Edited version of your written advice

Authorisation Number: 1051214077285

Date of Advice: 28 April 2017

Ruling

Subject: Car benefits provided to officers in overseas locations

Question 1

Is the travel to and from home in a vehicle provided by X to overseas employees (the Employees), under scenario 1, a business journey for the purposes of section 10 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

Question 2

Is the travel to and from home in a vehicle provided by X to the Employees, under scenario 2, a business journey for the purposes of section 10 of the FBTAA?

Answer

Yes

Question 3

Is the travel to and from home in a vehicle provided by the X to the Employees, under scenario 3, a business journey for the purposes of section 10 of the FBTAA?

Answer

Yes

Issue 2 - Fringe benefits provided to address security concerns

Question 1

Where the share car exclusion is not available, is X able to treat any fringe benefits provided in these circumstances as an excluded fringe benefit under paragraph 5E(3)(l) of the FBTAA?

Answer

Not necessary.

This ruling applies for the following periods:

Fringe benefits tax year ending 31 March 2017

Fringe benefits tax year ending 31 March 2018

Fringe benefits tax year ending 31 March 2019

Fringe benefits tax year ending 31 March 2020

Fringe benefits tax year ending 31 March 2021

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.

X is an employer.

X's employees (the Employees) are posted to international locations to work. These locations include (but are not limited to) the Philippines, Indonesia, Pakistan, India, South Africa, Middle East and South America.

The Employees are subject to high safety concerns as specified in a threat assessment conducted by a relevant government body.

The facts and circumstances for each location are very similar, so that facts below present the general position for all the Employees.

The Employees are subject to high safety concerns for various reasons.

Threat assessments have been completed.

The Employees' roles

1. The Employees are on continuous duty, 24 hours a day, which means they are expected to be available to work at any time of the day or night, seven days a week, and are remunerated according to this expectation.

2. The Employees' usual work places, during office opening hours, are Y. However, the Employees are also required to work at other locations including their homes.

3. The Employees' residences are set up with all necessary equipment as a back-up work place.

4. The roles and responsibilities of the officers are the same during office hours and outside office hours.

5. The Employees do not choose when to work from home; their roles dictate when and where they are required to work, including working from their residences.

6. Most Employees carry out employment duties in their residences every night; and many nights and weekends this would be for multiple hours. Most Employees do at least a few hours of work on a weekend, up to a whole weekend of work.

Provision of a car and driver

Employees are provided with use of a car and a driver to allow them to travel at the international location, including to and from their residences. Other than the travel in question, travel between residences and work places, the cars are rarely used for private travel.

The cars are standard passenger vehicles, designed to carry a load of less than 1 tonne and fewer than 9 passengers.

The Employees are provided with a driver to:

● enable the Employee to continue working during the car journey, and

● eliminate the risk of walking to and from a car park as they are picked up and dropped off at the door of the office (the usual daily work place).

Most car journeys take significantly longer than in Australia for similar distances due to the traffic conditions.

The Employees use laptops, iPads and phones to engage in usual duties whenever travelling. It is an exception if an Employee does not continue working in the cars.

X has encountered the following scenarios. In each scenario the Employee is provided with a vehicle and driver to allow them to travel to and from work and respond to work situations.

Scenario 1

The employee commences work via mobile devices while travelling to the office (usual daily work place). The employee travels directly from their home to the office. At the end of the day, the employee continues to work via mobile devices, while travelling directly from the office to home.

Scenario 2

A vehicle is used to drive home a member, who is on duty. The employee is called out and attends their usual place of employment. Whilst travelling to the office the employee will be responding and giving advice via mobile devices. The employee will then meet with other employees and coordinate a response to the incident. These employees may then use the vehicle to attend an alternative worksite to respond to the incident.

Scenario 3

An employee travels from home to an alternative working place.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 subsection 5E(3)

Fringe Benefits Tax Assessment Act 1986 paragraph 5E(3)(l)

Fringe Benefits Tax Assessment Act 1986 subsection 5E(6)

Fringe Benefits Tax Assessment Act 1986 section 10

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

Issue 1

Question 1

Summary

Yes. Under Scenario 1, where the Employees conduct substantial work in the cars, the travel is considered to be 'travel on duty', and amounts to a business journey for the purposes of section 10 of the FBTAA.

