Edited version of your written advice

Authorisation Number: 1051383793401

Date of advice: 8 June 2018

Ruling

Subject: Fringe Benefits Tax

Issue 1 – Exempt Fringe Benefit

Question 1

If ABC Pty Ltd provides a defensive driving safety program to all employees, no matter their employment duties or where they live, is it an exempt fringe benefit under section 58M of the Fringe Benefits Assessment Act 1986 (FBTAA)?

Answer

No. See question 2 for exceptions.

Question 2

If ABC Pty Ltd provides a defensive driving safety program only to employees who are required to travel as part of their employment duties, whether fleet vehicles or own private vehicle for work related travel, is it an exempt fringe benefit under section 58M of the FBTAA?

Answer

Yes

Question 3

If ABC Pty Ltd provides a defensive driving safety program to employees who live in rural and remote areas where private travel is over large distances and or on unsealed roads, is it an exempt fringe benefit under section 58M of the FBTAA?

Answer

No

Issue 2 - Otherwise Deductible Rule

Question 1

If ABC Pty Ltd provides a defensive driving safety program to all employees, no matter their employment duties or where they live, does the ‘otherwise deductible rule’ in section 24 of FBTAA 1986, apply to reduce the taxable value?

Answer

No.

Question 2

If ABC Pty Ltd provides a defensive driving safety program only to employees who are required to travel as part of their employment duties, whether fleet vehicles or own private vehicle for work related travel, does the ‘otherwise deductible rule’ in section 24 of FBTAA 1986, apply to reduce the taxable value?

Answer

Yes.

Question 3

If ABC Pty Ltd provides a defensive driving safety program to employees who live in rural and remote areas where private travel is over large distances and or on unsealed roads, does the ‘otherwise deductible rule’ in section 24 of FBTAA 1986, apply to reduce the taxable value?

Answer

No.

This ruling applies for the following periods:

Year ended 31 March 2019

Year ended 31 March 2020

Year ended 31 March 2021

Relevant facts and circumstances

ABC Pty Ltd (ABC) employees who are required to drive a vehicle for work purposes have a duty of care under industrial law (Work Health and Safety (WHS) Act 2011) to ensure so far as reasonably practicable the health and safety of workers and others in the workplace.

ABC employees who are required to drive a vehicle for work purposes are required to adhere to the following policies:

● ABC’s Policy on Safe Driving; and

● Fleet Road Safety Manual Policy

ABC obligations include providing employees with information on safe driving and the company currently offers an “Organisational Driver Safety Workshop”.

ABC is proposing to provide a safety defensive driving course to all employees in order to improve employee driving skills and awareness.

Various types of defensive driving courses are available including:

a) Seminars and workshops, which are theory based;

b) Practical driving courses where attendees theoretical lessons are reinforced with practical exercises on a purpose-built training circuit;

c) A combination of a) and b); and

d) Webinars and online learning, either pre-recorded or live interactive.

Driving courses cater for different vehicle types and can be individual or group sessions.

Relevant legislative provisions

section 24 of the Fringe Benefits Tax Assessment Act 1986

section 58M of the Fringe Benefits Tax Assessment Act 1986

subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986

section 8(1) of the Income Tax Assessment Act 1997

Reasons for decision

These reasons for decision accompany the Notice of private ruling for ABC Pty Ltd.

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Issue 1 – Exempt Fringe Benefit

The FBTAA specifies that certain benefits will be exempt benefits. Paragraph 58M(1)(a) of the FBTAA provides that an expense payment benefit is an exempt benefit where the recipients expenditure is in respect of ‘work-related counselling’ of an employee or their associate.

‘Work related counselling’, as is relevant to the circumstances, is defined in subsection 136(1) of the FBTAA to mean:

(a) … counselling attended by the employee; …

where all of the following conditions are satisfied:

(c) the attendance of:

(i) … the employee; …

at the counselling gives effect to an objective, purpose, plan or policy devised, adopted or required to be followed, by the employer to:

(iii) improve or maintain the quality of the performance of employees ' duties;

(d) the counselling relates to any of the following matters:

(i) safety;

(ii) health;

(iii) fitness;

(iv) stress management;

(v) personal relationships;

(vi) retirement problems;

(vii) drug or alcohol abuse;

(viii) rehabilitation or prevention of work-related trauma or of other disease or injury;

(ix) first aid;

(x) any similar matter;

(e) there is no benefit that:

(i) is provided in respect of the employment of the employee;

(ii) consists of the provision of, or relates to, the counselling; and

(iii) is provided wholly or principally as a reward for services rendered or to be rendered by the employee.

A training course or activity is ‘counselling’ as defined in subsection 136(1) of the FBTAA, which includes the giving of advice or information in a seminar. ‘Seminar’, while not defined in the FBTAA, takes its ordinary meaning which the Macquarie Dictionary Online edition defines as:

1. A small group of students, as in a university, engaged in advanced study and original research under a professor or the like;

2. The gathering place of such a group.

3. A course or subject of study for the advanced graduate students;

4. A meeting of students, usually at an advanced level, for discussion of and instruction in a specified topic, usually chaired by a teacher;

5. A meeting organised to discuss a specified topic: a public seminar on uranium mining.

Question 1

Summary

If ABC Pty Ltd provides a defensive driving safety program to all employees, no matter their employment duties or where they live, it is not an exempt fringe benefit under section 58M of the Fringe Benefits Assessment Act 1986 (FBTAA).

