Edited version of your private ruling

Authorisation Number: 1012425987315

Ruling

Subject: Fringe Benefits Tax - Exempt Residual Benefits

Question 1

Is the provision of transport, facilitated by way of a smart card registered in Company X's name, for the use of Company X's Y Division employees in respect of private passenger travel on Company X buses, under the terms of a valid salary sacrifice arrangement (SSA), an exempt residual benefit under subsection 47(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

Question 2

Is the provision of transport, facilitated by way of a smart card registered in Company X's name, for the use of a Y Division employee in respect of private passenger travel on a train, under the terms of a valid SSA, an exempt residual benefit under subsection 47(1) of the FBTAA?

Answer

Yes

Question 3

Is the provision of transport, facilitated by way of a smart card registered in Company X's name, for the use of a Y Division employee in respect of private passenger travel on ferries, under the terms of a valid SSA, an exempt residual benefit under subsection 47(1) of the FBTAA?

Answer

Yes

Question 4

Is the provision of transport, facilitated by way of a smart card registered in Company X's name, for the use of a Y Division employee in respect of private passenger travel on various private bus services, under the terms of a valid SSA, an exempt residual benefit under subsection 47(1) of the FBTAA?

Answer

Yes

Question 5

Is the provision of use of a 'motor vehicle', facilitated by way of a smart card registered in Company X's name, for the use of a Company X employee (other than a Y Division employee) in respect of private passenger travel between home and work on Company X buses, under the terms of a valid SSA, an exempt residual benefit under subsection 47(6) of the FBTAA?

Answer

Yes

Question 6

Is the provision of use of a 'motor vehicle', facilitated by way of a smart card registered in Company X's name, for the use of a Company X employee (other than a Y Division employee) in respect of private passenger travel between home and work on various privately owned bus services, under the terms of a valid SSA, an exempt residual benefit under subsection 47(6) FBTAA?

Answer

Yes

This ruling applies for the following period:

01 April 2013 - 31 March 2014

The scheme commences on:

01 April 2013

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.

The smart card is an integrated public transport electronic ticketing system, available to the general public, which unifies ticketing products and consistent fares and concessions across schedule passenger services provided by various bus, train and ferry services.

The smart card is the public face of the transport company and has been introduced across the network.

The smart card allows passengers to travel without discriminating as to the mode of transportation used to arrive at a particular destination. All revenue from the smart card belongs to the transport system for running the particular transportation service. Essentially, the smart card allows the passenger to travel on all modes of public transportation.

Company X consists of various divisions, including the Company X, Y Division. These divisions are not separate legal entities. Company X is the employer for all divisions.

The place of employment of all the relevant Company X employees or any other place from which or at such employees may before duties of their employment with Company X are wholly within the relevant area.

Company X intends to enter into valid salary packaging arrangements¹ (SSAs) with certain of its employees from both its Y Division and the other divisions of Company X in respect of the provision of passenger transport within the relevant area.

The relevant passenger transport will be on any, or all of, Company X buses, trains, ferries and various privately owned bus services.

The motor vehicles used by the privately owned bus services are not panel vans, utility trucks or any other road vehicle designed to carry a load of less than 1 tonne (other than in the latter case, there may be some vehicles designed for the principal purpose of carrying passengers).

The relevant Company X employees will usually receive smart cards whose balance levels are kept continually topped-up by predetermined amounts to the extent and frequency previously agreed under the terms of the SSAs between the employees and Company X.

When a smart card is purchased or registered an 'account holder' and an 'authorised user' is often nominated (although this is not mandatory for an 'adult' smart card).

The 'account holder' and the 'authorised user' of a smart card can be the same person or can be different people.

Under the smart card system, the 'account holder' is the person responsible for the fares, fees and other charges. Company X will be the 'account holder' for each of the relevant smart cards (which will have the Company X logo on them)

The 'authorised user' is the person who uses the smart card to travel. The Company X employee will be the 'authorised user' of the smart card.

The smart cards will be restricted under the terms of the SSAs to 'home to work travel' by the relevant Company X employees on regular and scheduled passenger transport services within the relevant area.

Under the terms of the SSAs, it is only the employee who will be able to validly use the smart cards for any of the relevant passenger transport services.

The relevant Company X employees will be required to sign a declaration at the end of each fringe benefits tax year that the smart cards were used solely for 'home to work travel' by the employee.

