Edited version of your written advice

Authorisation Number: 1012885167037

Date of advice: 30 September 2015

Ruling

Subject: Car Fringe Benefits

Question 1

Would subsection 8(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) apply to exempt a car benefit if there is no private use of the vehicle?

Answer

No.

Question 2

Would subsection 7(2) of the FBTAA apply to deem the car to be available for private use where the car is garaged overnight at the place of residence of the employee who has 'safe custody' of the car?

Answer

Yes

Question 3

If the car is stored at the employer's business premises, would the car be taken to be available for private use under subsection 7(3) of the FBTAA when it is away from the business premises?

Answer

No.

This ruling applies for the following periods:

Year ended 31 March 2016

The scheme commences on:

1 April 2015

Relevant facts and circumstances

Your company is looking to acquire a vehicle for work related use only.

This is a 4 seater passenger vehicle that uses electricity as an alternate source of fuel.

The nature of this vehicle means it must be recharged regularly and the driving range without a recharge is minimal.

You will provide an electric vehicle recharging station at your business premises.

You would like to store the vehicle at an employee's residence overnight and on weekends for safe custody however if fringe benefits tax will be payable you will store it at your business premises.

If the car is stored at your business premises you have confirmed that the following will apply and be strictly enforced:

• The employee will not be entitled to apply the car to private use

• The employee will not have custody or control of the car while they are not performing duties of their employment

• An associate of the employee will not be entitled to use or have custody or control of the car.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 subsection 8(2)

Fringe Benefits Tax Assessment Act 1986 subsection 7(2)

Fringe Benefits Tax Assessment Act 1986 subsection 7(3)

Question 1

Summary

The vehicle will not classify as an exempt vehicle under subsection 8(2) of the FBTAA as its primary purpose is to carry passengers.

Detailed reasoning

Subsection 8(2) of the FBTAA deals with exempt car benefits and provides that to qualify for the exemption, the vehicle must meet the below criteria:

• Be a taxi, panel van, utility truck or any other road vehicle designed to carry a load less than 1 tonne, other than a vehicle designed for the principal purpose of carrying passengers

• There should be no private use of the car other than work related travel or other private use that is minor infrequent and irregular

This subsection outlines that even if there is no private use of the vehicle if its primary purpose is to carry passengers it cannot be an exempt vehicle under subsection 8(2) of the FBTAA.

The vehicle is classified as an electric passenger car. The nature of the vehicle requires it to be recharged, however this does not change its primary purpose from being a passenger carrying vehicle that was designed to use electricity as an alternate source of fuel. Therefore regardless of whether there is any private use of the car it will not be an exempt vehicle under subsection 8(2) of the FBTAA.

Question 2

Summary

If the car is stored at an employee's residence for safe custody it will be deemed to be available for private use under subsection 7(2) of the FBTAA.

Detailed reasoning

Subsection 7(2) of the FBTAA refers to cars garaged at an employee's residence and states that where the below conditions are satisfied the car will be taken to be available for private use:

• The car is held by a person being the employer, an associate of the employer or a person with an arrangement relating to the use or availability of the car

• The car is garaged or kept at or near a place of residence of the employee or associate of the employee

Therefore once a car is garaged overnight at an employee's place of residence for safe custody the legislation deems that car to be available for private use and does not provide room for Commissioner's discretion. This is outlined in ATO Interpretative Decision ATO ID 2003/613 Fringe Benefits Tax Car fringe benefits: car taken to be available for private use under the statutory formula method which states that there is no discretion available to the Commissioner to treat the car as not being available for private use if it is garaged at or near the employees residence, even if there is extenuating circumstances.

Consequently in your case if the car is stored at the employee's residence it will be deemed to be available for private use and subject to fringe benefits tax under subsection 7(2) of the FBTAA.

Question 3

Summary

If the car is stored at the employer's business premises and an enforceable prohibition against any private use of the car is in place when it is away from the business premises, the car will not be deemed to be available for private use under subsection 7(3) of the FBTAA as long as:

• The employee will not be entitled to apply the car to private use

• The employee will not have custody or control of the car while they are not performing duties of their employment

• An associate of the employee will not be entitled to use or have custody or control of the car

Detailed reasoning

Subsection 7(3)(c) of the FBTAA states that a car that is stored at the business premises of the employer will be deemed to be available for private use if any of the following apply:

• The employee is entitled to apply the car to private use

• The employee is not performing the duties of his or her employment and has custody or control of the car

• An associate of the employee is entitled to use, or has custody or control of the car

If none of the above applies the car will not be taken to be available for private use. However subsection 7(4) of the FBTAA states that for the purposes of subsection 7(3) of the FBTAA a prohibition on the application of the car for private use must be in place and must be consistently enforced by the employer or the car will be taken to be available for private use.

Miscellaneous Taxation Ruling MT 2021 Fringe benefits tax: response to questions by major rural organisation (MT 2021) under the car fringe benefits section- question 20 refers to what constitutes a prohibition against the private use of a car and what is required to meet the definition of consistently enforced. It is explained that the employer would need to make an express prohibition in clear and unequivocal terms and make it clear that the prohibition would be reinforced by disciplinary measures if necessary. Examples of enforcement provided in MT 2021 include regular checks of odometer readings against business kilometres travelled or any system of review to detect and deter breaches of the prohibition of private use of the car.

In your case if the car is stored at the employer's premises and there is an enforceable system in place to prohibit the private use of the car while it is away from the business premises, the car will not be taken to be available for private use under subsection 7(3) of the FBTAA.

As you will put an enforceable system in place to prohibit the private use of this car then subsection 7(3) of the FBTAA will not apply in this case and the car will not be taken to be available for private use.