weeks - the holding period; or

(b) in any other case - a continuous period of not less than 12 weeks that begins and ends during the holding period.

In accordance with this definition, the log book period of a pool car will generally be the period for which the car is booked by an employee.

Therefore, in a log book year, section 10A requires:

· a log book containing details of the 'business journeys' undertaken during the period of the booking; and

· odometer records for the period(s) of the year for which the car was used to provide a car benefit for an employee of the particular department to be maintained. If the car was used to provide a car benefit during more than one period in a log book year, one of the periods for which the odometer records will need to be maintained is the log book period.

These records will be used by the employer to estimate the number of business kilometres travelled during the holding period and the business use percentage. This process is discussed below.

Record keeping requirements in a year that is not a log book year of tax

As set out above, section 10B applies to a year which is not a log book year. Generally, this will be a year in which a car benefit arises from the use of a car for which a car benefit has arisen for you in a previous year.

However, a year may be a non log book year even though it is the first year in which a car benefit arises for you from the use of a particular car, if the car is a replacement car.

As set out in the Explanatory Memorandum to Taxation laws Amendment (Fringe Benefits and Substantiation) Bill 1987section 162K:

…enables an employer to treat one car as a replacement for another without having to re-establish a nominated business percentage by keeping new log book records etc., e.g., if a car is sold and replaced by a new car or if a car that is used to provide fringe benefits ceases to be used for that purpose and another car commences to be so used.

Subsection 162K(2) states:

Where the employer nominates a particular car (in this section called the ``replacement car'') as having replaced another car (in this section called the ``original car'') with effect from a specified date in the current year of tax:

(a) the original car shall be treated, with effect from that date, as a different car; and

(b) the replacement car shall be treated, with effect from that date, as the same car as the original car.

However, the transfer of a business percentage is conditional on a record being made of the make, model and registration number of both cars and the date on which the replacement was made.

Section 10B states:

Where one or more car fringe benefits in relation to an employer in relation to a year of tax relate to a car while it was held by a particular person (in this section called the ``provider'') during a particular period (in this section called the ``holding period'') in a year of tax that is not a log book year of tax of the employer in relation to the car, the employer is entitled to a reduction in the operating cost of the car on account of business journeys undertaken during the holding period in the car if, and only if:

(a) odometer records are maintained by or on behalf of the provider in relation to the car for the holding period and, if the provider is not the employer, are given to the employer before the declaration date; and

(b) the employer specifies the employer's estimate of the number of business kilometres travelled by the car in the holding period; and

(c) the employer specifies the business use percentage applicable to the car in relation to the provider for the holding period.

In applying subsection 162(2), section 10B provides that if the year of tax is not a log book year of tax in relation to a particular car for you, the business use percentage for the period the car is booked by an employee will be nil unless:

· odometer records are maintained for the holding period (the period of the booking in which a car benefit was provided);

· the odometer records are given to the employer before the declaration date;

· the employer specifies the employer's estimate of the number of business kilometres travelled by the car during the holding period; and

· the employer specifies the business use percentage applicable to the car for the holding period.

The business use percentage

'Business use percentage' is defined in subsection 136(1) of the FBTAA to mean the percentage calculated on the basis of the formula:

Number of business

kilometres travelled by the

car during the holding period

------------------------------------------ x 100%

Total number of kilometres

travelled by the car during

the holding period

Therefore, for each period in which a car benefit arises during the period in which the car is booked by an employee, you will need to:

· estimate the number of business kilometres travelled while the car was booked; and

· determine the total number of kilometres travelled by the car while the car was booked.

Question 3

If a pool car gives rise to a car benefit for more than one employee, will the benefits be excluded fringe benefits under regulation 3F of the Fringe Benefits Tax Regulations 1992?

Summary

In general terms, if the total of the taxable values of the fringe benefits provided to an employee during an FBT year is more than $2,000 the employer is required to record the grossed-up taxable value of the fringe benefits on the employee's payment summary.

However, some fringe benefits do not need to be reported. These benefits are called excluded benefits.

Regulation 3F of the Fringe benefits Tax Regulations 1992 provides that a car benefit may be an excluded benefit where the following conditions are met:

(a) the benefit is a car benefit as described in subsection 7(1);

(b) the car benefit is either a fringe benefit, or an exempt benefit that would have been a fringe benefit if it was not an exempt benefit; and

(c) the car benefit relate to a car that gave rise to a car benefit for more than one employee during the relevant FBT year.