In addition to the employee's declaration, Company X will obtain sufficient documentation such as travel history reports (which can be obtained via the online smart card facility) to verify that smart cards were used solely for 'home to work travel' by the employee.

Company X has an operating contract with an agency for the ongoing operation of the Company X bus service that expires.

The Y Division collects all on bus ticketing fares and remits them to transport company which in turn pays the Y Division for operating the bus service. All other fare collection is facilitated primarily by the transport company through the Integrated Ticketing System.

The Y Division receives its revenues primarily from the transport company arrangements with the agency, on a fee for service basis for the various bus route operations.

The move toward remunerating the Y Division on a fee for service basis for the operation of the bus services has aligned the Y Division with the agency's arrangements with other private passenger transport companies.

The Y Division is responsible for the design of routes, timetabling, scheduling of the bus fleet, rostering of drivers, taking out appropriate insurances, maintaining a lost property register, implementing a customer feedback process, and first line maintenance of electronic ticketing systems.

The Y Division also ensures the maintenance of driver standards and behaviour, bus conditions, information services and promotion and marketing.

Company X is the owner or lessee of the entire fleet of Company X buses and totally responsible for their upkeep and maintenance. Company X also employs or subcontracts all personnel required for the continued provision of the Company X bus service.

The running of the Ferries is also the responsibility of Company X. However, the day to day operations of such ferries is contracted out to an independent third party.

The Ferries revenue is collected by the transport company and paid to Company X on an average fare basis.

Relevant legislative provisions

Fringe Benefit Tax Assessment Act 1986 Section 45

Fringe Benefit Tax Assessment Act 1986 Subsection 47(1)

Fringe Benefit Tax Assessment Act 1986 Subsection 47(6)

Fringe Benefit Tax Assessment Act 1986 Subsection 136(1)

Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision

Question 1

Subsection 47(1) of the FBTAA exempts residual benefits provided in respect of certain kinds of public transport. Subsection 47(1) of the FBTAA states (as relevant here):

47(1)

Where:

(a) in respect of the employment of a current employee, the employer... provides a residual benefit to the employee that consists of transport of the employee...:

(i) between:

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

(B) the place of employment of the employee or any other place from which or at which the employee performs duties of that employment; or

(ii) in a case where the place referred to in sub-subparagraph (i)(B) is in a metropolitan area - on a regular and scheduled service over a route wholly within that metropolitan area;

(b) ...the employer carries on a business of providing transport to members of the public;

(c) ...

(d) the transport referred to in paragraph (a) is provided in the same, or substantially the same, circumstances as transport provided to members of the public in the ordinary course of carrying on a business of providing transport to members of the public; and

(e) the employee is employed in the business of providing transport to members of the public;

the benefit is an exempt benefit.

Therefore, exemption under subsection 47(1) of the FBTAA requires (as relevant here) that all of the following criteria are met:

(a) a residual benefit is being provided that consists of transport.

(b) the recipient of the residual benefit is a current employee.

(c) the transport is provided in respect of the employee's employment.

(d) the transport is between the place of residence of the employee and the employee's place of employment (or any other place from which or at which the employee performs duties of that employment).

(e) the transport is provided on a regular and scheduled service over a route wholly within a metropolitan area where the place of employment (or other place where the employee performs duties of that employment) is in a metropolitan area.

(f) the provider is the employer.

(g) the employer carries on a business of providing transport to members of the public.

(h) the transport referred is provided in the same, or substantially the same, circumstances as transport provided to members of the public in the ordinary course of carrying on a business of providing transport to members of the public.

(i) the employee is employed in the business of providing transport to members of the public.

(a) is a residual benefit being provided that consists of transport?

Section 45 of the FBTAA states that a residual benefit is one that is not a benefit by virtue of any provision of Subdivision A of Divisions 2 to 11 inclusive of the FBTAA. Therefore, in basic terms, a residual benefit is a benefit that does not fall within one of the other more specific benefit types contained in the FBTAA.

