Edited version of your written advice

Authorisation Number: 1012937608207

Date of advice: 1 April 2016

Ruling

Subject: Car Fringe Benefit and Car Parking Fringe Benefits

Scenario 1 - Employees are 'on-call' but do not attend their usual place of employment if they are called out. They go directly from home to the alternate worksite.

Question 1

Do both journeys between the on-call employees' usual place of employment and home and then back again to their usual place of employment using cars provided by their employer constitute business journeys as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) for the purpose of calculating the taxable value of a car fringe benefit under section 10 of the FBTAA if the employees are not called out?

Answer

Yes.

Question 2

Will the answer to Question 1 differ if log books maintained during an applicable log book period pursuant to section 162H of the FBTAA indicate that employees on-call every night during the 12 week period were not called out to attend an incident during that period?

Answer

No.

Question 3

Do both journeys between the on-call employees' usual place of employment and home and then from home to an alternate worksite when an employee is called out using cars provided by their employer constitute business journeys for the purpose of calculating the taxable value of a car fringe benefit under section 10 of the FBTAA?

Answer

Yes.

Scenario 2 - Employees are 'on-call' and travel from home to their usual place of employment when called out. They then go to an alternate worksite.

Question 4

Do all journeys between the employees' usual place of employment and home and then back again to their usual place of employment and then off to an alternate worksite using cars provided by their employer, when responding to a call out, constitute business journeys as defined in subsection 136(1) of the FBTAA for the purpose of calculating the taxable value of a car fringe benefit under section 10 of the FBTAA?

Answer

No, only the following journeys will be business journeys:

• Where the duties of employment require the employee to immediately start coordinating a response to an incident from home, such as communicating instructions to other employees in relation to operational matters, the journey from home to the usual place of employment and the trip home would constitute business journeys.

• The trip from the usual workplace to the alternate worksite and back to the usual worksite or home are business journeys.

Issue 2

Question 1

Does a car parking fringe benefit arise under section 39A of the FBTAA when an on-call employee garages a car provided by their employer carrying bulky equipment at their residence and then returns the car to an allocated car spot at the worksite?

Answer

No.

This ruling applies for the following periods

1 April 2015 to 31 March 2016

1 April 2016 to 31 March 2017

1 April 2017 to 31 March 2018

1 April 2018 to 31 March 2019

The scheme commenced on

1 April 2015

The scheme that is the subject of the ruling:

The employer provides cars to its on-call employees. The cars are used to carry bulky equipment. The bulky equipment may be required by employees to carry out their duties when away from their regular place of employment responding to a call out.

Employees are generally on call for a period of 7 days.

The employer's policy only allows employees to use the car for official purposes. Employees using the car must not transport persons other than employees of the employer.

When the car is parked at the usual place of employment it is a pool car and is available for use by any employee as required to carry out employment duties. A vehicle will not be exclusively available for the use of any particular employee. The employer ensures that there is a car available at the end of the day for the on-call employee to take home.

In some situations the employee takes the same car home each night that they are on call e.g. if it is carrying specialist equipment.

In other situations the employee does not take the same car home. It will depend upon the availability of cars and vehicle allocation. As each car carries the same equipment, the employee may take a different car home each night during their on-call period.

Scenario 1

Your employee (a member of an operational team) is on-call and required to take a vehicle home. The vehicle is carrying bulky equipment so that it is available for immediate deployment to the call out site.

When the employee is called out they are not required to go to their usual place of employment prior to attending the call out site. The employee goes directly to the call out site.

Although it is possible to store the equipment at the usual place of employment, it is not practical or operationally efficient for employees to attend at their usual place of employment prior to attending the call out site to collect the items e.g. they may receive an urgent call out to carry out an operation or attend to an incident.

Scenario 2

Your employee (a team leader) is on call and is required to take a vehicle home. Although the vehicle is fitted out with bulky equipment, the employee is required to attend at their usual place of employment prior to attending the call out site. The employee is not required to be carrying the bulky equipment for these trips because the employee is able to pick up any required equipment from their usual place of employment prior to attending the call out site.

