Edited version of your private ruling

Authorisation Number: 1012600362890

Ruling

Subject: Fringe benefits tax

Question 1

Does a car parking fringe benefit arise under section 39A of the FBTAA when an employee who has garaged a vehicle at their residence (as per relevant guidelines) returns the car to the employer's car park, where

• it is parked for more than four hours between 7am and 7pm,

• the car is available for use by all employees and

• the car is not driven home by any employee on that day?

Answer

No

Question 2

Does a car parking fringe benefit arise under section 39A of the FBTAA when an employee who has garaged a vehicle at their residence (as per relevant guidelines) returns the car to the employer's car park, where

• it is parked for more than four hours between 7am and 7pm,

• the car is available for use by all employees and

• the car is driven home by a different employee on that day?

Answer

No

Question 3

Does a car parking fringe benefit arise under section 39A of the FBTAA when an employee who has garaged a vehicle at their residence (as per relevant guidelines) returns the car to the employer's car park, where

• it is parked for more than four hours between 7am and 7pm,

• the car is available for use by all employees and

• the same car is driven home by the same employee on that day?

Answer

No

This ruling applies for the following period:

1 April 2013 to 31 March 2014

The scheme commences on:

1 April 2013

Relevant facts and circumstances

The employer has many employees and operates from many locations and maintains a large fleet of vehicles. There are many vehicles that are parked at numerous car parking facilities within the CBD and a few metropolitan areas which are within a one kilometre radius of a commercial car parking station.

The parking facilities which are utilised for the employer vehicles are the business premises of the employer as they have control over the car parking spaces.

There are a number of instances where the employer's vehicles are parked for more than four hours between the hours of 7am and 7pm.

The employer has a number of policies in respect of vehicles which relate to acquisition, maintenance, operation and disposal. There are also policies about employees being licensed to drive vehicles. Additionally there are policies ensuring that the use of vehicles is only for the intended purpose the vehicles are supplied for and only under stipulated conditions.

The questions in the ruling are essentially about the vehicles that are used by a particular group of employees.

From this group an employee may take a vehicle home because

• he or she is on call overnight

• he or she is either starting or finishing in the field

• he or she is authorised to do so for a once-off private use.

The situations whereby an employee would have a car at home for two or more consecutive nights are not common. However it does exist in limited examples.

Whether an employee will be taking the same car home on consecutive nights depends upon the various factors. An employee may take the same car home on consecutive nights or it is just as possible that it is a different car.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 39A and

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

Reasons for decision

Question 1

Summary

No fringe benefit arises as the provision of the parking facility for the car does not relate to a particular employee.

Detailed reasoning

'Car parking fringe benefit' is defined in subsection 136(1) of the FBTAA to mean 'a fringe benefit that is a car parking benefit'.

The definition of 'fringe benefit' in subsection 136(1) states:

fringe benefit , in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit:

(a) provided at any time during the year of tax; or

(b) provided in respect of the year of tax;

being a benefit provided to the employee or to an associate of the employee by:

(c) the employer; or

(d) an associate of the employer; or

(e) a person (in this paragraph referred to as the arranger) other than the employer or an associate of the employer under an arrangement covered by paragraph (a) of the definition of arrangement between:

(i) the employer or an associate of the employer; and

(ii) the arranger or another person; or

(ea) a person other than the employer or an associate of the employer, if the employer or an associate of the employer:

(i) participates in or facilitates the provision or receipt of the benefit; or

(ii) participates in, facilitates or promotes a scheme or plan involving the provision of the benefit;

and the employer or associate knows, or ought reasonably to know, that the employer or associate is doing so;

in respect of the employment of the employee, but does not include: …

This definition of a fringe benefit was considered by the Full Federal Court in FC of T v Indooroopilly Children Services (Qld) Pty Ltd [2007] FCAFC 16; 2007 ATC 4236; 65 ATR 369.

In discussing whether this definition required the identification of a particular employee, Edmonds J at ATC 4253 said:

… I would incline to the views of Kiefel J in Essenbourne and Hill J in Walstern that the references to "the employee" throughout the definition are references to a particular employee who has been identified as "an employee" of the employer in terms of the opening words of the definition. Once identified as an employee of the employer by reference to the opening words of the definition, the terms of the definition which follow are to be applied by reference to the particular employee so identified.

…

A benefit may only be a "fringe benefit" if it is provided by one of four possible "providers" to one of two possible "recipients" - the employee or an "associate" of the employee. Even then, the benefit will only be a fringe benefit if it is in respect of the employment of an employee.

In applying this decision it is necessary to be able to identify a particular employee to whom the benefit relates and the benefit has to be provided in respect of the employment of that employee.

In the given situation, the employee is merely returning a pool car which he or she has been using to the employer's park facility. The only benefit that can be identified as being provided to the employee is the use of the car to drive to work. This is a separate car benefit.

The employee ceases to receive a benefit once the car is parked. From that point, it is the employer which receives the benefit of having its car parked in the car parking space on its premises.

As such, this situation can be distinguished from a situation in which the employee drives a car to and from work and receives the benefit of having a car parking space in which to park the car. In such a situation, the particular employee can be seen to be receiving a benefit from the provision of the car parking facility for the car.

Question 2

Summary

No fringe benefit arises as the provision of the parking facility for the car does not relate to a particular employee.

Detailed reasoning

The facts referred to in this question are similar to those in question one. The fact that another employee drives the car home at night will not alter the answer for the employee who had returned the car to the parking facility previously that morning.

Question 3

Summary

There will be no car parking benefit, and consequently no fringe benefit, when the employee returns the car to the parking facility and drives the same car home again. This is because the provision of the parking facility for the car is not provided in respect of the employment of the employee, thus not satisfying paragraph 39A(1)(d) of the FBTAA.