The case of National Australia Bank v FCT (1993) 46 FCR; 93 ATC 4914; (1993) 26 ATR 503 (NAB case) examined a situation where the National Australia Bank (NAB) authorised certain employees to travel to and from work in a taxi using Cabcharge vouchers which were then debited to the NAB's account each month. In the NAB Case, Ryan J stated (at pp ATC 4939 - 4940):

A good deal of attention in the course of argument was devoted to an analysis of the contractual arrangements which may be said to have been made between the taxi cab operator on the one hand, and the employee or the Bank on the other. It was the Commissioner's contention that the provision of travel by taxi cab is an expense payment benefit within s. 20 of the [FBTAA]. That section provides:

``Where a person (in this section referred to as the `provider')-

(a) makes a payment in discharge, in whole or in part, of an obligation of another person (in this section referred to as the `recipient') to pay an amount to a third person in respect of expenditure incurred by the recipient; or

(b) reimburses another person (in this section also referred to as the `recipient'), in whole or in part, in respect of an amount of expenditure incurred by the recipient,

the making of the payment referred to in paragraph (a), or the reimbursement referred to in paragraph (b), shall be taken to constitute the provision of a benefit by the provider to the recipient.''

Little assistance is gleaned for the purpose of this analysis by endeavouring to impute to the taxi cab operator or driver a belief as to the person with whom the contract of carriage is made. On the evidence, it can be inferred only that the taxi cab operator is content to accept, as consideration for provision of the service, the right, arising from delivery of the Cabcharge voucher, to claim from Cabcharge the cost of providing the service. If the taxi cab operator thought about it at all, he or she would probably regard the contract of carriage as being made with the party having the contractual right to discharge the cost by means of the Cabcharge voucher; i.e. the Bank.

What I regard as the preferable view, that the contract is between the taxi cab operator and the Bank, accommodates the arrangement under which the shift supervisor arranges for the attendance of one or more taxi cabs and two or more employees travel in the same cab. The contract which the taxi cab operator then and there makes is to attend at the Bank's premises and convey one or more of its employees as directed, in consideration of the provision by the Bank of a warrant authorizing the cost of the conveyance to be met by Cabcharge on the Bank's account. Even where the employee commissions the taxi cab from his or her home, the analysis which I favour remains available because the employee can be regarded as the agent of the Bank, having actual authority, evidenced by the possession of the Cabcharge voucher, to conclude a contract with the taxi cab operator on behalf of the Bank...

The view which I take of the contractual arrangement is that no obligation is imposed on the employee. Accordingly, the provision of the warrant for payment in the form of a Cabcharge voucher does not effect or result in a discharge or extinction of an obligation of the employee to pay any amount to the taxi cab operator.

...

As already indicated, I have accepted that the provision by the Bank to Mr Brewster of transport by taxi cab was a ``benefit'' as defined in the [FBTAA]. I have also explained why that benefit is not an ``expense payment fringe benefit'' by virtue of any provision of Subdivision A of Division 5 of the [FBTAA]. Since it has not been suggested to fall within Subdivision A of any of Divisions 2 to 4 or 6 to 11, it follows that it is a residual benefit by virtue of s. 45 of the [FBTAA].

In this case, the relevant Y Division employees are supplied with smart cards which the employees can subsequently use for passenger travel on Company X buses.

For each of the smart cards, Company X will be the 'account holder' and each of the Y Division employees will be the 'authorised user'. Company X, as the 'account holder', is the person ultimately responsible for fares, fees and other charges in respect of the use of the smart card.

It is considered that the Company X smart card arrangements are similar to the arrangements entered into in the NAB Case in that Company X, like NAB, will have the primary contractual arrangement with the entity providing the bus passenger transport.

It is also considered, therefore, that the relevant benefit being provided to each of the Y Division employees is that of passenger transport and such bus passenger transport is a residual benefit for the purposes of section 45 of the FBTAA.

Support for this conclusion is provided in Taxation Ruling TR 1999/10². TR 1999/10 in discussing the use of a 'Life Gold Pass' or a 'Severance Pass' by a Federal Member of Parliament states:

Life gold passes and severance passes

84. On 'retirement' from Federal Parliament, Members are issued with either a Life Gold Pass or a Severance Pass...

85. The benefits available to a Federal Member who has served in the Parliament are:

a) ...The holder of a Life Gold Pass...is entitled to up to 25 return trips per annum (by plane, train or bus) for non-commercial purposes within Australia, at government expense.

...

b) Severance Pass: A Member who doesn't qualify for a Gold Pass upon 'retirement' from Parliament may, nevertheless, obtain a Severance Pass for non-commercial travel...

