Edited version of your written advice

Authorisation Number: 1013004251906

Date of advice: 24 May 2016

Ruling

Subject: Fringe Benefits Tax: benefits provided to volunteers

Question 1

Will a fringe benefit arise from the provision of a car to a Controller to travel between their home and the Branch if the Controller is not separately paid and is not entitled to apply the car to any other private use?

Answer:

No.

Question 2

Will a fringe benefit arise from the provision of a car to an Controller to travel between their home and the Branch if the Controller is not separately paid, but is entitled to use the car for certain private journeys such as travelling to the shops?

Answer:

No.

Question 3

Will a fringe benefit arise from the provision of a car to a Controller to travel between their home and the Branch if the Controller receives a minimal annual payment, but is not entitled to apply the car to any other private use?

Answer:

No.

Question 4

Will fringe benefit arise from the provision of a car to a Controller to travel between their home and the Branch if the Controller receives a minimal annual payment and is entitled to use the car for certain private journeys such as travelling to the shops?

Answer:

No.

Question 5

Are you required to issue a payment summary in relation to the minimal annual payment made to the Individuals?

Answer:

No.

This ruling applies for the following periods:

1 April 2016 to 31 March 2019

The scheme commences on:

1 April 2016

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an association that provides assistance to people in need.

You are comprised of multiple branches of volunteer members.

This ruling concerns the provision of the use of a car to an Individual who is a branch Controller.

The Controllers are on call 24 hours per day, 7 days per week.

In the event of a call out, volunteer members will generally travel from home to their Branch to pick up a car prior to responding.

To assist with operational expediency, some Controllers are provided with a car which they can drive between their home and their Branch, to attend training and other active service requirements. Garaging the car at home enables the Controller to proceed directly to provide assistance, rather than having to drive to the Branch to pick up the car.

Generally, these cars cannot be used for other private journeys. However, some Controllers are able to use the cars for certain private purposes (for example, trips to the shops, or dropping children off at school while travelling between their home and their Branch). However, any such private journeys can only occur within the relevant local area.

In addition to the use of a car, a Controller may receive a minimal annual payment. This amount is based on the findings of a Working Group which was formed to investigate the out of pocket expenses incurred by the Controllers.

Controllers do not receive employment rights and entitlements such as paid leave or superannuation. However, they are covered by an appropriate level of volunteer insurance.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Income Tax Assessment Act 1997 Section 995-1

Taxation Administration Act 1953 Division 12 of Schedule 1

Taxation Administration Act 1953 Section 16-155 of Schedule 1

Reasons for decision

Will a fringe benefit arise from the provision of a car to a Controller?

In general terms a fringe benefit will arise when:

• a benefit is provided to an employee;

• by the employer, an associate or a third party under an arrangement;

• that is in respect of the employment of the employee; but

• does not come within paragraphs (f) to (s) of the fringe benefit definition in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

In the situation being considered the Controllers are able to garage a car which you hold at their residence. In addition, they may also use the car for a private purpose. Under subsection 7(1) of both the application and availability of a car for a private use are benefits. Therefore, the provision of a car to a Controller will be a benefit. The issue to be considered is whether a Controller is an employee?

Is a Controller an employee?

An 'employee' is defined at subsection 136(1) of the FBTAA to mean a current, future or former employee.

A 'current employee' is defined at subsection 136(1) of the FBTAA to mean 'a person who receives, or is entitled to receive, salary or wages'.

'Salary or wages' is defined at subsection 136(1) of the FBTAA to mean a payment from which an amount must be withheld under one of the listed provisions in Schedule 1 to the Taxation Administration Act 1953 (TAA).

The Controllers can be classified into the following four categories:

i. Controllers who only receive the use of a car to drive between home and the Branch;

ii. Controllers who only receive the use of a car to be driven between home and the Branch and can be used for certain other private journeys;

iii. Controllers who receive a minimal annual payment and the use of a car to drive between home and the Branch;

iv. Controllers who receive a minimal annual payment and the use of a car to be driven between home and the Branch and can be used for certain other private journeys

Will the Controllers who only receive the use of a car be an employee?

