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Ruling

Subject: home to work travel and private use of vehicles

Question 1

Are the duties of the employees itinerant in nature such that their travel to and from home and work is business travel for the purposes of calculating the taxable value of car fringe benefits under section 10 of the FBTAA?

Answer

Yes

Question 2

Are the duties of the manager itinerant in nature such that the travel to and from home and work is business travel for the purposes of calculating the taxable value of car fringe benefits under section 10 of the FBTAA?

Answer

No

Question 3

Are the employees allowed to record a non-descriptive purpose of their work travel for the purposes of the paragraph 136(1)(f) of the FBTAA definition of 'log book records'?

Answer

No

Question 4

Is the use of utilities, trucks and commercial vans with load carrying capacities of less than 1 tonne used by the employees exempt from fringe benefits tax under subsection 8(2) of the FBTAA?

Answer

No

Question 5

Is the use of motor vehicles of one tonne or more used in the employees exempt from fringe benefits tax under subsection 47(6) of the FBTAA?

Answer

No

This ruling applies for the following period<s>:

Year ended 31 March 2009

Year ended 31 March 2010

Year ended 31 March 2011

Year ended 31 March 2012

Year ended 31 March 2013

Year ended 31 March 2014

The scheme commences on:

1 April 2008

Relevant facts and circumstances

The employer has a group of employees which between them works 24 hours per day, 365 days per year.

The following information was provided:

· a description of the work undertaken by the employees

· description of the employer's private use policy; and

· a list of the vehicles used by the unit was provided.

The vehicles used by an employee would depend on the task they have been allocated to perform.

Private use is restricted for all staff except the manager who has full private use of a vehicle. The rest of the staff have around X% private usage of the vehicles.

The manager spends X% of their time at the employer's place of business the remaining employee only spend X% of their time there.

Relevant legislative provisions

FBTAA Subsection 7(1).

FBTAA Subsection 8(2).

FBTAA Section 10.

FBTAA Section 10A.

FBTAA Subsection 47(6).

FBTAA Subsection 136(1).

FBTAA Section 161.

FBTAA Section 162H.

Reasons for decision

Question 1

Are the duties of the employees itinerant in nature such that their travel to and from home and work is business travel for the purposes of calculating the taxable value of car fringe benefits under section 10 of the FBTAA?

Summary

The duties of the employees are itinerant and as a result the journeys to and from home to work are business journeys.

Detailed reasoning

Subsection 7(1) of the FBTAA sets out the conditions for a car, owned or leased by an employer, being provided to an employee or an associate of the employee as a car benefit.

For a car benefit to arise it must be

· applied to a private use (sub-paragraph 7(1)(a)(i) of the FBTAA); or

· taken to be available for private use (sub-paragraph 7(1)(a)(ii) 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'.

It should also be noted that subsection 7(2) of the FBTAA seems a car to be available for private use when it is garaged or kept at or near an employee's place of residence.

As a result a car fringe benefit will arise whenever an employee takes a car home and garages it there. However if the employer chooses to they can elect to use the operating cost methods contained in section 10 of the FBTAA. In order to make this election an employer must maintain a log book (for a minimum of 12 weeks), detailing all the business journeys undertaken in the car.

The question being asked here is whether the travel between the homes of this specific group of employees are business journeys. In particular the issue if focusing on whether the employment duties are itinerant.

Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel, explains the relationship between private use and business use for fringe benefits tax purposes and paragraph 25 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, 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.

This was expanded on in Taxation Ruling TR 95/34, Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses and paragraph

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…

Travel a fundamental part of the employee's work.

Paragraph 22 of TR 95/34 states:

Travel must be an essential feature of an employee's duties in order for that work to be classified as itinerant. In Taylor v. Provan [1975] AC 194 Lord Simon (discussing the rule established in Ricketts v. Colquhoun [1926] AC 1) said at 221:

'...the obligation to incur the expenses of travelling in question must arise out of the nature of the office or employment itself, and not out of the circumstances of the particular person appointed to the office or employed under contract of employment - two different classes of travelling expenses readily come to mind. The first is where the office or employment is of itself inherently an itinerant one. ...In such cases the taxpayer may well be travelling in the performance of the duties of the office or employment from the moment of his leaving home to the moment of his return there - a visit to any head office might well be purely incidental or fortuitous.'