Detailed reasoning

Under section 7 of the FBTAA a car benefit is provided at any time of a day, in respect of the employment of an employee, a car held by a person (the 'provider') is:

● applied to a private use by the employee or an associate of the employee; or

● taken to be available for the private use of the employee or an associate of the employee as set out in sections 7(2) or (3).

Where a car is not used for private use by the employee, no car benefit arises.

Section 10 of the FBTAA sets out a method for calculating the taxable value of a car fringe benefit using operating costs as the basis for the calculation. Using this method a reduction to operating costs may be available in relation to business journeys travelled.

The term 'business journey' is defined in subsection 136(1) of the FBTAA, in relation to a car fringe benefit in relation to an employer in relation to a car, as:

'… 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' is defined in the same subsection, in relation to a motor vehicle in relation to an employee or an employee's associate, 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'.

Travel between a person's home and their usual place of employment or business is ordinarily private travel, and is not undertaken in the course of earning their assessable income (Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel (MT 2027), paragraph 14).

For FBT purposes, the 'private use' question can be approached by considering whether the employee could claim an income tax deduction if they incurred the expenses themselves (MT 2027, paragraph 12).

MT 2027, paragraph 23, summarises the major elements of the income tax treatment for travel between two places of employment or business as follows:

○ Travel directly between two places of employment … will generally be accepted as business travel where the person does not live at either of the places and the travel has been undertaken for the purpose of enabling the person to engage in income-producing activities.

○ The position is less clear where the person lives at one of the places said to be a place of employment or business - it is then necessary to look closely at the requirement that the income-producing activity carried on at the person's home is such as to constitute the home as a place of employment or business.

○ For this purpose it is not sufficient that a room in the home is used in association with an employment or business conducted elsewhere.

○ It is rare for a home to represent a place of employment.

○ The more usual situation is for a self-employed person to use his home or part of it as a base of business operations (for example, painters, plumbers, electricians) ...'

A number of Taxation Rulings discuss FC of T v Collings 76 ATC 4254; (1976) 6 ATR 476 (Collings' case) in relation to when a home may constitute a base of operations.

In Collings' case, the taxpayer was a highly trained computer consultant, on call 24 hours a day, and was involved in a major conversion in computer facilities her employer provided to customers. She was provided with a portable terminal that was connected to the computer through the telephone line. The taxpayer commonly received telephone calls at home and gave advice to workers at the office any time a problem arose. If she was unable to resolve the problem over the phone or through the portable computer she would return to the office to get the computer working.

Taxation Ruling IT 112 Deductibility of travelling expenses between residence and place of employment or business (IT 112) discusses the Court decision as follows:

12. 'Rath J. stated that the abnormal journeys to and from home were made necessary by the very nature of the employment of the taxpayer's duties… She was not in a similar position to those employees who have to be on stand-by duty at their homes and are required to obey a summons to cope with some emergency. She was engaged on a special assignment and was continuously on duty wherever she was. The taxpayer was not choosing to do part of the work of her job in two separate places; unless she were to spend all her time in the office with the computer, she must have more than one place of work. The two places of work are a necessary obligation arising from the nature of her special duties. When called at her home, the taxpayer immediately had the responsibility of correcting the malfunction in the computer. She might there and then diagnose the trouble and provide the remedy or she might decide that she would have to make the journey to the office, and if she took this course she was during the journey on duty in regard to the particular problem that had arisen.

Paragraph 59 of Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses explains that, in this case, the court distinguished between:

● normal daily journeys to the office, and

● journeys, after ordinary office hours, where the taxpayer was required to return to work.

The latter journeys displayed the following characteristics (paragraph 207 of Taxation Ruling TR 95/13 Income tax: employee police officers - allowance, reimbursements and work-related deductions):

(a) The performance of the duties of the job commenced before leaving home. The obligation was more than just being on stand-by duty at home.

