Edited version of your written advice

Authorisation Number: 1012854056507

Date of advice: 5 August 2015

Ruling

Subject: FBT status of a sponsored vehicle

Question 1

Does the provision of a third party sponsored motor vehicle, negotiated by the employee, create an FBT liability for the employer?

Answer

Yes. The supply of the vehicle from a third party will subject to FBT.

This ruling applies for the following period

01 April 2015 - 31 March 2016

The scheme commences on

01 April 2015

Relevant facts and circumstances

1. The employer is seeking a ruling to assist with the FBT implications regarding the provision of a third party sponsored motor vehicle to one of their employees.

2. Some employees have a funded vehicle provided and others may receive a travel allowance.

3. The employee negotiated with the third party for the supply of a vehicle for the use of the employee (and a limited number of other employees).

4. The marketing department of the employer assisted with the arrangements and the employer supported the arrangement.

5. At the request of the third party there is no written contract in place between the parties.

6. The car is affixed with signage and logos of both the third party and the employer.

7. The third party funded the logos for both the third party and the employer. The employer provided the artwork.

8. The employee would not have been provided a vehicle as part of their employment package.

Assumption(s)

n/a

Relevant legislative provisions

All subsequent legislative references in this Ruling are to the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986) unless otherwise indicated.

Reasons for decision

Summary

The supply of the vehicle from a third party will be subject to FBT for the employer.

Detailed reasoning

9. The term "fringe benefit" is widely defined under subsection136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986) as follows:

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

…

Benefit

10. The term "benefit" is widely defined in subsection 136(1) to include any right, privilege, service or facility and the term "provide" is widely defined in subsection 136(1) to include "allow, confer, give, grant or perform".

11. The benefit provided to the employee is the vehicle provided by the third party.

12. The benefit must be provided in respect of employment. That is, there must be a sufficient or material link between the benefit and the employment: J & G Knowles & Associates Pty Ltd v FCT (2000) 44 ATR 22 at 28-29; Essenbourne Pty Ltd v FCT (2002) 51 ATR 629 at 644.

13. Here, the third party provided the benefit to the employee. It is reasonable that the third party done so based on the employee's employment and on the sponsorship arrangement between the third party and the employer.

Participates in or facilitates

14. In this case, it is necessary to consider whether the employer participates in or facilitates the arrangement between the employee and third party.

15. The employer must be shown to participate in or facilitate the benefit provided to one or more of its employees. Accordingly the following illustrative definition in the Macquarie Dictionary 5^th Ed is relevant:

Facilitate: to make easier or less difficult; help forward (an action, a process, etc.).

16. The marketing department for the employer assisted the employee in making the arrangements with the third party. The employer acknowledges that the employer supported this arrangement.

17. The facilitation of the vehicle is further evidenced by the employer supplying the artwork for the vehicle to be painted with the employer's logos on it.

18. The Explanatory Memorandum (EM) to Act No 16 of 1999 states at paragraph 2.43:

An employer will not liable for FBT in respect of a third party benefit if the employer did not agree and is not involved in relation to the provision or receipt of the benefit, regardless of whether the employer knew that the benefit had been provided.

…

Whether an employer is participating or facilitating in the provision or receipt of benefit directly or indirectly, to their employees by a third party is a question of fact. However, it is considered that an employer does not participate, facilitate or promote the actions of a third party if, for example, they have a policy that includes one or more of the following:

• Instructions issued to staff prohibiting acceptance of awards

• Correspondence to customary providers or incentives advising of the employer's policy and requesting that its employees be excluded from product promotions

• Signed undertakings by staff not to accept awards.

19. Here, the employer acknowledges they have a Code of Conduct; however, this document does not address this specific situation. Nor has the employer ever provided correspondence to customary providers of incentives requesting staff be excluded, and the employer has never required their staff to sign undertakings not to accept awards.

The car benefit

20. The application of the FBTAA 1986 to car benefits is outlined in section 7 of the FBTAA 1986 as follows:

7(1)  Car applied to, available for employee's private use  

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.

21. Here, the car was a car held by a provider and was applied to private use by the employee (or is taken to be available for the private use of the employee) and the car is so applied or available, as the case may be, under an arrangement between the provider and the employer. This application or availability of the car shall be taken to constitute a benefit provided on that day by the provider to the employee in respect of the employment of the employee.

22. The "arrangement" as described indicates that the car was provided by a third party which the employer facilitated (see above) for the employee's use.

23. Therefore, the fringe benefit provided will be a car benefit pursuant to section 7 of the FBTAA 1986.

ATO view documents

Application of the law based on facts and circumstances

Case references

Essenbourne Pty Ltd v FCT (2002) 51 ATR 629.

J & G Knowles & Associates Pty Ltd v FCT (2000) 44 ATR 22.