Paragraph 23 of TR 95/34 refers to Taxation, Commissioner of (Cth) v. Wiener (1978) 78 ATC 4006; 8 ATR 335 (Weiner's case) where the teacher was required to comply with a strict timetable that kept her on the move throughout each of the days; the transport remained at her disposal throughout each of those days.

Paragraph 24 of TR 95/34 refers to Brightman J's statement in Horton v. Young [1972] 47 TC 60: 1 Ch 157 at 164 describing a person's itinerant profession as having no fixed place or places at which to carry on the profession but moves continually from one place to another.

The tax office publication Fringe benefits tax: a guide for employers (NAT 1054-02.2005) (the Employers Guide) at page 35 considers employment duties of an itinerant nature and states:

Commonly, in these cases the employee works at the employer's office periodically (for example, once a week) to complete or file reports, pick up supplies or organise future trips. Travel between home and the office made in these limited circumstances is accepted as an ordinary incident of the business travel and, as such, is also treated as business travel.

The information provided indicates that this requirement is satisfied.

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

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.

Whereas paragraph 29 of TR 95/34 states:

In Case U97 87 ATC 584; AAT Case 68 (1987) 18 ATR 3491 (Case U97), the taxpayer was employed as a fireman. He was attached to a fire station located close to his home in a northern suburb of Sydney, but for some years worked as a relief fireman. In that capacity, he was commonly sent to other fire stations in the Sydney fire district. The only distinguishing feature of his claim was that he travelled to one outer station regularly for a number of days then another outer station for another period. In deciding that the taxpayer was not itinerant, Senior Member McMahon stated (ATC at 588; ATR at 3495-3496):

'There is not the web of workplaces that one looks for as a structure for the applicant's working life if that life is to be regarded as itinerant.'

In this case the facts indicate that the employees do not have a regular web of work places as described in Wiener's case and it would be unreasonable to conclude that any workplace is fixed to the extent that there would be a structure established in the employees' working life in the way one was established in Case U97 87 ATC 584; AAT Case 68 (1987) 18 ATR 3491 (Case U97).

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.

The facts indicate that the employees continually travel from one worksite to another.

Other factors

Degree of uncertainty of location in his or her employment

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.

Facts indicate that there is an element of uncertainty in their employment location.

Home is a base of Operations

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.

TR 95/34 refers to Taxation, Commissioner of (Cth) v. Collings (1976) 10 ALR 475; (1976) 76 ATC 4254; (1976) 6 ATR 476 (Collings case) where a highly trained computer consultant was required to be more than just being on stand-by duty. Her home and office were two separate but necessary places of work because of the special nature of her duties. She was provided with a portable terminal to use at home that was connected to the work computer. It was common for her to receive telephone calls at home and give advice to workers at the office. Her travel was at times when advice had been given but the computer was still not working.

In Taxation Ruling IT 112 Deductibility of travelling expenses between residence and place of employment or business, guidelines were provided in relation to various decisions of the Supreme Court, including the Collings case. At subparagraph 21(c) the ruling states, in cases comparable with the Collings Case:

Although it is not anticipated that the same circumstances present in this case will arise very often in other cases… The journeys to and from home were made necessary by the special nature of the taxpayer's employment whereby she was engaged on a special assignment and was continuously on duty wherever she was.

Subparagraph 21(c)(ii) of IT 112 draws a distinction between the facts in the Collings Case and employees on stand-by duty at their homes and who are required to obey a summons to cope with some emergency. For example the mere fact an airline pilot on stand-by duty at home is not enough to conclude at those times the airline pilot's duties are itinerant.

In this case all employees are at times on stand-by duty and may need to communicate for instructions once called out. However the facts indicate that they are not working prior to being called out.

Requirement to carry bulky equipment

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.

