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Ruling

Subject: travel provided on a bus

Question 1

Will bus transport provided to employees between the nearest train station and place of employment be an exempt residual benefit under subsection 47(6) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?.

Answer

Yes.

This ruling applies for the following periods:

Year ended 31 March 2012

Year ended 31 March 2013

Year ended 31 March 2014

Year ended 31 March 2015

The scheme commences on:

1 April 2011.

Relevant facts and circumstances

The employer provides a bus service between its premises and the nearest train station.

This bus operates as an express service between the two locations. The bus does not stop along the route to pick up or drop off passengers.

In the morning the service runs one-way from the station to the business premises for a fixed period. In the afternoon it runs the other way for a fixed period.

The reasons behind why the service was established were provided as was a breakdown of staff and customer usage.

Relevant legislative provisions

FBTAA subsection 47(6)

FBTAA section 58P

FBTAA subsection 136(1).

Reasons for decision

Summary

The private use is restricted to work-related travel and other travel that is minor, infrequent and irregular and there subsection 47(6) of the FBTAA applies.

Detailed reasoning

Subsection 47(6) of the FBTAA states:

Where:

(a) a residual benefit consisting of the provision or use of a motor vehicle is provided in a year of tax in respect of the employment of a current employee

(aa) the motor vehicle is not:

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

(ii) a car, not being:

(A) a panel van or utility truck; or

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

the benefit is an exempt benefit in relation to the year of tax.

In this case the employer is providing a bus service to and from their place of business to the nearby train station. The exemption requires us to look at the use of the bus by each employee that rides the bus rather than the bus itself. Therefore each trip could consist of a single benefit or many benefits depending on the number of employees on the bus.

In looking at whether subsection 47(6) of the FBTAA applies in this case ATO Interpretative Decision ATO ID 2001/313 Fringe benefits tax Fringe Benefits Tax: Exempt Residual Benefit concluded that travel on a bus involves the use of a motor vehicle.

We can conclude that the service involves the use of a motor vehicle and that each employee that travels on the bus has the use of that motor vehicle.

In addition the use of the bus is limited so it can be concluded that the use of the bus by employees is in respect of the employment of a current employee.

Therefore the only issue that needs further investigation is whether private use is limited to work-related travel and other minor, infrequent and irregular private travel.

Work-related travel

Work-related travel is defined in subsection 136(1) of the FBTAA as:

in relation to an employee, means:

(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 this case any journey undertaken on the bus will begin or end at the business premises so we can readily conclude that subparagraph (ii) of the above definition will be satisfied.

What needs to be determined is whether taking the employee to or from a nearby train station can be considered travel between employee's place of residence and their place of employment.

In ATO ID 2001/313 a bus was used to transport employees between the town where they resided and the nearby mine site at the beginning and end of each shift. As with the facts in this case it could be read that the mine site is a place of employment and that subparagraph 136(1)(b)(ii) of the FBTAA definition of work-related travel was satisfied in each instance. However the ATO ID does not go into any detail of how the employee's 'catch' or 'alight' the bus in the nearby town. As the ATO ID concluded that subsection 47(6) of the FBTAA applied, and the facts did not explain how the employee would catch and alight the bus at the town, this suggests (but does not confirm) that providing the overall travel is between the employee's 'place of residence' and 'place of employment', that the employer can the use of the motor vehicle for a part of overall journey and that the journey in work-related travel.

In other words on looking at whether travel is work related travel it is any part of a journey between a 'place of residence' and a 'place of employment' regardless of the number of differing form of transport used to take that journey that constitutes work-related travel.

This conclusion has further support in ATO Interpretative Decision ATO ID 2009/140 Fringe Benefits Tax Exempt benefits: free travel on bus - private use. The facts in this ATO ID state in part:

. . .The employee is provided with free transport on the buses under the employment arrangement. The employment arrangement is facilitated through the employer providing the employee with the use of a pre-paid ticket. The tickets and credits on each ticket are purchased by the employer from the third party entity, remain the property of the employer, and are held in the employer's name.

Under the employment arrangement the employee is only permitted to use this ticket for travel between the employee's place of residence and the employee's place of employment (between home and work). Any other form of use, including any use by an associate of the employee, is expressly prohibited. . . .

In the case outline in ATO ID 2009/140, it was also concluded that subsection 47(6) of the FBTAA applied and although there will be instances where an employee will reside near a bus stop or train station this is more likely an exception. It is more likely that in order to use public transport the employee would have to travel to a bus stop or train station first.

