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Ruling

Subject: Renting advertising space on private vehicles

Questions and answers

Question:

1. Are the drivers classified as employees for Pay as You Go (PAYG) withholding purposes, where you rent advertising space on vehicles they drive for private purposes?

Answer:

No.

Question:

2. Do you have an obligation to withhold from the payments you make to drivers for the advertising space, under the PAYG withholding system where they do not quote an ABN or a 'Statement by a Supplier' Form ticking the option 'The supplier is not entitled to an ABN as they are not carrying on an enterprise in Australia'?

Answer:

Yes.

This ruling applies for the following period

For the year ended 30 June 2012

For the year ended 30 June 2013

The scheme commenced on

1 July 2011

Relevant facts

You are starting a business where you rent advertising space on private vehicles. You are then looking at approaching businesses that wish to advertise and being the medium between the advertiser and the private vehicle owner/driver.

Potential clients have to complete an initial survey/application form that shows their driving habits. You can then present these to potential customers who can choose what is best for them. Under the contracts the car owner/driver will then have to meet these minimum requirements each month to receive payments. The car can be driven by different family members.

The advertising would be wraps or die cut stickers that are not removable. You would check kilometres and condition of stickers before making payments.

You have provided a copy of a draft contract, General Drivers Agreement.

Relevant legislative provisions

Taxation Administration Act 1953 Schedule I Part 2-5

Reasons for decision

Employees

There is no employer/employee relationship in relation to the payment under this agreement. You are renting the external surface of the vehicle. The vehicle owner/driver is not changing the way they use their vehicle. It is still predominantly being used for private purposes, the way it has normally been used. Different people can drive the vehicle. The nominated driver under the agreement has responsibility to see that these other drivers meet the obligations under the agreement.

The payment is ultimately a rental payment for the surface of the vehicle. It does not fall within the bounds of payments that may be subject to pay as you go withholding like salary and wages or allowances, for work or services.

Quotation of ABN

Whether a client of yours provides you with an ABN will depend on their circumstances:

If they are not conducting a business through the use of the vehicle or its use is not associated with some other business they will not be entitled to an ABN in connection with this activity. If they are not conducting a business they can supply you with a 'Statement by a Supplier' Form, ticking the option 'The supplier is not entitled to an ABN as they are not carrying on an enterprise in Australia'. You will have no withholding obligations in that instance in relation to eh client not quoting an ABN.

If they do not supply an ABN or the above form you will have an obligation to withhold tax from the payment for failure to quote an ABN.