Edited version of your private ruling

Authorisation Number: 1012465000920

Ruling

Subject: Pooled Cars and excluded fringe benefits

Question 1

Will the car fringe benefits provided to the employees in scenario 1 be excluded fringe benefits for the purposes of paragraph 5E(3)(i) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

Question 2

Will the car fringe benefits provided to the employees in scenario 2 be excluded fringe benefits for the purposes of paragraph 5E(3)(i) of the FBTAA?

Answer

Yes.

Question 3

Will the car fringe benefits provided to the employees in scenario 3 be an excluded fringe benefits for the purposes of paragraph 5E(3)(i) of the FBTAA?

Answer

Yes.

Question 4

Will the car fringe benefits provided to the employees in scenario 4 be an excluded fringe benefits for the purposes of paragraph 5E(3)(i) of the FBTAA?

Answer

Yes.

Question 5

Will the car fringe benefits provided to the employees in scenario 5 be an excluded fringe benefits for the purposes of paragraph 5E(3)(i) of the FBTAA?

Answer

Yes.

This ruling applies for the following periods:

Fringe benefits tax year ended 31 March 2008

Fringe benefits tax year ended 31 March 2009

Fringe benefits tax year ended 31 March 2010

Fringe benefits tax year ended 31 March 2011

Fringe benefits tax year ended 31 March 2012

Fringe benefits tax year ended 31 March 2013

Fringe benefits tax year ended 31 March 2014

Fringe benefits tax year ended 31 March 2015

The scheme commences on:

1 April 2007.

Relevant facts and circumstances

The employer operates a fleet of vehicles which are provided to their employees.

For the purposes of this ruling, all vehicles being provided are cars as defined in subsection 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997).

All cars are allocated to a single user, generally based on the position they hold. Usually this means the car belongs to the position. For example, the team leader position is allocated a specific car and whoever is currently in that position is allocated that particular car.

The employees are entitled to utilise the cars as they wish. That is, personal use, work-related and/or home to work travel.

Under the motor vehicle policy the cars are considered to be pool cars available for work purposes when the employees are at the employer's business premises

Any car swaps/reallocations are approved by management.

During previous FBT years the following five scenarios have all occurred in relation to the employer's cars:

1. The employer allocates two cars for private use to two employees as part of their employment conditions. These employees swap cars with each other for one night only, or one weekend only, without providing a reason for the swap.

2. The employer allocates two cars for private use to two employees as part of their employment conditions. These employees swap cars with each other for one night only, or one weekend only, outlining a reason for the swap.

3. The employer reallocates a car from employee 1 to employee 2 as a result of the first employee leaving the current employment and a new employee taking up the position. The reallocation has occurred during the FBT year. The reallocation is prior approved by the CEO or Manager as part of the employment contact.

4. The employer allocates employee 1 private use of a car as part of their employment conditions. While this employee is on leave, employee 2 is granted private use of the car by the CEO. The leave period could be one day or an extended period such as maternity leave, and leave could be at any time during the FBT year.

5. The employer reallocates or swaps cars among employees during periods of leave. E.g. A director goes on leave. A manager who becomes acting director drives the director's car, the employee who becomes acting manager drives the manager's car. These employees normally have private use of a council vehicle as part of their employment conditions, but have swapped cars when acting in other positions.

Relevant legislative provisions

Fringe Benefits Tax Regulations 1992 3F

Fringe Benefits Tax Regulations 1992 8

Fringe Benefits Tax Assessment Act 1986 Section 5E.

Fringe Benefits Tax Assessment Act 1986 Subsection 7(1).

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1).

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

Does Part IVA apply to this ruling?

Part IVA of the Income Tax Assessment Act 1936 is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA applies the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable.

We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part.

If you want us to rule on whether Part IVA applies we will first need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply.

For more information on Part IVA, go to our website www.ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select: Part IVA: the general anti-avoidance rule for income tax.

Reasons for decision

Summary

All car fringe benefits provided under all 5 scenarios are excluded benefits as they satisfy the conditions of both regulation 8 of the Fringe Benefits Tax Regulations 1992 (FBTR) and the former regulation (which was in effect up to 12 April 2013), regulation 3F of the FBTR.

Section 5E of the FBTAA determines an employee's individual fringe benefits amount and subsection 5E(3) provides a list of excluded benefits with paragraph 5E(3)(i) excluding benefits prescribed by regulation for the purposes of that paragraph.

Detailed Reasoning

One of these regulations is regulation 8 of the Fringe Benefits Tax Regulations 1992 (FBTR) which deals with car benefits arising from pooled or shared cars as being excluded fringe benefits for the purposes of paragraph 5E(3)(i) of the FBTAA. Regulation 8 states:

(1) For paragraph 5E(3)(i) of the Act, a car benefit is prescribed if:

(a) the benefit:

(i) is a car fringe benefit; or

(ii) would be a car fringe benefit if it were not an exempt benefit; and

(b) the car to which the benefit relates is applied to or available for the private use of more than one employee under subsection 7(1) of the Act.