Paragraph 64 of TR 95/34 states:

A deduction is not allowable if a secure area for the storage of equipment is provided at the work place (see Case 59/94 94 ATC 501; AAT Case 9808 (1994) 29 ATR 1232).

In this case a secure area for the storage is provided at the employer's business premises and in fact it is used for that purpose. It is considered the availability of secure storage at the business premises means that the transport of equipment in the vehicles is not the dominant reason for the travel to or from the home and the office.

However the equipment is not used at the business premises it is only used at work locations and therefore has to be transported to those locations for use. Therefore there is a requirement to carry the equipment to those locations.

The employer provides an allowance

Paragraph 72 of TR 95/34 states:

Official recognition by an employer may indicate that travelling is a necessary element of the employment… Alternatively, an allowance may be paid to compensate the employee for the time or distance involved in travelling to and from work, the lack of public transport or for travel at inconvenient times. The payment of an allowance in such circumstances would not indicate that the employment is itinerant in nature.

Paragraph 73 of TR 95/34 goes on to state:

Therefore, the payment of an allowance is, by itself, insufficient to prove itinerancy, and must be considered together with the other characteristics of the employee's work.

In this case cars are provided so there is not the need to provide the employees with an allowance for travelling to and from home to work. However the absence of an allowance to travel between home and work neither supports nor denies a conclusion the duties are or are not itinerant in nature.

Conclusion

The duties of the employees satisfy the majority of the characteristics mentioned in MT 2027 and TR 95/34 and those duties are considered inherently itinerant.

Additional information

It is important to note the following:

· It has been concluded that the employees do not have their homes as a base of operations and do not commence their duties upon receiving a call at home. However, at those times when their duties are itinerant, the travel to and from home and work will be the exception to the general rule that the travel is private in nature.

· being on stand-by does not, in itself, change the general rule that travel between home and a persons regular place of employment or business is ordinarily private travel;

· TR 95/34 recognises that an 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;

· TR 95/34 also recognises that itinerant work may be permanent or temporary in an employee's duties.

Question 2

Are the duties of the manager itinerant in nature such that the travel to and from home and work is business travel for the purposes of calculating the taxable value of car fringe benefits under section 10 of the FBTAA?

Summary

The duties of the manager are not itinerant and whether or not the travel between home and work is a business or private journey will depend on the nature of the journey.

Detailed reasoning

The criteria outlined in MT 2027 and TR 95/34 (explained above) need to be applied to the manager

Travel a fundamental part of the employee's work.

The manager spends a substantial proportion of time working on administrative duties at the one office with the remainder spent away from the office, which includes travel from home and the office.

Although only a small percentage of the time may be spent in the field, those duties in the field require the use of a vehicle and therefore this requirement is satisfied

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

The manager spends a substantial percentage of his or her time at the one office. It is considered the office is sufficiently part of the structure of this employee's working life of the manager to be a fixed place of work.

Continual travel from one worksite to another

The manager spends a substantial proportion of the time at the one office on management and administrative duties. Given the amount if time spent at the office the travel undertaken on tasks in the field is not continually unsettled to the extent that the manager's duties could be considered itinerant. Therefore this characteristic is not satisfied.

Other factors

Degree of uncertainty of location in his or her employment

The manager has a high degree of certainty of employment location given the fact that X% of the time attending the one office to attend to directing operations, managerial and other administrative duties.

Home is a base of Operations

The manager is also on call and as with the other employees there is no evidence that shows that the home is used as a base of operations. In fact X% of the time is spent at the one office.

Requirement to carry bulky equipment

As there is storage available at the office the employee spends X% of their time at there would be no need for the manager to transport equipment between home and that office. It would only need to be transported if the manager was required to transport equipment to an alternative work location.

The employer provides an allowance

As stated above this characteristic is not considered.

Conclusion

The duties of the manager do not meet the majority of the characteristics mentioned in MT 2027 and TR 95/34 as considered above. Therefore, those duties are not considered inherently itinerant. The nature of journeys to and from home and work will depend on the circumstances of each journey.