86. We do not consider that the issuing of passes under the Life Gold Pass and Severance Pass Schemes attracts any income tax implications. However, travel benefits received in relation to each use of a Gold Pass or Severance Pass by a Member will be taxed as a residual benefit, within the meaning of section 45 of Division 12 of the FBTAA, to the provider of the pass.

87. Similarly, travel benefits received by the spouse of a Gold Pass holder, will be taxed as a residual fringe benefit to the provider of the pass...

It is considered that the above view regarding the provision of residual benefits to the Y Division employees is not altered by Company X being either the owner or lessee of Company X buses.

This criterion is met.

(a) is the recipient a current employee?

The relevant passenger travel on Company X buses is provided only to current employees of the Y Division.

This criterion is met.

(b) is the transport provided in respect of the employee's employment?

It is considered that the relevant passenger travel on Company X buses is provided in respect of the Y Division employee's employment as evidenced by the fact that the employee gains access to such transport only under the terms of a valid SSA between the employee and Company X.

This criterion is met.

(c) is the transport between the employee's place of residence and the employee's place of employment?

Under the terms of the SSAs, the Y Division employee is provided with the relevant passenger travel on Company X buses only between the employee's place of residence and the employee's place of employment.

This criterion is met.

(d) is the transport provided on a regular and scheduled service over a route wholly within a metropolitan area where the place of employment (or other place where the employee performs duties of that employment) is in a metropolitan area?

Under the terms of the SSAs, the transport is provided only for regular and scheduled Company X bus services over routes wholly within the metropolitan area.

The places of employment (or other places where duties of employment are performed) by the employees of the Y Division are all within the metropolitan area.

Therefore, this criterion is met.

(e) is the provider the employer?

The term 'provider' is defined in subsection 136(1) of the FBTAA as meaning 'in relation to a benefit, …the person who provides the benefit'.

Paragraph (a) of the definition of the term 'provide', in subsection 136(1) of the FBTAA defines the term as meaning 'in relation to a benefit - includes allow, confer, give, grant or perform.

In this case, the relevant benefit is passenger transport on a Company X bus.

The Y Division employee gains access to such bus passenger transport by way of the funded smart card provided by Company X under the terms of the SSA between them.

It is considered that the above view is not altered by the financial arrangements between Company X and the transport company.

Company X is, therefore, the provider of the relevant benefit.

Company X is the employer of the Y Division employee.

This criterion is met.

(f) does the employer carries on a business of providing transport to members of the public

It is accepted that Company X carries on the business of providing transport to members of the public by way of the Company X bus passenger service.

This criterion is met.

(g) is the transport provided in the same, or substantially the same, circumstances as transport provided to members of the public in the ordinary course of carrying on a business of providing transport to members of the public?

It is accepted that the relevant transport provided to Y Division employees is on the same, or substantially the same, circumstances provided to members of the public in the ordinary course of Company X carrying out its business of providing passenger transport on Company X buses.

This criterion is met.

(h) is the employee employed in the business of providing transport to members of the public?

The employees in the Y Division undertake the necessary administrative work in respect of the running of Company X bus passenger services.

This criterion is met.

Conclusion

The provision of passenger transport on Company X buses by Company X to Y Division employees, under the terms of the relevant valid SSAs, will be exempt benefits under subsection 47(1) of the FBTAA as all the necessary criteria have been met.

Question 2

Detailed reasoning

As discussed previously in Question 1 above, exemption under subsection 47(1) of the FBTAA requires (as relevant here) that all of the following criteria are met:

(a) a residual benefit is being provided that consists of transport.

(b) the recipient of the residual benefit is a current employee.

(c) the transport is provided in respect of the employee's employment.

(d) the transport is between the place of residence of the employee and the employee's place of employment (or any other place from which or at which the employee performs duties of that employment).

(e) the transport is provided on a regular and scheduled service over a route wholly within a metropolitan area where the place of employment (or other place where the employee performs duties of that employment) is in a metropolitan area.

(f) the provider is an associate of the employer.

(g) the employer and the associate carry on a business of providing transport to members of the public.

(h) the transport referred is provided in the same, or substantially the same, circumstances as transport provided to members of the public in the ordinary course of carrying on a business of providing transport to members of the public.

(i) the employee is employed in the business of providing transport to members of the public.

(a) is a residual benefit being provided that consists of transport?

In this case, the relevant Y Division employees are supplied with smart cards which the employees can subsequently use for passenger travel on trains.