As each of these conditions will be met in an FBT year in which the particular pool car gives rise to a car benefit for more than one employee, each of the car benefits provided during that year to your employees will be an excluded fringe benefit under regulation 3F.

Detailed reasoning

However, some fringe benefits do not need to be reported. These benefits are called excluded benefits.

Regulation 3F of the Fringe benefits Tax regulations 1992 provides that a car benefit may be an excluded benefit where it relates to a car that gives rise to a car benefit for more than one employee during the year.

Regulation 3F states:

… a benefit is an excluded fringe benefit if, during a year of tax:

a) the benefit is a car benefit, as described in subsection 7(1) of the Act, that is:

i) a fringe benefit within the meaning of subsection 136(1) of the Act; or
ii) a benefit that:

(A) is an exempt benefit; and

(B) would have been a fringe benefit except that the benefit is an exempt benefit; and

b) the car benefit relates to a car the provision of which gives rise to the benefit described in paragraph (a) for more than 1 employee

Example:

The employer of 3 employees makes 1 car available to the employees, for private use, at different times during the year of tax.

In accordance with this regulation, a benefit will be an excluded benefit where the following conditions are met:

(a) the benefit is a car benefit as described in subsection 7(1);

(b) the car benefit is either a fringe benefit, or an exempt benefit that would have been a fringe benefit if it was not an exempt benefit; and

(c) the car benefit relate to a car that gave rise to a car benefit for more than one employee during the relevant FBT year.

In considering these conditions:

(i) Is the benefit a car benefit?

As concluded in relation to question 1 the benefit will be a car benefit.

(ii) Is the car benefit a fringe benefit, or an exempt benefit that would have been a fringe benefit if it was not an exempt benefit?

The car benefit will either be a fringe benefit, or an exempt benefit that would have been a fringe benefit if it was not an exempt benefit.

(iii) Did the car benefit relate to a car that gave rise to a car benefit for more than one employee during the relevant FBT year?

This condition will also be met as the car has given rise to a car benefit for more than one employee during the relevant FBT year.

Question 4

If in the year in which a car is transferred to the car pool, the car gives rise to a car benefit to an employee during the period in which it was held by the employer and to a second employee during the period in which it is part of the car pool:

(a) will the benefits be excluded fringe benefits under regulation 3F of the Fringe Benefits Tax Regulations 1992; and

(b) will separate log book and odometer records be required for both periods for the purpose of determining the business use percentage?

Summary

Reporting requirements

The previous question concerned the reporting requirements for a car benefit if the particular car from which the car benefit arose gave rise to a car benefit for another employee during the particular year, if the car was held by the same 'provider' when both of the car benefits were provided.

As set out in the response to that question, both of the car benefits are an excluded benefit.

This answer will not change if the pool car was held by the employer at the time the first car benefit was provided and by the car pool operator at the time the second car benefit was provided as:

(a) the benefit is a car benefit;

(b) the benefit will be either a fringe benefit or an exempt benefit that would have been a fringe benefit if it was not an exempt benefit; and

(c) the car benefit relates to a car that gave rise to a car benefit for more than one employee during the relevant FBT year.

Log book requirements

The response to question two discussed the log book requirements that apply when a car benefit arises from the use of a pool car by an employee.

In the year in which a car that was held by the employer is transferred to the car pool there will be two holding periods.

The first holding period will be the period in which it was held by the employer. Generally, this will be the period from 1 April until the date on which the car was transferred to the car pool operator.

The second holding period is the period in which it is used to provide a car benefit to an employee of the employer while it was held by the car pool operator.

Period in which the car was held by the employer

Generally, a car which is transferred from the employer to the car pool operator will have been held by the employer at the commencement of the year of tax. Consequently, as the cars are generally held for less than four years and a log book is kept in the first year in which a car is held, the transition year will generally not be a log book year of tax in respect of the period for which the car was held by the employer.

In such a situation, section 10B is the relevant section to consider. Under section 10B the employer is required to:

· have odometer records for the relevant holding period (the period from when the car was first held during the year of tax until the car was transferred to the Car pool operator);

· specify an estimate of the number of kilometres travelled by the car in the relevant holding period; and

· the business use percentage applicable to the car for the relevant holding period.

Period in which the car was held by the car pool operator

As discussed above, in relation to question 2 the relevant holding period for the car benefit provided to an employee while the car is being held by the car pool operator will be the part of the year that a car fringe benefit arose from the car as a result of an employee booking the car.