(b) The taxpayer did not choose to do part of the work in two separate places. The two places of work were a necessary obligation arising from the nature of the special duties of the job;

(c) The home takes on the characteristics of being a base of operations on occasions, since work had to be commenced there;

(d) The taxpayer commenced the task at home and the responsibility for completing it was not discharged until the taxpayer attends at the work site.

Scenario 1 discusses journeys from the Employee's residence to the office, and from the office to the Employee's residence. The scenario is not an emergency call-out situation, and represents the normal daily journey between the Employee's residence and their usual daily workplace.

As the Employees are not choosing to do part of their work in two separate places, and are on continuous duty, 24-hours a day, these circumstances are akin to Collings' case.

However, unlike Collings' case, due to the special nature of the Employees' employment, and the traffic conditions at the employment location, the Employees are required by X to carry out substantial employment tasks during the journeys to and from home. As stated in the facts, 'it is an exception when members don't work in the cars'.

Although Scenario 1 does not specify that employment tasks commence at home prior to the journey, or continue immediately on returning home, it is considered that where the Employees' carry out substantial employment duties in the cars throughout the journey, the normal daily journeys between home and the usual daily work place are travel 'on duty' rather than travel to the office where employment duties are commenced.

As the travel in Scenario 1 is considered to be 'travel on duty', the travel amounts to a business journey for the purposes of section 10 of the FBTAA.

Question 2

Summary

Yes. The travel in scenario 2 is consistent with paragraphs 17 and 18 of MT 2027, and is considered to be a 'business journey' for the purposes of section 10 of the FBTAA.

Detailed reasoning

MT 2027 clarifies that although travelling from home to work in response to a call while on stand-by would not ordinarily alter the private nature of the travel, the position will be different where it can be concluded, on an objective analysis of the nature of the employment duties, that the employee commenced duties at home on receiving the call prior to the travel (paragraph 17 and 18).

The performance of incidental tasks at home or en-route does not alter the character of the travel from private travel (MT 2027 paragraph 34).

Scenario 2 discusses journeys from the Employee's residence in response to an incident or emergency call-out. The journey may be to or from the office, or another location where the Employee is required to respond to the incident or emergency.

Under these circumstances, it is accepted that the Employee commences duties in response to the incident or emergency immediately upon receiving the call, and whilst waiting for the vehicle, at the Employee's residence. The Employee's responsibilities are not discharged until after the Employee has attended at the work location.

As such, the travel under scenario 2 is considered to be a 'business journey' for the purposes of section 10 of the FBTAA.

Question 3

Summary

Yes. Under Scenario 3, as substantial employment duties are undertaken at the alternative locations specified, the travel to these alternative work places is a business journey for the purposes of section 10 of the FBTAA.

Detailed reasoning

There are circumstances where an employee travels between home and an alternative work location in the ordinary course of their employment duties, for example to visit clients or customers (MT 2027 paragraph 28).

In these situations, for the period of the visit, the alternative location constitutes a place of employment as substantial employment duties are undertaken at that location. Further, they involve trips to a destination that, if made from the office or usual work place, the trip would clearly constitute business travel (MT 2027 paragraph 32).

The question to be determined is whether trips to alternative work locations, when made from home rather than from the office, should be similarly treated as business travel. Paragraph 34 of MT 2027, explains the ATO view:

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 such, an income tax deduction would be allowable for the travel:

● from home to the alternative work place then on to the normal work place, or directly home, and/or

● from the normal work place to an alternative work place, then either back to the normal work place or directly home (TR 95/13 paragraphs 220-224).

However, paragraph 34 of MT 2027 clarifies that travel will not amount to a business journey where the work undertaken at an alternative location involves merely incidental tasks (eg. travelling to a laboratory to collect test results en-route to the usual work place).

In Scenario 3 the Employee travels between home and alternative working places.

The Commissioner accepts that substantial employment duties are undertaken at these locations for the period the Employees visit, and the locations constitute alternative places of employment.

As such, the travel to the alternative work places, as described in Scenario 3, is a business journey for the purposes of section 10 of the FBTAA.