For similar reasons it was determined in Question 1 above that a residual benefit consisting of transport is being provided in respect of passenger travel on Company X buses, it is considered that a residual benefit consisting of transport is also being provided to the Y Division employees in respect of passenger travel on trains.

This criterion is met.

(b) is the recipient a current employee?

The relevant passenger travel on trains is provided only to current employees of the Y Division.

This criterion is met.

(c) is the transport provided in respect of the employee's employment?

It is considered that the relevant passenger travel on trains is provided in respect of the Y Division employee's employment as evidenced by the fact that the employee gains access to such transport only under the terms of a valid SSA between the employee and Company X.

This criterion is met.

(d) is the transport between the employee's place of residence and the employee's place of employment?

Under the terms of the SSAs, the Y Division employee is provided with the relevant private passenger travel on trains only between the employee's place of residence and the employee's place of employment with Company X.

This criterion is met.

(e) is the transport provided on a regular and scheduled service over a route wholly within a metropolitan area where the place of employment (or other place where the employee performs duties of that employment) is in a metropolitan area?

Under the terms of the SSAs, the transport is provided only for regular and scheduled trains services over routes wholly within the metropolitan area.

The places of employment (or other places where duties of employment are performed) by the employees of the Y Division are all within the metropolitan area.

Therefore, this criterion is met.

(f) is the provider the employer?

For similar reasons it was determined in Question 1 above that Company X is the provider of the passenger transport on a Company X bus, it is considered that Company X is also the provider of the passenger transport on trains.

This criterion is met.

(g) does the employer carries on a business of providing transport to members of the public

It is accepted that Company X carries on the business of providing transport to members of the public by way of the Company X bus passenger service.

This criterion is met.

(h) is the transport provided in the same, or substantially the same, circumstances as transport provided to members of the public in the ordinary course of carrying on a business of providing transport to members of the public?

It is accepted that the relevant transport provided to Y Division employees is on the same, or substantially the same, circumstances provided to members of the public in the ordinary course of trains carrying out its business of providing passenger transport.

This criterion is met.

(i) is the employee employed in the business of providing transport to members of the public?

The employees in the Y Division undertake the necessary administrative work in respect of the running of Company X bus passenger services.

This criterion is met.

Conclusion

The provision of passenger transport on trains by Company X to Y Division employees, under the terms of the relevant valid SSAs, will be exempt benefits under subsection 47(1) of the FBTAA as all the necessary criteria have been met.

Question 3

Detailed reasoning

As discussed previously in Question 1 above, exemption under subsection 47(1) of the FBTAA requires (as relevant here) that all of the following criteria are met:

(a) a residual benefit is being provided that consists of transport.

(b) the recipient of the residual benefit is a current employee.

(c) the transport is provided in respect of the employee's employment.

(d) the transport is between the place of residence of the employee and the employee's place of employment (or any other place from which or at which the employee performs duties of that employment).

(e) the transport is provided on a regular and scheduled service over a route wholly within a metropolitan area where the place of employment (or other place where the employee performs duties of that employment) is in a metropolitan area.

(f) the provider is an associate of the employer.

(g) the employer and the associate carry on a business of providing transport to members of the public.

(h) the transport referred is provided in the same, or substantially the same, circumstances as transport provided to members of the public in the ordinary course of carrying on a business of providing transport to members of the public.

(i) the employee is employed in the business of providing transport to members of the public.

(a) is a residual benefit being provided that consists of transport?

In this case, the relevant Y Division employees are supplied with smart cards which the employees can subsequently use for passenger travel on Ferries.

For similar reasons it was determined in Question 1 above that a residual benefit consisting of transport is being provided in respect of passenger travel on Company X buses, it is considered that a residual benefit consisting of transport is also being provided to the Y Division employees in respect of passenger travel on ferries.

This criterion is met.

(b) is the recipient a current employee?

The relevant passenger travel on ferries is provided only to current employees of the Y Division.

This criterion is met.

(c) is the transport provided in respect of the employee's employment?

It is considered that the relevant passenger travel on ferries is provided in respect of the Y Division employee's employment as evidenced by the fact that the employee gains access to such transport only under the terms of a valid SSA between the employee and Company X.

This criterion is met.

(d) is the transport between the employee's place of residence and the employee's place of employment?