Therefore although silent on this ATO ID 2009/140, also suggests that a journey between a 'place of residence' and a 'place of employment' where the employer has only been provided use of a motor vehicle for part of that journey can still be considered to be work-related travel. This is the case even though at either end of the public transport leg the employee is left to organise the remainder of the journey themselves.

Therefore based on these two ATO ID's we can conclude that in this case the travel between be business premises and the nearby station can be considered to be work-related travel providing it forms part of an overall journey between a 'place of residence' and a 'place of employment'.

What we now need to determine if this is in fact what is happening before the employer gets to the station in the morning and after they leave the station in the afternoon.

There are two windows where the employees have use of the bus. The morning and the afternoon. These windows indicate that the employees who use the service use it to travel to work in the morning on the bus and then use it to travel home in the afternoon, albeit for only part of the overall journey. Any overall trip that has started or ended at an employees 'place of residence' will be work-related travel.

However if the employee's destination (or starting point) is not a place of residence then the whole journey may not be work-related travel and it is these journeys that are of concern when looking at applying this exemption.

Other minor, infrequent and irregular private travel

In determining whether other private use is minor, infrequent and irregular we would actually need to look at the travel of each employee.

The value of the benefit would more than likely be minor given the nature of each journey and the issue of frequency and regularity is contained in Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits and paragraphs 144 to 148 state:

In National Australia Bank Ltd v. Commissioner of Taxation (1993) 46 FCR 252; 93 ATC 4914; (1993) 26 ATR 503 (NAB case) Ryan J held that expenditure on taxi fares by the employer in relation to shift employees travelling to and from work were not exempt benefits.

Ryan J held on the facts before the Court that even accepting that the notional taxable value of each taxi cab trip was 'small', the benefit was nevertheless not an exempt benefit under section 58P. It was not unreasonable to treat the presumptively minor benefit provided to the employee as a fringe benefit, as it was necessary to regard each journey by taxi cab undertaken in similar circumstances in the relevant year as an associated benefit. The sum of the presumptively minor benefits was substantial.

In Case 2/96 (1995) 32 ATR 1099, 96 ATC 131; (Case 2/96) the Administrative Appeals Tribunal (AAT) held that a company provided taxi travel for employees in circumstances distinguishable from those in the NAB case, and on the facts before it, held that the taxi travel benefits would be exempt benefits where the number of total trips was less than 48 or, on a monthly averaging basis, less than four per month in relation to any given employee in an FBT year.

In reaching its conclusion, the AAT acknowledged that this view was somewhat arbitrary but having regard to the ad hoc nature of the employer's requirements the employee could not have expected the benefits. It was also stated that:

[it] is in the end result necessary to draw a line at some point, in each case in relation to particular facts. We consider that in this case the line can appropriately be drawn, in relation to each employee, on this basis.

The relevance of the decisions and the factual arrangements in both the NAB case and Case 2/96 are somewhat limited although the discussion on 'infrequent and irregular' is still relevant. Both decisions were based on the originally enacted section 58P, where the threshold test required that the notional taxable value of the minor benefit be 'small'.

Although it was looking at frequency in respect of the application of section 58P of the FBTAA, Case 2/96 (1995) 32 ATR 1099, 96 ATC 131; (Case 2/96) allowed travel of less than 48 occasions per FBT year (or less than four per month) as being allowable in the circumstances of that case.

In this case the difficulty the employer faces is determining who on a day to day basis actually uses it and the nature of their journey. The timing and one-way natures of the service strongly suggests that it would mostly be used for travel between home and work. We can also exclude travel to and from other places of employment as that is not private travel.

The only issue is where the employee detours on the way home. For example, after catching the bus to the train station the employee could catch the train to watch a sporting event before going home. Even if this occurs, there is an argument that the bus leg of the journey is part of the overall journey that starts at the place of employment and at some point ends at the place of residence.

Ultimately unless the employee explains where they have travelled from or will be travelling to every time they catch the bus the employer will not be able to quantity when the employee does detour.

Although the employer may not be able to quantify each single employee's use of the service throughout an FBT year that would involve a detour, Case 2/96 allows for a conclusion on what is irregular and infrequent based on the facts of the case.

In this case it is accepted that the service being provided is to allow the employees to travel to and from work each day and that the majority of the travel will be work-related travel. It is accepted that any travel that involves detours made by an employee would be minor infrequent and irregular from that work-related travel.