In some situations the employee may be required to commence coordinating the response to the incident from home.

In other situations the employee will return to their usual place of employment to meet with other appointees and commence coordinating the response to the incident.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986, section 7

Fringe Benefits Tax Assessment Act 1986, section 10

Fringe Benefits Tax Assessment Act 1986, section 39A

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

Fringe Benefits Tax Assessment Act 1986, section 162F

Fringe Benefits Tax Assessment Act 1986, section 162G

Fringe Benefits Tax Assessment Act 1986, section 162H

Income Tax Assessment Act 1997, section 995-1

Reasons for decision

The General Rule

Subsection 7(1) of the FBTAA provides that a car fringe benefit will arise when a car that is held by an employer is either:

• applied to a private use by an employee or an associate of an employee or

• is taken to be available for the private use of an employee or an associate of an employee.

A car fringe benefit will only arise when the vehicle being provided to an employee is a car as defined. Car is defined in subsection 136(1) of the FBTAA with reference to its definition in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) as '…a motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than nine passengers'. Private use of a motor vehicle that is not a car may give rise to a residual fringe benefit.

Subsection 7(2) of the FBTAA provides that a car is taken to be available for private use on a day where, in respect of the employment of an employee, the car is garaged or kept at or near a place of residence of the employee.

Deemed availability for private use under subsection 7(2) is not dependent on any actual use or actual availability for any use. Where the conditions of the subsection are met, then the car concerned is taken to be available for private use.

In applying these rules, a car that is garaged at an employee's home is treated as being available for private use of the employee regardless of whether or not the employee has permission to use it privately.

Therefore, if the cars that are held by the employer (or an associate or under an arrangement with the employer or associate) are garaged at the homes of employees, a car benefit will arise from the provision of the cars to the employees unless the benefit is an exempt benefit.

The FBTAA provides two alternative methods of valuing such benefits:

• the statutory formula method under section 9 and

• the operating cost method under section 10.

Where the operating cost method is used to calculate the taxable value of a car fringe benefit, the taxable value is a percentage of the total costs of operating the car during the FBT year. The relevant percentage depends upon the business use percentage.

Calculating the percentage of business use

Subsection 10(2) of the FBTAA states:

Subject to this Part, where an election is made under subsection (1), the taxable value, or the aggregate of the taxable values, as the case requires, of the car fringe benefits in relation to the employer in relation to the year of tax that relate to the car while it was held by a particular person (in this section referred to as the provider) during a particular period (in this section referred to as the holding period) in the year of tax is the amount calculated in accordance with the formula:

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

where:

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

BP is -

(a) if, under section 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

(a) 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.

Subsection 136(1) of the FBTAA defines the business use percentage as the number of business kilometres travelled by the car during the holding period divided by the total number of kilometres travelled by the car during the holding period expressed as a percentage. Business kilometre means a kilometre travelled by the car in the course of a business journey.

Sections 10A and 10B of the FBTAA provide that the business use percentage will be nil unless certain records such as odometer records and a log book containing details of the business journeys undertaken during the log book period have been maintained. Logbook records are usually maintained for a continuous 12 week period and every 5 years. The business use percentage established during this period can be used for 5 years unless there are variations in the pattern of business use.

Business and Private Journeys

For the purposes of the operating cost method, a 'business journey' is defined in subsection 136(1) of the FBTAA as:

(a) … a journey undertaken in a car otherwise than in the application of the car to a private use, being an application that results in the provision of a fringe benefit in relation to the employer; …

Private use of a 'motor vehicle' is defined in subsection 136(1) of the FBTAA as:

… any use of the motor vehicle by the employee or associate, as the case may be, that is not exclusively in the course of producing assessable income of the employee.

When determining the distinction between private and business use for FBT purposes, paragraph 12 of Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel (MT 2027) employs an approach of asking whether the expenditure on travel between home and work would have been wholly deductible to the employee for income tax purposes. If the expenditure would be wholly deductible if incurred by an employee then the use of the car is regarded as a business journey for FBT purposes.