Under the terms of the SSAs, the Y Division employee is provided with the relevant passenger travel on ferries only between the employee's place of residence and the employee's place of employment with Company X.

This criterion is met.

(e) is the transport provided on a regular and scheduled service over a route wholly within a metropolitan area where the place of employment (or other place where the employee performs duties of that employment) is in a metropolitan area?

Under the terms of the SSAs, the transport is provided only for regular and scheduled ferries services over routes wholly within the metropolitan area.

The places of employment (or other places where duties of employment are performed) by the employees of the Y Division are all within the metropolitan area.

Therefore, this criterion is met.

(f) is the provider the employer?

For similar reasons it was determined in Question 1 above that Company X is the provider of the passenger transport on a Company X bus, it is considered that Company X is also the provider of the passenger transport on ferries.

This criterion is met.

(g) does the employer carries on a business of providing transport to members of the public

It is accepted that Company X carries on the business of providing transport to members of the public by way of the Company X bus passenger service.

This criterion is met.

(h) is the transport provided in the same, or substantially the same, circumstances as transport provided to members of the public in the ordinary course of carrying on a business of providing transport to members of the public?

It is accepted that the relevant transport provided to Y Division employees is on the same, or substantially the same, circumstances provided to members of the public in the ordinary course of ferries carrying out its business of providing passenger transport.

This criterion is met.

(i) is the employee employed in the business of providing transport to members of the public?

The employees in the Y Division undertake the necessary administrative work in respect of the running of Company X bus passenger services.

This criterion is met.

Conclusion

The provision of passenger transport on ferries by Company X to Y Division employees, under the terms of the relevant valid SSAs, will be exempt benefits under subsection 47(1) of the FBTAA as all the necessary criteria have been met.

Question 4

Detailed reasoning

As discussed previously in Question 1 above, exemption under subsection 47(1) of the FBTAA requires (as relevant here) that all of the following criteria are met:

(a) a residual benefit is being provided that consists of transport.

(b) the recipient of the residual benefit is a current employee.

(c) the transport is provided in respect of the employee's employment.

(d) the transport is between the place of residence of the employee and the employee's place of employment (or any other place from which or at which the employee performs duties of that employment).

(e) the transport is provided on a regular and scheduled service over a route wholly within a metropolitan area where the place of employment (or other place where the employee performs duties of that employment) is in a metropolitan area.

(f) the provider is an associate of the employer.

(g) the employer and the associate carry on a business of providing transport to members of the public.

(h) the transport referred is provided in the same, or substantially the same, circumstances as transport provided to members of the public in the ordinary course of carrying on a business of providing transport to members of the public.

(i) the employee is employed in the business of providing transport to members of the public.

(a) is a residual benefit being provided that consists of transport?

In this case, the relevant Y Division employees are supplied with smart cards which the employees can subsequently use for passenger travel on privately owned and operated buses (private buses).

For similar reasons it was determined in Question 1 above that a residual benefit consisting of transport is being provided in respect of passenger travel on Company X buses, it is considered that a residual benefit consisting of transport is also being provided to the Y Division employees in respect of passenger travel on the privately owned bus services.

This criterion is met.

(b) is the recipient a current employee?

The relevant passenger travel on the privately owned bus services is provided only to current employees of the Y Division.

This criterion is met.

(c) is the transport provided in respect of the employee's employment?

It is considered that the relevant passenger travel on the privately owned bus services is provided in respect of the Y Division employee's employment as evidenced by the fact that the employee gains access to such transport only under the terms of a valid SSA between the employee and Company X .

This criterion is met.

(d) is the transport between the employee's place of residence and the employee's place of employment?

Under the terms of the SSAs, the Y Division employee is provided with the relevant passenger travel on the privately owned bus services only between the employee's place of residence and the employee's place of employment with Company X.

This criterion is met.

(e) is the transport provided on a regular and scheduled service over a route wholly within a metropolitan area where the place of employment (or other place where the employee performs duties of that employment) is in a metropolitan area?

Under the terms of the SSAs, the transport is provided only for regular and scheduled private bus services over routes wholly within the metropolitan area.

The places of employment (or other places where duties of employment are performed) by the employees of the Y Division are all within the metropolitan area.

Therefore, this criterion is met.

(f) is the provider the employer?

For similar reasons it was determined in Question 1 above that Company X is the provider of the passenger transport on a Company X bus, it is considered that Company X is also the provider of the passenger transport on the privately owned bus services.