Additional information

The manager is allowed private use of the employers vehicles, including to and from home and work.

It has been concluded that the manager's home is not a base of operations.

Paragraph 22 of MT 2027 states:

Two further points should be noted. First, where the application of this principle results in travel undertaken in response to an emergency call being treated as business travel, it does not follow that normal daily travel undertaken by the employee to and from the office will be similarly treated. The decision in Collings was expressly restricted to travel outside the normal daily journey.

It has also been concluded that the structure of the manager's duties mean the main office is the manager's usual place of work. Paragraph 22 of MT 2027 means that the travel to and from home and that office keeps its private character even on those occasions when the manager travels from home to pick up equipment from the office and then undertakes travel for field work.

However when on call and the manager is called from home and travels directly to a location other than their office the character of that journey would change from a private to a business nature.

Question 3

Are the employees allowed to record a non-descriptive purpose of their work travel for the purposes of the paragraph 136(1)(f) of the FBTAA definition of 'log book records'?

Summary

In order to satisfy the requirements under the FBTAA the general locality of the location or locations would be required to be recorded in the log book.

Detailed reasoning

The taxable value of a car fringe benefit under the operating cost method is calculated by use of the formula in subsection 10(2) of the FBTAA which takes the total operating costs of the car and reduces this total according to the percentage of business use.

To use the operating cost method certain records must be maintained including a log book. Section 10A of the FBTAA sets out the records that must be maintained in a log book year which are:

· Log book records for an applicable log book period;

· Odometer records for the applicable log book period; and

· Odometer records for the period the car was held during the year.

The definition of 'log book records' is contained in subsection 136(1) of the FBTAA and paragraph (f) of that definition requires that an entry me made that records 'the purpose or purposes of the journey':

In addition section 161 of the FBTAA provides that where two or more business journeys are undertaken consecutively on any day, only one entry for the series needs to be recorded in the logbook. This means that if all journeys undertaken during a day are business journeys then only one entry need be made in the logbook.

There is no provision within the FBTAA to allow the Commissioner discretion as to the description of a non-specific purpose of travel such as to be entered into a log book.

In considering what type of entry is to be recorded in a log book as the 'purpose of the journey' it is appropriate to have regard to the objective of the log book requirement - broadly, to provide satisfactory evidence of the extent of business journeys undertaken in a car during a particular period. It will be apparent from this that an entry merely indicating 'operations' will be insufficient for this purpose.

The entry should be sufficiently descriptive of the purpose of the journeys to enable them to be characterised as business journeys and to correlate broadly with the distance travelled. However this does not mean that the description needs to be overly detailed. For example paragraph 4.2 of the Employers Guide provide the following example:

Where two or more business trips are undertaken consecutively on any day, only one entry for the series needs to be recorded in the logbook. For example, an entry for a salesman who called on 10 customers while working in the Bathurst -Orange area of New South Wales could record the odometer readings at the start and end of the consecutive journeys and describe the purpose of the travel as '10 customer calls, Bathurst-Orange area'.

Question 4

Is the use of utilities, trucks and commercial vans with load carrying capacities of less than 1 tonne used by the employees exempt from fringe benefits tax under subsection 8(2) of the FBTAA?

Summary

There is no evidence to determine whether the private use is limited to work-related travel or other private use that is minor, infrequent and irregular. Without that evidence subsection 8(2) of the FBTAA cannot apply.

Detailed reasoning

Subsection 8(2) of the FBTAA provides an exemption from the fringe benefits tax for limited private use of a car. It states:

A car benefit provided in a year of tax in respect of the employment of a current employee is an exempt benefit in relation to the year of tax if:

(a) the car is:

(i) a taxi, panel van or utility truck, designed to carry a load of less than 1 tonne; or

(ii) any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers); and

(b) there was no private use of the car during the year of tax and at a time when the benefit was provided other than:

(i) work-related travel of the employee; and

(ii) other private use by the employee or an associate of the employee, being other use that was minor, infrequent and irregular.