As the Controllers in the first two categories only receive the use of a car, they do not receive and are not entitled to receive 'salary or wages'. Therefore, they do not come within the definition of 'current employee'.

However, section 137 of the FBTAA extends the meaning of salary or wages to create an employment relationship for the purposes of the FBTAA where a benefit is provided that would have been classified as salary or wages if it had been a cash payment. That is, had the benefit been provided by way of a cash payment, the payment would be a payment from which an amount must be withheld under one of the provisions of the TAA listed in the definition of salary or wages?

Subsection 137(1) states:

For the purpose only of ascertaining whether a person is an employee or an employer within the meaning of this Act, where:

(a) a benefit is provided by a person (in this subsection referred to as the first person) to, or to an associate of, another person (in this subsection referred to as the second person);

(b) but for this subsection, the benefit would not be regarded as having been provided in respect of the employment of the second person; and

(c) either of the following conditions is satisfied:

(i) if the benefit were provided by the first person by way of a cash payment to the second person, the payment would constitute salary or wages paid by the first person to the second person;

(ii) all of the following conditions are satisfied:

(A) subparagraph (i) does not apply in relation to the benefit;

(B) the first person is an associate of a third person or the benefit is provided under an arrangement between the first person and a third person;

(C) if the benefit were provided by the third person by way of a cash payment to the second person, the payment would constitute salary or wages paid by the third person to the second person;

a definition in subsection 136(1) applies as if the benefit were salary or wages paid to the second person by:

(d) in a case to which subparagraph (c)(i) applies - the first person; or

(e) in a case to which subparagraph (c)(ii) applies - the third person.

In considering whether the relevant withholding provisions would apply if the use of the car had been provided as a cash payment it is necessary to consider whether the Controllers are volunteers or employees? Guidance for considering this question is provided on the ATO's website, as follows:

Volunteers can be paid in cash, given non-cash benefits or given a combination of both cash and non-cash benefits. These payments are given various descriptions, including honorariums, reimbursements and allowances. Sometimes they are given no name at all.

The name or description of the payment does not determine its treatment for tax purposes - it depends on the nature of the payment and the volunteer's circumstances.

Generally, receipts that are earned, expected, relied upon and have an element of periodicity, recurrence or regularity are treated as assessable income of a volunteer.

If a person's activities are a pastime or hobby - rather than income producing - money and other benefits received from those activities are not assessable income.

A payment that is not assessable to a volunteer will have many of the following characteristics:

• The payment is to meet incurred or anticipated expenses.

• The payment has no connection to the volunteer's income-producing activities or services.

• The payment is not received as remuneration or as a consequence of employment.

• The payment is not relied upon or expected by the volunteer for day-to-day living.

• The payment is not legally required or expected.

• There is no obligation on the part of your organisation to make the payment.

• The payment is a token amount compared to the services provided or expenses incurred by the volunteer. Whether the payment is token depends on the full facts surrounding the payment and volunteer's circumstances.

Guidance in distinguishing volunteers from employees is also provided:

Employee - definition

Generally, an individual is considered to be an employee if they:

• are paid for time worked

• receive paid leave - for example, sick, annual, recreation or long service leave

• are not responsible for providing the materials or equipment needed to do their job

• must perform the duties of their position

• agree to provide their personal services

• have work hours set by an agreement or award

• are recognised as part and parcel of your organisation's business

• do not take commercial risks and cannot make a profit or loss from the work performed.

…

Volunteer - definition

There is no legal definition of 'volunteer' for tax purposes. A dictionary definition of a volunteer is someone who enters into any service of their own free will, or who offers to perform a service or undertaking.

A genuine volunteer does not work under a contractual obligation for remuneration and would not be an employee or independent contractor.