In applying the definition of log book year of tax in subsection 162G(1), the first year in which a car fringe benefit is provided to an employee after the car has been transferred will be a log book year of tax.

Therefore, in applying section 10A to the car benefit that arose in relation to the use of the car by an employee after it was transferred to the Car pool operator, the employer is required to:

· have log book records and odometer records for the applicable log book period;

· have odometer records for the holding period;

· specify an estimate of the number of kilometres travelled by the car in the relevant holding period; and

· the business use percentage applicable to the car for the relevant holding period.

Detailed reasoning

Reporting requirements

As set out in the response to that question, both of the car benefits are an excluded benefit.

(a) the benefit is a car benefit;

(b) the benefit is either a fringe benefit or an exempt benefit that would have been a fringe benefit if it was not an exempt benefit; and

(c) the car benefit relates to a car that gave rise to a car benefit for more than one employee during the relevant FBT year.

This answer will not change if the pool car was held by the employer at the time the first car benefit was provided and by the Car pool operator at the time the second car benefit was provided as:

(a) the benefit is a car benefit;

(b) the benefit will be either a fringe benefit or an exempt benefit that would have been a fringe benefit if it was not an exempt benefit; and

(c) the car benefit relates to a car that gave rise to a car benefit for more than one employee during the relevant FBT year.

Log book requirements

The response to question two discussed the log book requirements that apply when a car benefit arises from the use of a pool car by an employee.

In the year in which a car that was held by the employer is transferred to the car pool there will be two holding periods.

The first holding period will be the period in which it was held by the employer. This will be the period from 1 April until the date on which the car was transferred back to the car pool operator.

The second holding period is the period in which it was held by the car pool operator and is used to provide a car benefit to an employee of the employer.

In considering the records that need to be kept in relation to both of these periods:

· section 10A sets out the records that are required to be kept in a log book year of tax;

· section 10B sets out the records that are required to be kept in a non-log book year of tax; and

· section 162G sets out when a year will be a log book year of tax.

Each of these sections refers to car fringe benefits that relate to a car 'while it was held by a particular person'. That is, in identifying the records that are required to be kept for both of the holding periods it is necessary to separately consider both periods.

Period in which the car was held by the employer

In such a situation, section 10B is the relevant section to consider. Under section 10B the employer is required to:

· have odometer records for the relevant holding period (the period from when the car was first held during the year of tax until the car was transferred to the Car pool operator);

· specify an estimate of the number of kilometres travelled by the car in the relevant holding period; and

· the business use percentage applicable to the car for the relevant holding period.

Period in which the car was held by the car pool operator

Therefore, in applying section 10A to the car benefit that arose in relation to the use of the car by an employee after it was transferred to the car pool operator, the employer is required to:

· have log book records and odometer records for the applicable log book period;

· have odometer records for the holding period;

· specify an estimate of the number of kilometres travelled by the car in the relevant holding period; and

· the business use percentage applicable to the car for the relevant holding period.

Question 5

Summary

As discussed above in answer to question three, a car benefit will be an excluded benefit that will not be reported on the employee's payment summary where:

(a) the benefit is either a fringe benefit or an exempt benefit that would have been a fringe benefit if it was not an exempt benefit; and

(b) the car benefit relates to a car that gave rise to a car benefit for more than one employee during the relevant FBT year.

Where a car benefit only arises in relation to one employee yours the second requirement will not be satisfied. Therefore, the exclusion under regulation 3F will not apply to a car benefit provided to an employee by virtue that the car has been used to provide a car benefit to an employee of an associate.

Detailed reasoning

As discussed above in answer to question three, a car benefit will be an excluded benefit that will not be reported on the employee's payment summary where:

(a) the benefit is either a fringe benefit or an exempt benefit that would have been a fringe benefit if it was not an exempt benefit; and

(b) the car benefit relates to a car that gave rise to a car benefit for more than one employee during the relevant FBT year.

Where a car benefit only arises in relation to one employee of yours the second requirement will not be satisfied. Therefore, the exclusion under regulation 3F will not apply to a car benefit provided to an employee by virtue that the car has been used to provide a car benefit to an employee of an associate.

In your ruling application you referred to the fact that all government bodies are part of the Crown and for common law purposes constitute one legal entity. We do not dispute this fact. However, as discussed above in relation to question one, when an eligible State or Territory body is nominated, under subsection 135U(1), the nominated body is taken for the purposes of the Act to be the employer of each employee of the State or Territory that has a sufficient connection with the body. Therefore, once a nomination has been made, the relevant employer for the purposes of the FBTAA is the nominated body. It is not the Crown.