Example:

An employer makes one car available to 3 employees, for private use, at different times during the year of tax.

(2) The benefit is prescribed in relation to:

(a) each employee in relation to which the benefit is provided; and

(b) each year of tax from 1 April 2007.

This regulation came into effect 12 April 2013 and replaces regulation 3F of the FBTR which stated:

(1) For paragraph 5E (3) (i) of the Act, a benefit is an excluded fringe benefit if, during a year of tax:

(a) the benefit is a car benefit, as described in subsection 7 (1) of the Act, that is:

(i) a fringe benefit within the meaning of subsection 136 (1) of the Act; or

(ii) a benefit that:

(A) is an exempt benefit; and

(B) would have been a fringe benefit except that the benefit is an exempt benefit; and

(b) the car benefit relates to a car the provision of which gives rise to the benefit described in paragraph (a) for more than 1 employee.

Example

The employer of 3 employees makes 1 car available to the employees, for private use, at different times during the year of tax.

(2) The fringe benefit is an excluded fringe benefit in relation to each of those employees.

(3) The fringe benefit is an excluded fringe benefit in relation to:

(a) the year of tax starting on 1 April 2007; and

(b) each later year of tax.

Although regulation 3F of the FBTR has been repealed and replaced with regulation 8, the new regulation operates in the same way as the old in that:

· The motor vehicle is a car

· A car benefit has to arise ( or would have been a car benefit it the benefit was not an exempt benefit); and

· the car has been applied to or was available for the private use of more than one employee under subsection 7(1) within an fringe benefit tax (FBT) year.

Car

A car is a defined in subsection 136(1) of the FBTAA to have the same meaning as the definition of car contained in subsection 995-1(1) of the ITAA 1997 which states:

means a *motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers

For completeness subsection 995-1(1) of the ITAA 1997 defines a motor vehicle and this definition states:

means any motor-powered road vehicle (including a 4 wheel drive vehicle)

For the purposes of this ruling, all vehicles provided by the employer are cars as defined.

Car benefit (or exempt benefit that would have been a car benefit)

A car benefit is also defined in subsection 136(1) of the FBTAA as a benefit referred to in subsection 7(1) of the FBTAA and subsection 7(1) states:.

Where:

(a) at any time on a day, in respect of the employment of an employee, a car held by a person (in this subsection referred to as the ``provider''):

(i) is applied to a private use by the employee or an associate of the employee; or

(ii) is taken to be available for the private use of the employee or an associate of the employee; and

(b) either of the following conditions is satisfied:

(i) the provider is the employer, or an associate of the employer, of the employee;

(ii) the car is so applied or available, as the case may be, under an arrangement between:

(A) the provider or another person; and

(B) the employer, or an associate of the employer, of the employee;

that application or availability of the car shall be taken to constitute a benefit provided on that day by the provider to the employee or associate in respect of the employment of the employee.

In looking at whether a car is taken to be available for private use, it is taken to be available when:

· It is garaged at an employee's residence (subsection 7(2) of the FBTAA); or

· (subsection 7(3) of the FBTAA), when the car is not at the employer's business premises:

- the employee Is entitled to apply the car to a private use

- the employee is not performing the duties of their employment and has custody or control of the car; or

- an associate of the employee is entitled to use, or has custody or control of, the car

The motor vehicle policy allows for employees to use cars as described in the facts to this ruling and allows for private use when the car is away from the employer's business premises.

Therefore a car benefit will arise (or would have arisen in the case of exempt benefits) when the car is used by the custodian under this policy.

The car has been applied to or was available to more than one employee

Scenarios 1 and 2

Under scenario 1 there are two employees who have use of a car each. These employees swap cars with each other for one night only, or one weekend only, without providing a reason for the swap. The swap was approved by the employer

Scenario 2 is the same as scenario 1 except a reason for the swap is provided.

Even though one employee might only use one of the cars for a short period of time within that FBT year each car is applied to a private use of both the employee at some point within the FBT years.

Scenario 3

In this scenario a car is reallocated from one employee to another because the first employee is leaving and the new one is taking their place.

Under this scenario the car is held by the employer and will be applied to a private use by the first and then the second employee.

Scenario 4

The employer allocates an employee private use of a car as part of their employment conditions. While this employee is on leave a second employee is granted private use of the car by the CEO.

Under this scenario the car is held by the employer and will be applied to a private use by the first and then the second employee.

Scenario 5

The employer reallocates or swaps cars among employees during periods of leave.

As per scenarios 1 and 2 (under a swap) and scenario 4 (reallocation when on leave) the car is held by the employer and will be applied to a private use of at lease two employees.