Edited version of your written advice

Authorisation Number: 1012896772604

Date of advice: 28 October 2015

Ruling

Subject: Car fringe benefits - Electronic log book requirements

Question 1

Is the company's modified Navman system set up in a way by which the generated FBT Trip Report satisfies the definition of 'log book records' in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) and the requirements in sections 10, 10A and 10B of the FBTAA?

Answer

Yes

Question 2

If the answer to Question 1 is yes, does the operation of section 161 of the FBTAA extend to the company such that the company's employees are not required to make a business or private travel selection on their Navman system where they travel for two or more consecutive business journeys on the same day?

Answer

Yes

This ruling applies for the following periods:

Year ending 31 March 2016

Year ending 31 March 2017

Year ending 31 March 2018

Year ending 31 March 2019

The scheme commences on:

1 April 2015

Relevant facts and circumstances

1. The company is a world-leading manufacturer and supplier of a wide variety of products and services.

2. The company provides car fringe benefits to its employees including the Account Managers who are responsible for selling its products. They are required to travel extensively for business purposes, meeting existing and potential clients at various locations throughout the working day. These meetings are required to be in person and cannot be done over the phone or through other means as it is customary for the Account Managers to bring and demonstrate the operation of the company's various products and tools to their customers.

3. Due to the nature of the company's employment duties, a very high percentage of employees' travel during work hours is for a business purpose.

4. The company has made an election to use the operating cost method for determining the taxable value of car fringe benefits under section 10 of the FBTAA.

5. Navman Wireless has developed the Navman system as a means of recording car log book entries.

6. The company has recently installed the Navman system in their corporate vehicles used primarily for business travel by their employees including Mangers.

7. The company's Navman system has two relevant components.

8. The Navman system is a non-integrated fleet vehicle system that records for each car journey, the times the journey starts and finishes, the destination, the kilometres travelled and allows the driver to record the journey as being for either business or private purposes.

9. At the installation of the Navman system the user is prompted to enter the car's current odometer reading.

10. At the start of a journey the following information is collected:

• Location - GPS satellite information is captured and returned to the In Vehicle Unit (IVU) when the ignition is turned on. This includes longitude and latitude

• Time/Date - Time and date are collected from the GPS satellite and returned to the IVU at the time the ignition is turned on

• Employee ID - The company Managers are promoted by the Navman system to manually input an unique PIN code prior to starting their journey

• Type of Journey - Business or private use details are collected via the driver pressing a button on the Mobile Data Terminal; and

• Audio reminder - A buzzing sound will be heard for a period of time after the ignition is turned on and will stop when private or both business and a related purpose are selected. If these details are not selected the buzzing sound will automatically timeout.

11. At the end of each car journey the following information is collected.

• Location - GPS satellite information is captured and returned to the IVU when the ignition is turned off. This includes longitude and latitude; and

• Time/Date - Time and date are collected from the GPS satellite and returned to the IVU at the time the ignition is turned off.

12. The odometer reading recorded in the Navman system may be manually updated should it be necessary.

13. All information on any journeys undertaken by a car will be sent via the mobile network to be stored on a central server. Should the mobile network not be available, all data is stored on the IVU until such time as the network becomes available again. All information sent via the mobile network will be encrypted to ensure secure transmission and will be backed up to ensure safety of the information in the event of a disaster. All Administrator Level Users will be given an individual User Name and a Password for access to the web portal for the software component.

14. Each IVU has an inbuilt battery unit that will continue to record and provide a signal in the event of vehicle battery failure.

15. When the purpose of the car journey does not fit within the 10 predetermined selections the driver can elect not to select a purpose for that particular journey. However, the driver will be able to subsequently log into the Navman system software to manually update the purpose of the journey. Should any record details be incomplete the administrator will be notified of these omissions by an exception report and will be able to take the appropriate action to correct the record.

16. The company will be able to use the Navman system to produce, in English, a Navman system 'FBT Trip Report' for any selected period for each car that has the system fitted.

17. The Navman system 'FBT Trip Report' will provide the following information for each journey undertaken in the selected period:

• the trip type (private or business)

• the status (purpose) of the trip

• the driver's name (where the identification unit is installed)

• the start time and date

• the location from which the journey commenced

• the starting odometer reading

• the time and date on which the journey was completed

• the location at which the journey was completed

• the ending odometer reading; and

a. total distance travelled during the trip (in kilometres).

18. The Navman system 'FBT Trip Report' will also provide details of:

• the total number of kilometres travelled during the selected period

• the number of private kilometres travelled during the selected period

• the number of business kilometres travelled during the selected period; and

• The calculated business use percentage for the selected period.

18. Due to the significant number of business journeys undertaken by employees travelling primarily for business purposes, including Managers, the company proposes to modify the Navman system such that the system is automated to a default business trip for a set period of time during working hours. This will require the employee to log in once only at the start of the working day, rather than logging in each time they exit and enter the vehicle after visiting a customer for work related purposes. It will be possible to override the GPS and choose the "private" journey identifier where the employee is not undertaking a consecutive business journey. The GPS will be set to "private" on weekends to capture private travel.

19. Where the Navman system is set to a default business journey option during working hours, the company proposes to update its internal compliance policy in relation to logbook requirements to ensure that the employees' private journeys are captured and monitored. The details of the policy are as follows:

• The employee is required to turn the "business" trip identifier off and the "personal' trip identifier on if the employee deviates from consecutive work journeys.

• If the employee makes a mistake when selecting the type of travel for a particular journey, they are able to correct their mistakes immediately or at a later point through the operation of the GPS.

• The company will conduct random sample checks of the data with its employees, and they will also review exception reports where there is an unexpected spike in business or private travel.

20. The company is provided with fleet company reports which monitor the fuel usage of the company's fleet and discrepancies in expectations on fuel usage are reviewed.

Relevant legislative provisions

FBTAA section 10

FBTAA section 10A

FBTAA section 10B

FBTAA subsection 136(1)

FBTAA section 161

Reasons for decision

Question 1

Summary

The company's modified Navman system is set up in a way in which the generated FBT Trip Report satisfies the definition of 'log book records' in subsection 136(1) of the FBTAA and the requirements of sections 10, 10A and 10B of the FBTAA.

Detailed reasoning

Section 10 of the FBTAA allows an employer to elect to calculate the taxable value of a car fringe benefit using the cost basis method (operating cost method).

Where the election is made, the taxable value of the car fringe benefit using the operating cost method is calculated according to the following formula in subsection 10(2):

(C x (100% - BP)) - R

Where:

C is the operating cost of the car during the holding period;

BP is:

(a) nil if, under sections 10A or 10B, the employer is not entitled to a reduction in the operating cost of the car on account of business journeys undertaken in the car during the holding period - nil; or

…

(c) in any other case - the business use percentage applicable to the car for the holding period; and

R is the amount (if any) of the recipient's payment.

As the company has made the relevant election and intends to claim a reduction in the operating cost of a car, on account of business journeys undertaken during the holding period, they must meet the requirements of either section 10A (if the year is a log book year of tax), or section 10B of the FBTAA (if the year is not a log book year of tax).

Does the company's Navman system 'FBT Trip Report' meet the relevant requirements of section 10A of FBTAA?

Section 10A states:

No reduction of operating cost in a log book year of tax unless log book records and odometer records are maintained.

Where one or more car fringe benefits in relation to an employer in relation to a year of tax relate to a car while it was held by a particular person (in this section called the 'provider') during a particular period (in this section called the 'holding period' ) in a year of tax that is a log book year of tax of the employer in relation to the car, the employer is entitled to a reduction in the operating cost of the car on account of business journeys undertaken in the car during the holding period if, and only if:

(a) log book records and odometer records are maintained by or on behalf of the provider for an applicable log book period in relation to the car; and

(b) odometer records are maintained by or on behalf of the provider for the holding period; and

(c)...

(d) the employer specifies the employer's estimate of the number of business kilometres travelled by the car during the holding period; and

(e) the employer specifies a percentage as the business use percentage applicable to the car in relation to the provider for the holding period.

Section 162G sets out various circumstances under which a particular year can be treated as a 'log book year of tax.' The Commissioner has accepted in Class Ruling (CR) 2013/66 at paragraph 29 that all employers using the Navman system will make an election under paragraph 162G(1)(b) to treat a relevant current year of tax as a 'log book year of tax'.

Nevertheless, it is essential (to meet the requirements of section 10A) that both 'log book records' and 'odometer records' are maintained.

Does the company's Navman system 'FBT Trip Report' satisfy the requirements of the definition of "log book records"?

Subsection 136(1) of the FBTAA defines 'log book records' as:

"log book records, in relation to a car held by a person (in this definition called the holder), in relation to a period, means a daily log book or similar document in which, in respect of each business journey:

(a) that is undertaken in the car during the period; and

(b) that the holder, or a person acting on behalf of the holder, chooses to record in the document for the purpose of demonstrating the pattern of use of the car during the period;

an entry setting out particulars of:

(a) the date on which the journey began and the date on which it ended; and

(b) the respective odometer readings of the car at the beginning and end of the journey; and

(c) the number of kilometres travelled by the car in the course of the journey; and

(d) the purpose or purposes of the journey;

is made in the English language at, or as soon as reasonably practicable after, the end of the journey. "

The above definition of 'log book records' in subsection 136(1) requires that the relevant record be 'a daily log book or similar document' and also the relevant entries are 'made in the English language at, or as soon as reasonably practicable after, the end of the journey'.

The business use or private use details for the journey are input by the driver onto the screen of the company's Navman system at the start of each car journey. Navman system 'FBT Trip Report' provides its information in English.

Furthermore, the definition of log book in section 136 of the FBTAA provides that the log book entry must be made at the end of the journey to which it relates, or as soon as reasonably practicable after the end of the journey.

Paragraph 35 of the CR 2013/66 states that:

Although it is expected that the relevant entries will be made the same day the car journey was undertaken, it is accepted that in situations where it is not practical to generate a Navman system 'FBT Trip Report' on a daily basis, the period of making such entries may be extended. Therefore, provided the necessary entries are made or produced, at least weekly, it is considered that such circumstances will not alter the conclusion above.

In the present case, the company expects that the relevant entry will be made by its employees on the same day that the journey is undertaken. Where an entry is required to be modified, for example choosing the incorrect trip identifier, the company will modify it within 5 working days, which complies with this requirement.

Therefore, the 'trip report' provided by the company's Navman system meets the necessary requirement of being a 'daily log book or similar document' and also meets the necessary requirement of having the relevant entries 'made in the English language at, or as soon as practicable after, the end of the journey'.

Odometer readings:

Paragraph (d) of the definition of 'log book records' in subsection 136(1), requires the respective odometer readings of the car at the beginning and at the end of the journey be entered into the relevant records.

The term 'odometer' is not defined in either the FBTAA or the Income Tax Assessment Act 1997 but the Macquarie Dictionary, online edition, defines that term as being 'an instrument for measuring distance passed over, as by a motor vehicle'.

The term 'odometer records', as defined in subsection 136(1) makes reference to 'odometer readings of the car'. In this regard, it is concluded that, whilst odometer readings must pertain to the car, it does not necessarily mean that they must also be attributable either wholly or in part to the rotation of the car's wheels, thereby mechanically moving the standard odometer fitted in the car by the manufacturer.

Provided the device used to determine the car's odometer readings is of sufficient integrity it can be accepted that a system other than the car's own odometer may meet the FBTAA legislative requirements.

Each time the car is driven, the start and end odometer readings for the journey are calculated by the Navman system from the GPS and other telemetry data recorded. It is accepted that the opening and closing odometer readings calculated by the Navman system are of sufficient integrity to be 'odometer readings of the car'.

The commissioner has accepted in paragraph 31 of CR 2013/66 that the opening and closing odometer readings for each car journey detailed on Navman system 'FBT Trip Report' satisfies the requirements of paragraph (d) of the definition of 'log book records' in subsection 136(1).

Further, the Navman system 'FBT Trip Report' sets out particulars that readily satisfy paragraphs (c), (e) and (f) of the definition of 'log book records' in subsection 136(1).

Business journey in relation to a period

The definition of 'log book records', in subsection 136(1), also requires that each business journey recorded in the log book records be in relation to a 'period'.

Paragraph 10A (a) refers to log book records being maintained for an 'applicable log book period'.

The term 'applicable log book period' is defined in subsection162H(1) as follows:

162H(1) [Car fringe benefit]

For the purposes of the application of section 10 in relation to a car fringe benefit in relation to an employer in relation to a car while it was held by a particular person during a particular period (in this subsection called the 'holding period') starting or ending in a year of tax, a reference to the applicable log book period is a reference to:

(a) if the holding period is a period of less than 12 weeks - the holding period; or

(b) in any other case - a continuous period of not less than 12 weeks that begins and ends during the holding period.

It has been accepted by the Commissioner at paragraph 46 of CR 2013/66 that in the absence of evidence to the contrary in a particular case, all employers using the Navman system 'FBT Trip Report' in relation to any car fringe benefits they provide will maintain the necessary records for the duration of the 'applicable log book period' (as that latter term is defined in subsection 162H(1)).

Therefore, the company's Navman system 'FBT Trip Report' satisfies all the relevant requirements of the definition of 'log book records' as defined in subsection 136(1).

Does the company's Navman system 'FBT Trip Report' satisfy the requirements of the definition of 'odometer records'?

The definition of 'odometer records' in subsection 136(1), requires that odometer readings be recorded in relation to both the 'commencement of the period' and at the 'end of the period'.

The company's Navman system 'FBT Trip Report' provides details of the odometer reading for the car at the start of the first recorded journey and also the odometer reading for the car at the end of the last recorded journey that were undertaken during each report period.

As stated previously, the Commissioner has accepted in CR 2013/66 at paragraph 46 that in the absence of evidence to the contrary in a particular case, that all employers using the Navman system trip will maintain the necessary records for the 'applicable log book period'.

It was also accepted by the Commissioner at paragraph 34 of CR 2013/66 that the Navman system 'FBT Trip Report' provided by the Navman system meets the necessary requirement of having entries 'made in the English language at, or as soon as reasonably practicable after, the end of the journey'.

Therefore, it is considered that the Navman system 'FBT Trip Report' satisfies all the relevant requirements of the definition of 'odometer records' as defined in subsection 136(1).

As discussed above, the company's Navman system 'FBT Trip Reports' are 'log book records' and 'odometer records' for the purposes of paragraph (a) of section 10A.

It is also accepted, in the absence of any evidence to the contrary in a particular case, that all remaining applicable requirements of section 10A will be met by employers using the Navman system 'FBT Trip Report'. As such, the company using the Navman system 'FBT Trip Report' will be entitled to a reduction of the operating costs of a car on account of business journeys, in a log book year of tax, as the Navman system 'FBT Trip Report' meets the relevant requirements of section 10A.

Does the company's Navman system 'FBT Trip Report' meet the relevant requirements of section 10B of FBTAA?

Section 10B states:

No reduction of operating cost in a non-log book year of tax unless log book records and odometer records are maintained in log book year of tax 

Where one or more car fringe benefits in relation to an employer in relation to a year of tax relate to a car while it was held by a particular person (in this section called the 'provider') during a particular period (in this section called the 'holding period') in a year of tax that is not a log book year of tax of the employer in relation to the car, the employer is entitled to a reduction in the operating cost of the car on account of business journeys undertaken during the holding period in the car if, and only if:

(a) odometer records are maintained by or on behalf of the provider in relation to the car for the holding period and, if the provider is not the employer, are given to the employer before the declaration date; and

(b) the employer specifies the employer's estimate of the number of business kilometres travelled by the car in the holding period; and

(c) the employer specifies the business use percentage applicable to the car in relation to the provider for the holding period".

As stated above, the company's Navman system 'FBT Trip Report' will satisfy the definition of the term 'odometer records' in subsection 136(1). For the same reason, it is considered that the FBT Trip Report' satisfies the definition of 'odometer records' for the purposes of paragraph 10B(a).

The commissioner has also accepted in CR 2013/66 at paragraph 59 that in the absence of any evidence to the contrary in a particular case, that all remaining requirements of section 10B will be met by employers using Navman system 'FBT Trip Report'.

For the reasons stated above, the company's Navman system 'FBT Trip Report' is entitled to a reduction of the operating costs of a car on account of business journeys, in a non-log book year of tax, as the Navman system 'FBT Trip Report' meets the relevant requirements of section 10B.

Although the proposed modification of the company's Navman system is to be set to a default 'business journey option during working hours, the system remains of sufficient integrity as:

• It will be possible to override the GPS and choose the "private" Journey identifier where the employee is not undertaking a consecutive business journey.

• The GPS will be set to "private" on weekends to capture private travel.

• The company proposes to update its internal compliance policy in relation to logbook requirements to ensure that the employees' private journeys are captured and monitored. The details of the policy are as follows:

• The employee is required to turn the "business" trip identifier off and the "personal' trip identifier on if the employee deviates from consecutive work journeys

• If the employee makes a mistake when selecting the type of travel for a particular journey, they are able to correct their mistakes immediately or at a later point through the operation of the GPS.

• The company will conduct random sample checks of the data with its employees, and they will also review exception reports where there an unexpected spike in business or private travel.

• The company monitors the fuel usage of the company's fleet and reviews discrepancies in expectations on fuel usage.

Conclusion

As established above, notwithstanding the proposed modification of the company's Navman system, it remains of sufficient integrity and is set up in a way by which the generated FBT Trip Report satisfies the definition in subsection 136(1) of the FBTAA and the requirements in sections 10, 10A and 10B of the FBTAA.

Question 2

Summary

The operation of section 161 of the FBTAA extends to the company, such that the company's employees are not required to make a business or private travel selection on their Navman system where they travel for two or more consecutive business journeys on the same day.

Detailed reasoning

Subsection161 (1) of the FBTAA states that:

"For the purposes of this Act, where:

(a) during a particular period during a day, 2 or more journeys are undertaken in a car; and

(b) each of the journeys in the car during that period is a business journey;

the journeys referred to in paragraph (b) shall be deemed to constitute a single journey."

Pursuant to subsection 161(1), if a person made two or more consecutive business journeys on the same day, the series of journeys can be recorded as a single journey.

Subsection 161(1) of the FBTAA simplifies the log book entry requirements by authorising the use of a single entry to record consecutive business journeys undertaken on a particular day.

The rationale behind subsection 161(1) of the FBTAA is consistent with the company's position that given some of the company's employees are required to undertake constant travel for business purposes in fulfilling their day to day employment duties, it would place an undue administrative burden upon them to confirm on their Navman system the purpose of their next journey, especially where that purpose will almost always be for business travel.

Thus section 161 operates to deem two or more business journeys undertaken on the same day to constitute a single journey for log book purposes. This approach recognises the practical reality faced by the company's employees and offers a 'common sense' approach where back-to-back business journeys are recorded as a single journey, and as such the employee is not required to make a manual selection about the nature of the journey where it is for a business purpose.

Section 161 does not explicitly contemplate its operation in relation to electronic logbooks. However, as it has been established above that the company's Navman system satisfies the requirements of sections 10, 10A, 10B and subsection136(1) of the FBTAA and constitutes 'log book records' and 'odometer records', it is clear that the operation of section 161 can extend to the company's Navman system as well.

Essentially, this means the company's employees are only required to make a selection of business travel at the start of their first trip of the day, and no selection is required for the rest of the day's travel, if the rest of the day's travel is for a business purpose.