In your application you also contended that regulation 3F does not specifically state that the recipient employees must be employed by the same employer. We do not agree with this contention as regulation 3F does not sit alone.

As set out in paragraph (a) of subregulation 3F(1) the benefit being considered is 'a car benefit, as described in subsection 7(1) of the Act'. For the benefit to be a car benefit, paragraph 7(1)(b) requires either:

· the provider to be 'the employer, or an associate of the employer, of the employee'; or

· the car to be applied or available under an arrangement that involves 'the employer, or an associate of the employer, of the employee'.

That is, subsection 7(1) identifies a particular employer to which the car benefit relates. Given this linkage to the employer of the employee in subsection 7(1), we do not agree with your contention that regulation 3F can apply where there are different employers.

It is also necessary to consider the context in which the reportable fringe benefit provisions operate. To determine whether an employee has a reportable fringe benefits amount that has to be shown on the employee's payment summary the employer is required to calculate the individual fringe benefits amount of the employee.

As set out in section 5D of the FBTAA, 'an employee's individual fringe benefits amount is the employee's share of the taxable value of fringe benefits (with some exclusions) provided in respect of his or her employment.' That is, the reportable fringe benefits tax system involves the allocation of the employer's fringe benefits between the employer's employees. Any fringe benefits provided by other employers to their employees are not part of this process.

It should be noted that there are practical reasons for not taking the fringe benefits provided to employees of other employers into account as an individual employer has no way of knowing whether a car benefit has arisen in relation to the availability or use of a particular car by an employee of another employer. Although in the situation being considered car benefits will only arise in relation to the use of the car by an employee of an associate of the employer, subsection 132(2) of the FBTAA only requires an associate that provides a fringe benefit to an employee of the employer to keep records that are relevant for the purpose of ascertaining the employer's liability under the FBTAA and to provide those records to the employer. There is no requirement to provide these details to be provided to other employers.

Question 6

Will a car parking fringe benefit arise under section 39A of the FBTAA if an employee who has garaged a pool car at his or her residence returns the car to the car pool operator car park where it is parked for more than four hours if the car is available for use by all employees of the associated employers and is not driven home by an employee on that day?

Summary

A fringe benefit will not arise unless a benefit has been provided to an employee or an associate of an employee.

An employee who returns a pool car that has been garaged at the employee's residence to the car pool operator car park will receive a car benefit from the garaging of the car at his or her residence and driving the car from home to work.

The employee ceases to receive a benefit once the car is parked. From that point, it is the car pool operator that receives the benefit of having its car parked in the car park.

Detailed reasoning

'Car parking fringe benefit' is defined in subsection 136(1) of the FBTAA to mean 'a fringe benefit that is a car parking benefit'.

The definition of 'fringe benefit' in subsection 136(1) 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:

(d) an associate of the employer; or

(e) a person (in this paragraph referred to as the arranger) other than the employer or an associate of the employer under an arrangement covered by paragraph (a) of the definition of arrangement between:

(i) the employer or an associate of the employer; and

(ii) the arranger or another person; or

(ea) a person other than the employer or an associate of the employer, if the employer or an associate of the employer:

(i) participates in or facilitates the provision or receipt of the benefit; or

(ii) participates in, facilitates or promotes a scheme or plan involving the provision of the benefit;

and the employer or associate knows, or ought reasonably to know, that the employer or associate is doing so;

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

This definition 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 369.

In discussing whether this definition required the identification of a particular employee, 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 which the benefit relates and the benefit has to be provided in respect of the employment of that employee.

In the given situation, the employee is merely returning a pool car which he or she has been using to the car pool operator car park. The only benefit that can be identified as being provided to the employee is the use of the car to drive to work. This is a separate car benefit.

The employee ceases to receive a benefit once the car is parked. From that point, it is the car pool operator that receives the benefit of having its car parked in the car park. As such, this situation can be distinguished from a situation in which the employee drives a car to and from work and receives the benefit of having a car parking space in which to park the car. In such a situation, the employee can be seen to be receiving a benefit from the use of the car park.

Question 7

Summary

The facts of this situation are similar to the previous question as an employee who has no ongoing entitlement to use a pool car returns the car to the car park in the morning.

In accordance with the response given to question six, this employee will not receive a benefit once the car is returned to the car park. Prior to that time, the benefit will be a car benefit.

The fact that another employee drives the car home at night will not alter the answer for the employee who returns the car to the car park in the morning.