This criterion is met.

(g) does the employer carries on a business of providing transport to members of the public

It is accepted that Company X carries on the business of providing transport to members of the public by way of the Company X bus passenger service.

This criterion is met.

(h) is the transport provided in the same, or substantially the same, circumstances as transport provided to members of the public in the ordinary course of carrying on a business of providing transport to members of the public?

It is accepted that the relevant transport provided to Y Division employees is on the same, or substantially the same, circumstances provided to members of the public in the ordinary course of the privately owned bus services carrying out their business of providing passenger transport.

This criterion is met.

(i) is the employee employed in the business of providing transport to members of the public?

The employees in the Y Division undertake the necessary administrative work in respect of the running of Company X bus passenger services.

This criterion is met.

Conclusion

The provision of passenger transport on the privately owned bus services by Company X to Y Division employees, under the terms of the relevant valid SSAs, are exempt benefits under subsection 47(1) of the FBTAA as all the necessary criteria have been met.

Question 5

Detailed reasoning

Subsection 47(6) of the FBTAA exempts residual benefits provided in respect of the limited private use of certain kinds of motor vehicles. Subsection 47(6) of the FBTAA states (as relevant here):

47(6)

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) ...

(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.

Therefore, exemption under subsection 47(6) of the FBTAA requires (as relevant here) that all of the following criteria are met:

(a) a residual benefit is being provided that consists of the provision or use of a motor vehicle.

(b) the recipient of the residual benefit is a current employee.

(c) the residual benefit is provided in respect of the employee's employment.

(d) the relevant motor vehicle is not one of the excluded types.

(e) there was no private use of the relevant motor vehicle other than work-related travel of the employee and 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.

(a) is a residual benefit being provided that consists of the provision or use of a motor vehicle?

Section 45 of the FBTAA states that a residual benefit is one that is not a benefit by virtue of any provision of Subdivision A of Divisions 2 to 11 inclusive of the FBTAA. Therefore, in basic terms, a residual benefit is a benefit that does not fall within one of the other more specific benefit types contained in the FBTAA.

The definition of the term 'motor vehicle' in subsection 136(1)of the FBTAA states that it has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997).

Subsection of the 995-1(1) of the ITAA 1997 defines a 'motor vehicle' as meaning any motor-powered road vehicle (including a 4 wheel drive vehicle).

It is accepted, therefore, that a Company X bus is a 'motor vehicle' for the purposes of the FBTAA.

The term 'use' is not defined in the FBTAA and, consequently, will have its normal meaning in the context in which it is used. The term 'use' has a broad meaning and, as such, is not necessarily restricted in the current context to situations where the employee has control of a vehicle.

In the NAB case , Ryan J noted that the specific inclusion of 'a taxi let on hire to the provider', in paragraph 47(6)(aa) of the FBTAA, indicates that the legislature considered 'use of a motor vehicle' could include a passenger's travel in a taxi.

As a passenger's travel in a bus is comparable to a passenger's travel in a taxi, these comments by Ryan J in the NAB case support the conclusion that bus transportation can also involve the 'use of a motor vehicle'.

In Question 1 it was determined that the relevant passenger transport on a Company X bus by a Y Division employee was a residual benefit. It is considered that for similar reasons to those used in Question 1 regarding the Y Division employee, the relevant passenger transport on a Company X bus by a Company X employee (other than a Y Division employee) will also be a residual benefit.

Consequently, this criterion is met as, for the purposes of the FBTAA, a Company X bus is a 'motor vehicle', the relevant employee has 'use' of that bus and such use is a residual benefit.

(b) is the recipient a current employee?

The relevant passenger travel on the Company X buses is provided only to current employees of Company X.

This criterion is met.

(c) is the residual benefit provided in respect of the employee's employment?

It is considered that the relevant passenger travel on the Company X buses is provided in respect of the employee's employment as evidenced by the fact that the employee gains access to such transport only under the terms of a valid SSA between the employee and Company X.

This criterion is met.

(d) is the relevant motor vehicle not one of the excluded types?

As already stated above, it is accepted that a Company X bus is a 'motor vehicle' for the purposes of the FBTAA.

It is accepted that all the relevant passenger transport will be provided on Company X buses none of which fall within any of the excluded types of motor vehicles.

This criterion is accepted as being met.