In considering whether expenditure has been incurred in the course of gaining or producing assessable income for the purposes of determining a taxpayer's entitlement to a deduction, the High Court has held that the language is intended to cover any number of factual and legal situations in which expenditure is incurred and the enquiry posed by the provision is whether the occasion of the outgoing can be found in whatever is productive of the assessable income. Thus, essential to the enquiry is determining what is productive of the assessable income and then considering the connection between it and the expenditure. A causal connection will not suffice. What is required is a closer and more immediate connection: See Federal Commissioner of Taxation v Day (2008) 236 CLR 163; 2008 ATC 20-064; [2008] HCA 53 (Day) citing Ronpibon Tin NL v FC of T (1949) 78 CLR 47 and Federal Commissioner of Taxation v Payne [2001] HCA 3; 2001 ATC 4027.

In addition to MT 2027, Taxation Ruling IT 112 Deductibility of travelling expenses between residence and place of employment or business (IT 112) and Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses (TR 95/34) provide guidance as to the circumstances in which home to work travel may be deductible, and therefore, a business journey.

Generally, expenditure incurred in travelling between home and a person's regular place of employment or business is private in nature and is not an allowable deduction as the expenditure is a pre-requisite to earning assessable income as opposed to expenditure which is incurred in the course of gaining or producing income: Lunney v Commissioner of Taxation of the Commonwealth of Australia; Hayley v Commissioner of Taxation of the Commonwealth of Australia (1958) 100 CLR 478 and see paragraph 14 of MT 2027 which states, 'put at its simplest, travel to work is private; travel on work is business'.

There are situations where travel between home and work has been accepted as business travel. These situations are addressed in MT 2027 and IT 112 and include:

• employment duties of an itinerant nature: see also TR 95/34

• business trip on way to and from work - situations where an employee who has a regular place of employment travels to an alternative location to perform their duties, and if the journey had been made from the regular place of employment would constitute business travel

• travelling outside the normal daily journey where it can be concluded on an objective analysis of the nature of the office or employment that the employee commenced duties on receiving the call. It does not extend to a person who chooses to perform some of their duties at home, and

• travel incorporating the transport of bulky equipment.

These situations are also discussed in Taxation Ruling TR 95/13 Income Tax: employee police officers - allowance, reimbursements and work related deductions at paragraphs 200 to 231. At paragraph 211 of TR 95/13 it states that it would be unusual for a police office to be involved in itinerant work.

While guidance can be obtained from cases, each case must be decided on its own particular facts having regard to whether the occasion of the outgoings can be found in whatever is productive of the assessable income: Ronpibon Tin; Payne; Day.

Travel while on stand-by duty

The fact that an employee may travel to and from their usual place of employment in response to a call out while on call out duty would not ordinarily alter the character of that travel: see paragraph 17 of MT 2027. That is, it will remain private travel.

However, paragraph 18 of MT 2027 explains that the position will be different where it can be concluded on an objective analysis of the nature of the employment duties that the employee commences duties on receiving the call. In these situations the journey from home to the place of employment is undertaken to complete duties of employment already underway before the journey commenced and as such is considered a business journey. An example of this situation is given in paragraph 19 of MT 2027 as follows:

… a medical practitioner, under the terms of his appointment with a hospital, was required to be accessible by telephone to receive emergency calls and to give immediate instructions on treatment prior to travelling to the hospital, such that his responsibility for the patient commenced on receiving the call.

Paragraph 22 of MT 2027 explains that this does not mean that the normal daily travel undertaken by the employee to and from the place of employment is business travel. Nor will it apply to an employee who chooses to perform some of their employment duties at home.

Travel and Bulky equipment

Travel incorporating the transport of equipment is discussed in paragraphs 37 to 38 of MT 2027. Where an employee's use of the vehicle can be attributed to the necessary carriage of equipment rather than simply travelling to and from work it will be accepted as business travel. The Commissioner's view of the so-called bulky equipment exception is discussed in IT 112.