The same principle applies to the employee who drives the car home that night. Provided the employee does not have an ongoing entitlement to use the car to travel between home and work, the employee cannot be said to have received a benefit prior to the time at which he or she drove the car home. As with the first employee, the only benefit that arises from taking the car home will be a car benefit.

Detailed reasoning

The facts of this situation are similar to the previous question as an employee who has no ongoing entitlement to use a pool car returns the car to the car park in the morning. In accordance with the response given to question six, this employee will not receive a benefit once the car is returned to the car park. Prior to that time, the benefit will be a car benefit.

The fact that another employee drives the car home at night will not alter the answer for the employee who returns the car to the car park in the morning.

Question 8

Will a car parking fringe benefit arise under section 39A of the FBTAA if an employee who has garaged a pool car at his or her residence returns the car to the car pool operator car park where it is parked for more than four hours before it is driven home by the same employee if the car is available for use by all employees of the associated employers?

Summary

In this third situation, the employee who returns the car to the car pool operator car park in the morning drives the car home at night.

In such a situation, the employee may receive both car benefits and a car parking benefit if the requirements of subsection 39A(1) are met.

One of the requirements is for the benefit to be 'in respect of the employment of the employee'. This requirement is also contained within the definition of 'fringe benefit'.

The phrase "in respect of" in relation to the employment of an employee is defined in subsection 136(1) of the FBTAA to include 'by reason of, by virtue of, for or in relation directly or indirectly to, that employment'.

The meaning of this was phrase was considered by the Federal court in J & G Knowles v Federal Commissioner of Taxation [2000] 96 FCR 402; 2000 ATC 4151; 44 ATR 22 (Knowles) and Starrim Pty Ltd v Federal Commissioner of Taxation [2000] FCA 952; 2000 ATC 4460; 44 ATR 487 (Starrim).

In applying this decision, for the car park to be considered to be provided 'in respect of' the employment of the employee there needs to be a sufficient or material connection between the provision of the car park and the employment of the employee. Unless the car park can be seen to be a product or incident of the employment it is unlikely to be a fringe benefit.

By itself, the fact that a car is driven both from home to work and then from work to home on the same day by an employee who does not have an ongoing entitlement to the private use of the car will not provide the necessary connection between the benefit and the employment of the employee.

However, the necessary connection may exist if the employee has an ongoing entitlement to take the car home.

Detailed reasoning

In this third situation, the employee who returns the car to the car pool operator car park in the morning drives the car home at night.

In such a situation, the employee may receive both car benefits and a car parking benefit if the requirements of subsection 39A(1) are met.

Under subsection 39A(1) a car parking benefit will arise on a day when a car benefit relating to the car is provided to an employee or an associate in respect of the employment of the employee if:

(a) the car is parked on business premises or associated premises of the provider (the car pool operator);

(b) a commercial parking station is located within a one kilometre radius of the premises on which the car is parked;

(c) the lowest fee charged by the operator of the 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;

(d) the car is parked for more than four hours between 7 am and 7 pm on the day;

(e) the provision of parking facilities for the car during the periods is in respect of the employment of the employee;

(f) the car is parked at or near the employee's primary place of employment on that day; and

(g) the car is used by the employee to travel between home and work (or work and home) at least once on that day.

One of the requirements is for the benefit to be 'in respect of the employment of the employee'. This requirement is also contained within the definition of 'fringe benefit'.

In Knowles the Full Federal Court considered the judgements in Smith v FCT (1987) 164 CLR 513; 19 ATR 274; 87 ATC 4883 and Federal Commissioner of Taxation v Rowe (1995) 60 FCR 99; 31 ATR 392; 95 ATC 4691 before concluding that it is not sufficient for the purposes of the FBTAA to conclude that there is a causal connection between the benefit and the employment.

At paragraph 26 the Court said:

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.

At paragraphs 28 and 29 the Court said:

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.

…

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 FBTAA merely to enquire whether there is some causal connection between the benefit and the employment: see FCT v Rowe (1995) 60 FCR 99 at 114 and 123; 31 ATR 392 at 404 and 412; 95 ATC 4691 at 4703 and 4710. Although Brennan, Deane and Gaudron JJ observed in Technical Products (at 47), that the requisite connection will not exist unless there is "some discernible and rational link" between the 2 subject matters which the statue requires to be linked, as was pointed out by Dawson J (at 51), the connection must be "material."

However, the necessary connection may exist if the employee has an ongoing entitlement to take the car home.

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