Further guidance is provided in Miscellaneous Taxation Ruling MT 2032 Fringe benefits tax: sporting clubs (MT 2032). In discussing whether a benefit provided to a player will be a fringe benefit paragraph 3 of MT 2032 states:

a taxable fringe benefit will only arise in relation to benefits given to players if the players are "employees" of the club.

In discussing when players will be considered to be employees of the club paragraph 4 notes there is a range of situations. The situations at both ends of the range are discussed in paragraphs 4 and 6 of MT 2032. Paragraph 4 of MT 2032 states:

At one end there are the professional clubs of the major football competitions in each State. The players in these typically are under contract, are well remunerated, and there is a clear employer-employee relationship for FBT purposes. If such a club provides an overseas trip or similar reward to its players there is clearly a taxable fringe benefit

By contrast, paragraph 6 of MT 2032 states:

It is equally clear that at the other end of the spectrum an employer-employee relationship does not exist in the case of minor competitions where the players do not receive match payments from the club.

In providing a guideline as to the approach to be adopted where the situation is between these two situations paragraph 8 of MT 2032 states:

Where the level of payments to players is such as to do little more than offset the training and travelling expenses of the players this tends towards a conclusion that the players are not employees for FBT purposes.

In applying these guidelines, a Controller who only receives the use of a car to travel between home and the Branch will clearly not be regarded as being an employee as the use of the car is merely offsetting travel expenses that would otherwise be incurred in carrying out the duties as a Controller.

The inclusion of certain private journeys, such as journeys to the shops or taking children to school on the way between home and the Branch will not alter this conclusion as:

• the Controller is not receiving any other remuneration;

• the value of the private journeys will not be sufficient to cause the use of the car to be considered to be a form of remuneration;

• the Controller does not receive employment rights and entitlements such as paid leave or superannuation;

• the use of the car is not being provided in connection with the income producing activities of the Controller;

• there is no expectation or entitlement for the provision of a car;

• the provision of the car is discretionary and may be revoked at any time; and

• having regard to all of the circumstances, the value of the benefit is a token amount that is not commensurate with the service provided by the Controller.

Will the conclusion alter if the Controller receives a minimal annual payment?

Where the Controller receives a minimal annual payment, the Controller will be an employee if a withholding obligation exists in relation to the payment under one of the provisions of the TAA listed in the definition of salary or wages in section 136(1) of the FBTAA.

For the purposes of this Ruling, the relevant provision is section 12-35 of Schedule 1 to the TAA as the payment will not be:

• a payment to a company director covered by section 12-40 of Schedule 1 to the TAA;

• a payment to an office holder covered by section 12-45 of Schedule 1 to the TAA;

• a Commonwealth education or training payment covered by section 12-115 of Schedule 1 to the TAA; or

• a compensation, sickness or accident payment covered by section 12-120 of Schedule 1 to the TAA.

Section 12-35 of Schedule 1 to the TAA states:

An entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity)

The factors that are considered in determining whether the payments are made to a Controller as an employee are the same as those discussed above in relation to the application of section 137 of the FBTAA. In considering those factors in relation to section 137, we concluded that the provision of the use of a car to undertake certain private journeys was not sufficient to make the Controller an employee.

In considering whether the conclusion changes if the Controller also receives a minimal annual payment it is noted that this payment may result in the amount received plus the value associated with the private use of the car exceeding the Controller's anticipated expenses. While this factor may indicate the person is an employee, rather than a volunteer, this factor by itself is not sufficient to conclude that the Controller is an employee. In this regard it is noted:

• the Controller does not receive employment rights and entitlements such as paid leave or superannuation;

• there is no expectation or entitlement for the provision of a car and the payment;

• the provision of the car is discretionary and may be revoked at any time; and

• having regard to all of the circumstances, the value of the benefit (even where the payment is included) is a token amount that is not commensurate with the service provided by the Controller.

These factors support the Controllers being classified as volunteers, rather than employees.

Therefore, the payment will not be subject to the withholding provisions and it will not be necessary to issue a payment summary in relation to the payment.