Application to your circumstances

Paragraph 136(1)(c) of the FBTAA requires that the work related counselling is to ‘improve or maintain the quality of the performance of employees’ duties’. If the employees duties do not require them to drive, the defensive driving course will not improve or maintain the performance of the employees duties and hence is not an exempt benefit under Paragraph 58M(1)(a) of the FBTAA. If the training provided by ABC is made mandatory, it will still not meet the requirements of an exempt fringe benefit unless the employee’s duties include driving.

Question 2

Summary

If ABC Pty Ltd provides a defensive driving safety program only to employees who are required to travel as part of their employment duties, whether fleet vehicles or own private vehicle for work related travel, it is an exempt fringe benefit under section 58M of the FBTAA.

Application to your circumstances

The defensive driving safety program described in the facts above meets the definition of ‘work related counselling’ in subsection 136(1) of the FBTAA. If the ABC employee is required to drive a car as part of their duties, as stated therein, then the defensive driving course will ‘improve or maintain the quality of the performance of employees’ duties’. The program would be an exempt expense payment benefit under paragraph 58M(1)(a) of the FBTAA.

Question 3

Summary

If ABC Pty Ltd provides a defensive driving safety program to employees who live in rural and remote areas where private travel is over large distances and or on unsealed roads, it is not an exempt fringe benefit under section 58M of the FBTAA.

Application to your circumstances

Paragraph 136(1)(c) of the FBTAA requires that the work related counselling is to ‘improve or maintain the quality of the performance of employees’ duties’. If the employees duties do not require them to drive, the defensive driving course will not improve or maintain the performance of the employees duties and hence is not an exempt benefit under Paragraph 58M(1)(a) of the FBTAA. If the training provided by ABC is made mandatory, it will still not meet the requirements of an exempt fringe benefit unless the employee’s duties include driving.

Issue 2 - Otherwise Deductible Rule

Reductions in taxable value of expense payment fringe benefits are addressed by section 24 of FBTAA 1986 also known as the ‘otherwise deductible’ rule.

The taxable value of an expense payment fringe benefit may be reduced in accordance with the ‘otherwise deductible’ rule where the recipient of the benefit is an employee. Broadly, this means that the taxable value may be reduced by the amount the employee would have been entitled to claim as an income tax deduction if the employer had not reimbursed them. Under the ‘otherwise deductible’ rule, if an employer reimburses the employee for all or part of the expense. The taxable value of the expense payment fringe benefit would be nil.

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

The courts have considered the meaning of the term 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; [1949] HCA 15; (1949) 56 ALR 785; (1949) 8 ATD 431 the High Court stated that:

'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing the assessable income" mean in the course of gaining or producing such income.'

Taxation Ruling TR 98/9 discusses circumstances in which self-education expenses are allowable as a deduction. If a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction.

Paragraph 42 states that if a course of study is too general in terms of the taxpayer's current income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist.

Paragraph 14 of TR 98/9 states that if the study of a subject of self-education objectively leads to, or is likely to lead to, an increase in a taxpayer's income from his or her current income-earning activities in the future, the self-education expenses are allowable as a deduction.

Question 1

Summary

If ABC Pty Ltd provides a defensive driving safety program to all employees, no matter their employment duties or where they live, the ‘otherwise deductible rule’ in section 24 of FBTAA 1986, does not apply to reduce the taxable value.

Application to your circumstances

Where the ABC employee is only driving for personal purposes, such as home to work, or is not required to drive a car as a condition of their employment the defensive driving course would not be an allowable deduction. The course of study, defensive driving, is too general in terms of the employee's current income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist.

This situation does not meet the requirements of the ‘otherwise deductible’ rule as the expense would not be an allowable deduction to the employee. Thus, if the ABC reimburses the cost of the defensive driving course, there would be no reduction in the taxable value of the expense fringe benefit.

Where the ABC provides a defensive driving safety program to employees who are required to travel as part of their employment duties, the ‘otherwise deductible’ rule applies, see question 2 for further explanation.

Question 2

Summary

If ABC Pty Ltd provides a defensive driving safety program only to employees who are required to travel as part of their employment duties, whether fleet vehicles or own private vehicle for work related travel, the ‘otherwise deductible rule’ in section 24 of FBTAA 1986, applies to reduce the taxable value.

Application to your circumstances

If the ABC employee is required to drive a car as part of their duties, as stated therein, then the defensive driving course would be an allowable deduction. In this instance, the current income-earning activities of the ABC employee are based on the exercise of the skill of safe driving, and the subject of self-education enables the employee to maintain or improve that skill.

Under the ‘otherwise deductible’ rule, if the ABC reimburses the employee for all or part of the defensive driving course expense, the taxable value of the expense payment fringe benefit would be nil.

Question 3

Summary

If ABC Pty Ltd provides a defensive driving safety program to employees who live in rural and remote areas where private travel is over large distances and or on unsealed roads, the ‘otherwise deductible rule’ in section 24 of FBTAA 1986, does not apply to reduce the taxable value.

Application to your circumstances

Where the ABC employee is only driving for personal purposes or is not required to drive a car as a condition of their employment the defensive driving course would not be an allowable deduction. The course of study, defensive driving, is too general in terms of the employee's current income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist.

This situation does not meet the requirements of the ‘otherwise deductible’ rule as the expense would not be an allowable deduction to the employee. Thus, if the ABC reimburses the cost of the defensive driving course, there would be no reduction in the taxable value of the expense fringe benefit.