The principles stated in IT 112 for determining whether or not travel between work and home will be deductible due to the transport of bulky equipment involve a consideration of the fundamental nature of the duties carried out by the employee within the following framework:

• The journey was undertaken as part of the operation by which the employee earns their assessable income.

• The journey is essential to the carrying on of those operations; there is no other practicable way of getting the equipment to the places where the employee is to perform their duties of employment.

• In a practical sense, the journey should be attributed to the carriage of the equipment rather than to travel to the place of employment. The mode of the employee's travel should simply be a consequence of the means employed to get the equipment to the workplace.

A deduction is not generally allowable if a secure area for the storage of equipment is provided at the workplace: See TR 95/13 paragraph 205.

Travel between alternate work sites and work or home

Paragraph 220 of TR 95/13 discusses travel from the normal work place to an alternative work place while on duty and back to the normal work place or directly home and states:

220. A deduction is allowable for the cost of travel from a police officer's normal work place to other work places. The cost of travel from the alternative work place back to the normal work place or directly home is also an allowable deduction. This travel is undertaken in the performance of a police officer's duties. It is incurred in the course of gaining assessable income and is allowable as a deduction.

TR 95/13 goes on to consider travel from home to an alternative workplace for work-related purposes and then to the normal workplace or directly home at paragraph 222:

A deduction is allowable for the cost of travel from home to an alternative work place. The cost of travel from the alternative work place to the normal place of employment or directly home is also an allowable deduction (see paragraphs 32 to 35 of Taxation Ruling MT 2027).

Paragraphs 34 of MT 2027 provides as follows:

34. While the position is not free from doubt and is perhaps clearer in some of the instances cited in paragraph 30 than in others, it has been decided that the total journey from the employee's home to the client's premises and on to the office should be accepted as business travel. This approach is to be adopted where -

• the employee has a regular place of employment to which he or she travels habitually;

• in the performance of his or her duties as an employee, travel is undertaken to an alternative destination which is not itself a regular place of employment (i.e., this approach would not apply, for example, to a plant operator who ordinarily travels directly to the job site rather than calling first at the depot or to an employee of a consultancy firm who is placed on assignment for a period with a client firm); and

• the journey is undertaken to a location at which the employee performs substantial employment duties.

As an illustration of this last point, travel to an employee's place of employment would not be accepted as business travel where the employee merely performs incidental tasks enroute such as collecting newspapers or mail. Similarly, for example, the fact that a dentist may call in at a dental laboratory to collect dentures, etc., enroute to the surgery at which he or she is employed would not result in the trip being accepted as constituting business travel.

Paragraph 36 of MT 2027 also specifically includes travel home the preceding night before a business trip the next morning as an incidental business trip.

36. Where an employer provides an employee with a car solely for the purposes of undertaking a business journey from the employee's home the next morning, the trip home on the preceding night will be accepted as business travel, being incidental to the next morning's journey. However, this approach is restricted to circumstances of the kind detailed and would not, for example, apply where a person has regular use of the car for private purposes.

You have described two distinct factual scenarios where employees who are on-call use employer cars to travel between home, work and alternate work-sites. We will consider the application of these principles to each of those scenarios below:

Scenario 1 - Employees are 'on-call' but do not attend their usual place of employment if they are called out. They go directly from home to the alternate worksite.

Question 1

Do both journeys between the on call employees' usual place of employment and home and then back again to their usual place of employment using cars provided by the employer constitute business journeys as defined in subsection 136(1) of the FBTAA for the purpose of calculating the taxable value of a car fringe benefit under section 10 if the employee is not called out?

Answer

Yes.

Detailed reasoning

In scenario 1, employees are required to take a vehicle home whilst they are on call. The nature of the employees' duties are such that when they are called to return to work they may be required to attend directly at alternative worksites to perform operational work. Vehicles are fitted out with equipment ready for a range of potential situations encountered in the employee's day to day activities.