(e) is there no private use other than work-related travel of the employee and other private use by the employee (or an associate), being other use that was minor, infrequent and irregular?

The term 'private use' is defined (as relevant here) in subsection 136(1) of the FBTAA as follows:

private use, in relation to a motor vehicle, in relation to an employee..., means any use of the motor vehicle by the employee...that is not exclusively in the course of producing assessable income of the employee.

The term 'work-related travel' is also defined in subsection 136(1) of the FBTAA as follows:

work-related travel, 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.

The relevant employees, in this particular case, are using the Company X buses only for passenger transport between their place of residence and their place of employment or any other place where they perform the duties of their employment.

As determined above, bus transportation can involve the 'use of a motor vehicle'.

Paragraph 14 of Miscellaneous Taxation Ruling MT 2027³ discusses the 'presumption' concerning an employee's home to work travel:

14. ...[T]he decision in Lunney and Hayley v FCT (1958) 100 CLR affirmed the position that travel between home and a person's regular place of employment or business is ordinarily private travel. While travel to work is a necessary pre-requisite to earning income it is not undertaken in the course of earning that income. Put at its simplest, travel to work is private; travel on work is business.

It is considered, therefore, that the above 'home-to-work' passenger travel by the relevant employees on the Company X buses will be 'private use' of those vehicles and also be 'work-related travel' under paragraph (a) of the definition of that term in subsection 136(1) of the FBTAA.

This criterion is met.

Conclusion

The provision of passenger transport on Company X buses by Company X to Company X employees (other than Y Division employees), under the terms of the relevant valid SSAs, will be exempt benefits under subsection 47(6) of the FBTAA as all the necessary criteria have been met.

Question 6

Detailed reasoning

As determined above in Question 5, exemption under subsection 47(6) of the FBTAA requires (as relevant here) that all of the following criteria are met:

(a) a residual benefit is being provided that consists of the provision or use of a motor vehicle.

(b) the recipient of the residual benefit is a current employee.

(c) the residual benefit is provided in respect of the employee's employment.

(d) the relevant motor vehicle is not one of the excluded types.

(e) there was no private use of the relevant motor vehicle other than work-related travel of the employee and 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.

(a) is a residual benefit being provided that consists of the provision or use of a motor vehicle?

For similar reasons it was determined in Question 5 above that the employee's passenger travel on Company X was a residual benefit consisting of the use of a motor vehicle, it is considered that the relevant employee's travel on privately owned bus services is also a residual benefit consisting of the use of a motor vehicle.

This criterion is met.

(b) is the recipient a current employee?

The passenger travel on the privately owned bus services is provided only to current relevant employees of Company X.

This criterion is met.

(c) is the residual benefit provided in respect of the employee's employment?

It is considered that the passenger travel on the privately owned bus services is provided in respect of the relevant employee's employment as evidenced by the fact that the employee gains access to such transport only under the terms of a valid SSA between the employee and Company X.

This criterion is met.

(d) is the relevant motor vehicle not one of the excluded types?

The motor vehicles used by the privately owned bus services are not panel vans, utility trucks or any other road vehicle designed to carry a load of less than 1 tonne (other in the latter case vehicles that are designed for the principal purpose of carrying passengers).

This criterion is met.

(e) is there no private use other than work-related travel of the employee and other private use by the employee (or an associate), being other use that was minor, infrequent and irregular?

For similar reasons it was determined in Question 5 above that the 'home-to-work' passenger travel by the relevant employees on the Company X buses will be 'private use' of those vehicles and also be 'work-related travel' it is considered that the 'home-to-work' passenger travel by the relevant employees on the privately owned bus services will be 'private use' of those particular privately owned vehicles and also be 'work-related travel'.

This criterion is met.

Conclusion

The provision of passenger transport on privately owned bus services by Company X to Company X employees (other than Y Division employees), under the terms of the relevant valid SSAs, will be exempt benefits under subsection 47(6) of the FBTAA as all the necessary criteria have been met.

¹ What comprises a valid salary sacrifice arrangement is discussed in Taxation Ruling TR 2001/10 Income tax: fringe benefits tax and superannuation guarantee: salary sacrifice arrangements.

² Taxation Ruling TR 1999/10 Income tax and fringe benefits tax: Members of Parliament - allowances, reimbursements, donations and gifts, benefits, deductions and recoupments.

³ Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel.