| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your private ruling
Authorisation Number: 1012232050347
This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.
Ruling
Subject: Fringe benefits tax
Question 1
Where you previously provided a car benefit to the employee of an associate entity, does the transfer of that employee's employment from the associate entity to you result in a 'new commitment' for purposes of applying the statutory formula method under section 9 of the Fringe Benefits Tax Assessment Act 1986?
Answer
No
This ruling applies for the following periods:
Year ended 31 March 2012
Year ended 31 March 2013
The scheme commences on:
On or after 1 June 2011
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
Prior to 30 June 2011, a number of employees of company A entered separate individual deeds of novation, whereby their original motor vehicle lease between the employee and the financier was revoked, and a new lease was entered into between Company B (you) (an associate of company A), the financier and the employee.
In accordance with the novation documentation, you then had the obligation to make the lease payments and the employee retained the obligation to guarantee the residual value.
On or after 1 January 2011, a specific group of employees previously employed by company A, changed legal employer to you.
Some of the employees that were transferred as a consequence of a restructure have motor vehicles provided via existing novated lease arrangements. Importantly, there will be no change to the lease novation.
The relevant motor vehicle lease novation agreements will not change when the employer entity changes. Instead, they will remain as is with the new employer, i.e. you, continuing to be the contracting party.
Relevant legislative provisions
Fringe Benefits Tax Assessment Act 1986 Section 9.
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Summary
The transfer of employees from your associate entity to you does not result in a 'new commitment' for purposes of applying the statutory formula method as you were previously providing car benefits to those employees whilst they were employed by company A.
Detailed reasoning
Section 9 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides the formula for calculating the taxable value of car fringe benefits. This section was amended by Part 1 of Schedule 5 to the Tax Laws Amendment (2011 Measures No. 5) Act 2011.
The amendments to section 9 of the FBTAA made by this part apply to car fringe benefits provided during the year of tax beginning on 1 April 2011. Under the amendments a flat statutory rate of 20% applies (subject to transitional rules) regardless of the distance travelled.
The amendments apply to all car fringe benefits provided after 7:30pm AEST on 10 May 2011 except where there is a pre-existing commitment in place to provide a car.
The term pre-existing commitment means a commitment to the application or availability of the car that was made prior to 7:30pm AEST on or after 1 January 2011.
In accordance with the Explanatory Memorandum to Tax Laws Amendment (2011 Measures No.5) Act 2011 a 'commitment' is entered into at the point where there is a financially binding commitment to a transaction on one or more of the parties and it cannot be backed out of. The commitment needs to be one that relates to the application or availability of the car to an employee or associate.
Prior to 30 June 2011, you entered into novated leases whereby you provided car fringe benefits to employees of your associate. The novated lease arrangement is a pre-existing commitment to provide a car to the employee.
At a time on or after 1 January 2011 some of those employees changed employer such that you are now their employer. The novated lease arrangements under which you provided the car fringe benefits whilst they were employed by your associate did not change.
Consequently there is no new commitment because you have continued to provide the car fringe benefits to the relevant employees.