It would be impractical for on-call employees to perform their duties at the various locations at which they may be required to carry out their duties without the use of a car in which all the necessary equipment is installed. Whilst it is possible to securely store the equipment at the regular place of employment, it would not be possible to secure the equipment at the many alternative worksites at which the equipment would be required when an employee is on call. Having regard to the inherent nature of duties, it is accepted that it would not be operationally efficient to return to the usual place of employment to collect the items before answering a call-out. The nature of an on-call employee's duties in scenario 1 necessitates taking a vehicle home fitted out with the required equipment so that if they receive a call out they can carry out their duties in a practical and operationally efficient manner.

Applying the guidance in MT 2027 and the principles discussed above, we consider the journeys between work and home and then back to work for an on-call employee covered by scenario 1 to be business journeys.

Question 2

Will the answer to Question 1 differ if log books maintained during an applicable log book period pursuant to section 162H of the FBTAA indicate that employees on call taking employer cars home every night during the 12 week period were not called out to attend an incident during that period?

Answer

No.

Detailed reasoning

An employer intending to claim a reduction in the operating costs of a car, on account of the business journeys undertaken during the holding period, must meet the requirements of section 10A of the FBTAA (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).

Section 10A of the FBTAA provides the requirements to maintain a log book and odometer records in a log book year otherwise no reduction can be made when electing to adopt the operating cost method. It states:

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) if the provider is not the employer - those log book records and odometer records are given to the employer before the declaration date; and

(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 of the FBTAA defines a log book year of tax to occur if one of the following applies in relation to the employer in relation to the car:

• none of the previous four years was a log book year of tax

• the employer elects that the year be treated as a logbook year of tax, and

• The Commissioner notifies you in writing to treat the year of tax as a log book year.

Log book records are defined in subsection 136(1) of the FBTAA 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:

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

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

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

(f) 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.

Odometer records are a record of the total distance travelled during the same 12 weeks that log book records are maintained, and the total distance travelled each year: subsection 136(1) of the FBTAA.

An applicable log book period is defined in section 162H of the FBTAA as a continuous period of not less than 12 weeks that begins and ends during the holding period unless the holding period is less than 12 weeks (in which case it is the holding period).

The method used to estimate the number of business kilometres travelled in a year for the purpose of determining the business use percentage in set out in section 162F of the FBTAA, which states:

… the number of kilometres that represents a reasonable estimate of the number of business kilometres applicable to a car held by a person during a period in a year of tax shall be determined having regard to all relevant matters including, but without limiting the generality of the following:

(a) any log book records, odometer records or other records maintained by or on behalf of the person; and

(b) any variations in the pattern of use of the car.

The Fringe benefits tax - a guide for employers provides that the 12-week period chosen should be representative of the car's business use.

If you keep log book records and odometer records for a period of 12 weeks in which an employee is on-call, but is not called out, recording the details required under the definitions of log book records and odometer records in subsection 136(1) of the FBTAA, and this gives rise to a percentage of 100% business use, the Commissioner accepts that the period will be representative of the car's business use during a year of tax where the variations in use of the car would be due to the employee using the car to attend call outs. That is, the pattern of use would still be 100% business use.

If variations in the pattern of use involve private use you should keep other log book records to make a reasonable estimate of the percentage of business use of the car.

Question 3

Do both journeys between the on call employees' usual place of employment and home and then from home to an alternate worksite when an employee is called out using employer cars constitute business journeys for the purpose of calculating the taxable value of a car fringe benefit under section 10 of the FBTAA?

Answer

Yes.

Detailed reasoning

An on-call employee has a usual place of employment to which they habitually travel. In the course of undertaking their duties whilst on call, employees travel at the direction of the employer for the purpose of fulfilling their duties to an alternative worksite at which they perform substantial duties. Therefore, on call employees' journeys by car between their usual place of employment and home and then to an alternative worksite when they are called out are regarded as business journeys as defined in subsection 136(1) of the FBTAA.

Scenario 2 - Employees are 'on-call' and travel from home to their usual place of employment when called out. They then go to an alternate worksite.

Question 4

Do all journeys between the employees' usual place of employment and home and then back again to their usual place of employment and then off to an alternate worksite using employer cars when responding to a call out constitute business journeys as defined in subsection 136(1) of the FBTAA for the purpose of calculating the taxable value of a car fringe benefit under section 10?

Answer

No, only the following journeys will be business journeys:

• Where the duties of employment require the employee to immediately start coordinating a response to an incident from home, such as communicating instructions to other employees in relation to operational matters, the journey from home to the usual place of employment and the trip home would constitute business journeys.

• The trip from the usual workplace to the alternate worksite and back to the usual work site or home are business journeys.

Detailed reasoning

In this scenario, where the employee will return to their usual place of employment to meet with other appointees and commence coordinating the response to the incident, the travel is considered private. The fact that the employee is transporting bulky goods in the vehicle does not alter this conclusion because the duties of employment do not require the employee to be transporting the bulky goods home. The employee is able to collect the bulky goods when attending at their usual place of employment in response to the call out.

However, in circumstances where the duties of employment require the employee to immediately start coordinating a response to an incident from home, such as communicating instructions to other employees in relation to operational matters, the journey from home to the usual place of employment is in the course of undertaking employment duties that have already commenced and the travel including the trip home would constitute business journeys. As per paragraph 22 of MT 2027, the normal daily travel undertaken by the employee to and from the usual place of employment will remain private.

The trip from the usual workplace to the alternate worksite and back to the usual work site or home are business journeys as per paragraph 220 of TR 95/13.

Issue 2

Question 1

Does a car parking fringe benefit arise under section 39A of the FBTAA when an on call employee garages the car carrying bulky equipment at their residence and then returns the car to an allocated car spot at the usual place of employment?

Answer

No.

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 for a benefit to be a fringe benefit 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.

Subsection 39A(1) of the FBTAA sets out the conditions that must be met for a car parking benefit to arise. Subsection 39A(1) of the FBTAA states:

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

(iii) 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.

For the purposes of this Ruling, it is assumed the conditions in paragraphs (a), (b), (c), (e), (f), (g), (h) and (i) are met. That is, a car parking benefit will arise from the parking of the car if it is possible to identify a particular employee to whom the benefit relates and the parking facilities for the car are provided 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 27 to 29 the Court said:

27. Here the question whether there is a sufficient or material connection or relationship between a benefit and employment is assisted by having regard to the purpose or object of imposing FBT on employers. That purpose was stated by the then Treasurer, Mr Keating, in the Second Reading Speech (2 May 1986, Hansard, House of Representatives) at 3020 to be to ``ensure that all forms of remuneration paid to employees bear a fair measure of tax...''

28. 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 then the benefit is likely to be extraneous to the employment and will not bear FBT, notwithstanding that the employment might have been a causal factor in the provision of the benefit…

…

29. 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".

Where the vehicle is returned to the allocated car spot at the worksite and is not driven home by any other employee on that day or is driven home by a different employee on that day

In this situation, the employees merely return the employer's car which they have taken overnight because they were on call to the car park at their usual place of employment. 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 on an ongoing basis and receives the benefit of having a car parking space in which to park the car. In such a situation, a particular employee can be identified in respect of the provision of the car parking facility for the car.

Where the vehicle is returned to the allocated car spot at the work site and is driven home by the same employee on that day

In this situation, the on-call employee drives home the same vehicle that they had taken home the previous night. In such a situation a particular employee can be identified in respect of the parking of the vehicle. However, the provision of the parking facilities must be provided in 'respect of the employment of the employee'. Therefore, we need to establish if 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 under the terms of the employer's policy has done so for official purposes. Employees are generally rostered on call for 7 days at a time, a period of relatively short duration. The employees do not have an ongoing entitlement to the use of the car.

Where employees return a car after taking a car home as required by their duties of employment, they park their cars in the parking facility because that is where the cars are kept when not being used to conduct the employer's business. Taking this into account along with the employer's policy 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 any particular day, there will be no car parking benefit.