There will be a number of vehicles in the fleet that are commercial cars being panel vans, utility trucks or other road vehicles that are designed to carry a load of less than 1 tonne and is not designed for the principal purpose of carrying passengers.

However for the exemption to apply there has to be no private use other than work-related travel of the employee; and other minor, infrequent and irregular private use of the vehicle by employees. It is important to note that in applying this exemption it the use of the car itself that determines whether the exemption applies.

To begin with Work-related travel is defined in subsection 136(1) of the FBTAA to mean:

(a) travel by the employee between:

(i) the place of residence of the employee; and

(ii) the place of employment of the employee or any other place from which or at which the employee performs duties of his or her employment; or

(b) travel by the employee that is incidental to travel in the course of performing the duties of his or her employment.

In our answer to question one we determined that home to work travel by the employees (other than the manager) is business travel so their travel between their place of residence and place of employment is not private use so we only need to look at whether their private use is minor, infrequent and irregular.

However if the manager also uses one of these vehicles the manager may be undertaking private use that is work-related travel as defined. However the manager also has full private use of whichever fleet car he or she chooses to use. So once again the issue comes down to whether other private use of a specific car is minor, infrequent and irregular.

The words minor, infrequent and irregular are not defined in the FBTAA.

The Explanatory Memorandum to the Taxation Laws Amendment (Fringe Benefits and Substantiation) Bill 1987 gives some guidance as to what may be considered as minor, infrequent or irregular as those words are used in section 58P of the FBTAA. It states:

The occasional use of an employer's vehicle by an employee for a special purpose such as rubbish removal or to travel from home to work during a transport strike would be exempt benefits provided the employee in question did not have a general entitlement to use the vehicle for private purposes. However, in some cases, the benefit would be of sufficient value to override considerations of irregularity or lack of frequency. A "one-off" loan of a four- wheel drive vehicle to enable an employee to travel cross country during an extended annual holiday break may not be exempt under section 58P because the value of such a benefit is not small.

Chapter 7.6 of the Employers Guide provides two examples to help determine a similar exemption for the private use of commercial cars. Both these examples state in part:

Example 1: exempt use

An electrical company employee takes the company van (carrying capacity of less than one tonne) home each night as there is no security at the company premises. The only non-work-related use during the FBT year was a trip to pick up some furniture and take it to the employee's home. This use of the van would be exempt from FBT.

If the use of the vehicle exceeds the limits set out above, it is a car fringe benefit. All the private use of the vehicle, including the travel between home and work, is taken into account in determining the business percentage under the operating cost method. . .

Example 2: non-exempt use

A council employee takes a utility (carrying capacity of less than one tonne) home each night and on the weekends. Although the utility is clearly marked as a council vehicle, the employee uses it for shopping and other private purposes during the week and often for country trips on the weekends.

This use of the utility would not be exempt from FBT and would be treated as a car fringe benefit. .

The fact that the manager has full private use of vehicles and that other employees have X% private usage makes it impossible to determine if the actual usage of a vehicle in a specific FBT year is minor, infrequent and irregular.

Without evidence to demonstrate that the usage of a vehicle is minor, infrequent and irregular subsection 8(2) of the FBTAA cannot apply.

Question 5

Is the use of motor vehicles of one tonne or more used by the employees exempt from fringe benefits tax under subsection 47(6) of the FBTAA?

Summary

There is no evidence to determine whether the private use is limited to work-related travel or other private use that is minor, infrequent and irregular. Without that evidence subsection 47(6) of the FBTAA cannot apply.

Detailed reasoning

Subsection 47(6) of the FBTAA operates similarly to subsection 8(2) of the FBTAA for particular commercial vehicles that have a designed load carrying capacity of 1 tonne or more.

In fact the same examples provided in the Employers Guide in respect of the application of subsection 8(2) of the FBTAA are provided in respect of the application of subsection 47(6) of the FBTAA.

Therefore the same reasons given in our answer to question 4 as to why subsection 8(2) of the FBTAA does not apply to the use of the fleet vehicles equally applies here.