Detailed reasoning

In the scenario described in question three, an employee can be identified to whom the benefit may relate. There may potentially be the provision of a fringe benefit. Therefore we need to consider the conditions outlined in subsection 39A of the FBTAA that give rise to a car parking benefit.

Under subsection 39A(1) of the FBTAA:

If the following conditions are satisfied in relation to a daylight period, or a combination of daylight periods, on particular day:

(a) during the period or periods, a car is parked on one or more premises of a person (the provider), where:

(i) the premises, or each of the premises, on which the car is parked are business premises, or associated premises, of the provider; and

(ii) a commercial parking station is located within a 1km radius of the premises, or each of the premises, on which the car is parked; and

(iii) the lowest fee charged by the operator of any such commercial parking station in the ordinary course of business to members of the public for all-day parking on the first business day of the FBT year is more than the car parking threshold;

(b) the total duration of the period or periods exceeds 4 hours;

(c) any of the following applies:

(i) a car benefit relating to the car is provided on that day to an employee or an associate of an employee in respect of the employment of the employee;

(ii) the car is owned by, or leased to, an employee or an associate of an employee at any time during the period or periods;

(iii) the car is made available to an employee or an associate of an employee at any time during the period or periods by another person, where:

(A) the other person is neither the employer of the employee nor an associate the employer of the employee; and

(B) the other person did not make the car available under an arrangement to which the employer of the employee, or an associate of the employer of the employee, is a party;

(d) the provision of parking facilities for the car during the period or periods is in respect of the employment of the employee;

(e) on that day, the employee has a primary place of employment;

(f) during the period or periods, the car is parked at, or in the vicinity of , that primary place of employment;

(g) on that day, the car is used in connection with travel by the employee between:

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

(ii) that primary place of employment;

(h) the provision of the parking facilities for the car during the period or periods is not taken, under the regulations, to be excluded from this section;

(i) the day is on or after 1 July 1993

the provision of the parking facilities for the car during the period or periods is taken to constitute a benefit provided by the provider to the employee or the associate of the employee in respect of the employment of the employee.

Each of the paragraphs within subsection 39A of the FBTAA must be satisfied on a particular day for a car parking benefit to exist. In particular there is a requirement in paragraph 39A(1)(d) of the FBTAA that the provision of the parking facility for the car is in respect of the employment of the employee.

The phrase 'in respect of' in relation to the employment of an employee is defined in subsection 136(1) of the FBTAA to include 'by reason of, by virtue of, for or in relation directly or indirectly to that employment'.

The meaning of 'in respect of employment' was considered by the Full Federal Court in J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation [2000] 96 FCR 402; 2000 ATC 4151; 44 ATR 22; [2000] FCA 196 (Knowles).

In Knowles the Full Federal Court considered the judgements in Smith v FCT (1987) 164 CLR 513; 19 ATR 274; 87 ATC 4883 and Federal Commissioner of Taxation v Rowe (1995) 60 FCR 99; 31 ATR 392; 95 ATC 4691 before concluding that it is not sufficient for the purposes of the FBTAA to conclude that there is a causal connection between the benefit and the employment.

At paragraph 26 the Court said:

Whatever the question is to be asked, it must be remembered that what must be established is whether there is a sufficient or material, rather than a, causal connection or relationship between the benefit and the employment.

At paragraphs 28 and 29 the Court said:

While the width of the definition of "fringe benefit" was designed to capture benefits that, in truth, were other than remuneration, the stated purpose suggests that asking whether the benefit is a product or incident of the employment will be helpful. If it is not there the benefit is likely to be extraneous to the employment and will not bear FBT, notwithstanding that the employment might have been the causal factor in the provision of the benefit.

…

To put the matter another way, although the process of characterising the benefit provided in a particular case can involve questions of fact and degree, it is not sufficient for the purposes of the FBTAA merely to enquire whether there is some causal connection between the benefit and the employment: see FCT v Rowe (1995) 60 FCR 99 at 114 and 123; 31 ATR 392 at 404 and 412; 95 ATC 4691 at 4703 and 4710. Although Brennan, Deane and Gaudron JJ observed in Technical Products (at 47), that the requisite connection will not exist unless there is "some discernible and rational link" between the two subject matters which the statute requires to be linked, as was pointed out by Dawson J (at 51), the connection must be "material".

In applying this decision we need to establish that there is a sufficient or material connection between the provision of the parking facility for the car and the employment of the employee.

An employee who has taken a car home in accordance with the guidelines stipulated by the employer in the relevant policies, has done so for operational purposes and operational necessity.

The provisions in those guidelines do not allow for employees to take vehicles home on an ongoing basis and it is only in limited circumstances that an employee would take the same car home for more than one night.

If the employee returns the car to the parking facility at the employer's premises and he or she takes that same car home on the same day it could be argued that there is a causal connection between the employee's employment and the provision of the parking facility for the car.

In order to establish whether there is a sufficient or material connection, however, we must ask whether the provision of the parking facility for the car is a product of the employee's employment.

Where the employee takes a car home as part of the employer's operational requirements, or for a once-off private use, he or she parks the car in the parking facility because that is where the car is kept when not being used to conduct the employer's business. Taking this into account along with the policies and practice in relation to the use of cars by employees, it could not be said that the provision of the parking facility for the car is an entitlement of the employee's employment but rather it is a product of the business needs of the organisation.

Therefore the provision of the parking facility for the car is not in respect of the employee's employment and paragraph 39A(1)(d) of the FBTAA is not satisfied.

As all of the conditions of subsection 39A(1) of the FBTAA will be not satisfied on the particular day, there will be no car parking benefit.