Edited version of your written advice

Authorisation Number: 1012688431816

Ruling

Subject: Fringe benefits tax - exempt benefit

Question 1

Will a set rate charged to employees for using vehicles to travel between home and work change the fringe benefits tax exempt status of the vehicles under subsection 8(2) or subsection 47(6) of the Fringe Benefits Tax Assessment 1986?

Answer

No

This ruling applies for the following period:

1 October 2014 to 31 March 2018

The scheme commences on:

1 October 2014

Relevant facts and circumstances

An employer has vehicles which are exempt from fringe benefits tax. These vehicles are exempt as they comply with the requirements to be exempt.

Any private use of the vehicles during the FBT year of tax is restricted to

• travel between home and work

• travel that is incidental to travel in the course of duties of employment, and

• any non-work related use is minor, infrequent and irregular.

The non-work related use also applies to an employee's associate.

The employer is looking to enforce a set rate charge for employees who use the employer's vehicles only for commuting between home and work.

Relevant legislative provisions

Subsection 8(2) of the Fringe Benefits Tax Assessment Act 1986

Subsection 47(6) of the Fringe Benefits Tax Assessment Act 1986

Reasons for decision

Generally speaking, a liability for fringe benefits tax (FBT) arises where an employer's motor vehicle is used by an employee for private purposes or is available for the private use of an employee.

However, under sub-sections 8(2) for exempt vehicles and 47(6) for exempt residual benefits of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), a liability for FBT will not arise where the private use of certain vehicles by employees during a particular year of tax is limited to certain work-related travel and non-work-related use that is minor, infrequent and irregular.

If an employee/recipient of a fringe benefit or exempt benefit makes a cash payment to the employer for the supply of the benefit, the taxable value of that fringe benefit is reduced by that particular payment. Such a payment is referred to as an employee contribution.

Some important points to note about employee contributions are:

• an amount paid directly by an employee to the employer for the use of a vehicle may be an employee contribution

• an employee contribution may be made only from an employee's after-tax income

• you can't use an employee contribution towards a particular fringe benefit to reduce the taxable value of any other fringe benefit

• an employee contribution paid directly to you needs to be included in your assessable income (as a general rule, the costs you incur in providing fringe benefits are income tax deductible)

• an employee contribution paid to a third party who is not an associate is not assessable to you

• when calculating the taxable value of either a type 1 or type 2 benefit, you use the full GST-inclusive amount of the contribution to reduce the taxable value of the benefit.

In your situation, you propose to charge your employees for the use of vehicles where the vehicles are only used to commute between home and work. Such a payment is an employee contribution.

An employee contribution reduces the taxable value of the benefit. However, if the benefit from the use of vehicles is an exempt benefit, there will be no any taxable value to be reduced by the employee contribution. That is, the payment by an employee of an employee contribution towards the cost of providing a benefit, does not affect whether or not a benefit is an exempt benefit.

Therefore, as long as you satisfy the exemption requirements set out under subsection 8(2) or subsection 47(6) of the FBTAA, the payment by employees of a charge, to use vehicles only to commute between home and work, will not affect the exempt status of the vehicles.