Edited version of your written advice

Authorisation Number: 1051445673431

Date of advice: 26 October 2018

Ruling

Subject: Fringe benefits tax - car fringe benefits

Question 1

Are the employee’s duties itinerant in nature for the purposes of Division 2 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes.

Question 2

Is travel from the employee's home to the home of a client of the employer considered a business journey as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes.

This ruling applies for the following periods:

Year ended 31 March XXXX

Year ended 31 March XXXX

Year ended 31 March XXXX

The scheme commences on:

01 April XXXX

Relevant facts and circumstances

The employer provides a care assessment service to clients.

The duties of the employees of the employer include the following:

● travel to the client’s home and undertake a face to face assessment

● completion of client documentation and referrals to relevant services using a laptop computer provided by the employer

● travel to the employer’s office on a weekly basis to attend meetings, complete training, seek guidance on complex cases and collect client packs for the following week.

It is expected that an employee will undertake a number of assessments per day and complete the required documentation in the field where possible. On the day where the employee is required to travel to their employer’s office they will still undertake an in-home assessment for at least two clients and complete the required documentation.

Each client will only receive one in-home visit from an employee.

The employees travel directly to the home of their first client then continue on to their next client’s homes before returning to their home at the completion of their duties each day.

An employee is not required to perform any employment duties at their home. They may choose to log on to their issued laptop computer and do some work/finish up at home because it’s easier/convenient but it’s not a job requirement.

The employee can access their list of appointments via the service portal up to two weeks in advance. The allocation of clients is determined by acuity and geographical location as determined by the employer’s scheduler.

While the employee can view the information in the portal, client visits may change on the actual day of work if they are required to cover the unplanned leave of another employee.

Rather than an allowance, employees are provided with a vehicle by their employer to recognise the need for travel between their home and various work sites. The vehicle is garaged at the employee’s home.

The vehicles provided are designed to carry less than one tonne and fewer than nine passengers. They are passenger sedans.

Employees do not contribute to the running costs of the vehicle. The vehicle is not used to transport a family member or anyone else for any part of the journey from home to work or any other part of the return journey home.

Internal policy prohibits any private use of the car.

The Selection Criteria for the position held by the employee includes requiring them to hold a drivers licence and be willing to use it for work purposes; which can include driving long distances across their region.

The employer elected to use the operating cost method to calculate the taxable value of car fringe benefits.

Relevant legislative provisions

Fringe Benefits Assessment Act 1986 subsection 7(1)

Fringe Benefits Assessment Act 1986 subsection 8(2)

Fringe Benefits Assessment Act 1986 section 10

Fringe Benefits Assessment Act 1986 subsection 136(1)

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Question 1

Summary

The employee’s duties are itinerant in nature for the purposes of Division 2 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

Detailed reasoning

Car Fringe Benefits

General rules that apply in this case

Subsection 7(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides that a car fringe benefit will arise on a day where a car owned or leased by an employer is applied to a private use by an employee, or an associate of the employee, or is taken to be available for their private use.

Under subsection 7(2) of the FBTAA a car is taken to be available for private use where the car is garaged or kept at or near a place of residence of the employee or of an associate of the employee.

In this case, the employer provides an employee with a car. The car is garaged at the employee’s home and is therefore taken to be available for their private use.

Each car that the employer provides to employees is a ‘car’ as defined in section 995-1 of the Income Tax Assessment Act 1997 as it is a motor vehicle designed to carry a load of less than 1 tonne and fewer than nine passengers. The cars are sedans designed for the principal purpose of carrying passengers. Therefore, they are not exempt vehicles under subsection 8(2) of the FBTAA.

Accordingly, a car fringe benefit arises on the days that the car is garaged at the employee’s place of residence.

Valuing the car fringe benefit

The taxable value of a car fringe benefit reflects an employee’s private use of the car as only the private use of the car is subject to fringe benefits tax (FBT).

In this case, the employer has elected to use the operating cost method in section 10 of the FBTAA to calculate the aggregate taxable value of car fringe benefits in relation to the cars provided to employees.

The number of kilometres travelled by the car in the course of a ‘business journey’ is needed to calculate the taxable value in accordance with the formula at subsection 10(2) of the FBTAA. The effect of the formula is to reduce the operating costs of the car by the business percentage.

Subsection 136(1) of the FBTAA defines ‘business journey' as any use of the car other than private use by an employee or an associate of the employee.

Itinerant work

Travel between places of employment will generally be considered business travel whereas travel from home to work is normally private travel. However, where the nature of the employee's employment is itinerant, travel from home to work may be considered business travel.

Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses (TR 95/34) provides guidance as to when an employee's work is itinerant. Paragraph 7 states:

There have been a number of cases considered by the Courts, Boards of Review and Administrative Appeals Tribunal where deductions for transport expenses were allowed on the basis of the taxpayers' 'shifting places of work'. 'Shifting places of work' is another term for itinerancy. In these cases the obligation to incur the transport expenses arose from the nature of the taxpayers' work, such that they were considered to be travelling in the performance of their duties from the moment of leaving home. The following characteristics have emerged from these cases as being indicators of itinerancy:

a) travel is a fundamental part of the employee's work

b) the existence of a 'web' of work places in the employee's regular employment, that is, the employee has no fixed place of work

c) the employee continually travels from one work site to another. An employee must regularly work at more than one work site before returning to his or her usual place of residence

d) other factors that may indicate itinerancy (to a lesser degree) include:

i. the employee has a degree of uncertainty of location in his or her employment (that is, no long term plan and no regular pattern exists)

ii. the employee's home constitutes a base of operations

iii. the employee has to carry bulky equipment from home to different work sites

iv. the employer provides an allowance in recognition of the employee's need to travel continually between different work sites.

In applying TR 95/34 to the employee’s employment, we had regard to these characteristics as follows:

● travel is a fundamental part of the employee’s work. Their job is to undertake a face-to-face care assessment in the client’s home. Therefore travel is an essential feature of their duties

● the very nature of the employee’s work means that they have shifting places of work; that is, they have no fixed place of work. They undertake a number of client assessments each work day before returning home. They only attend a client’s home once. We consider a ‘web’ of workplaces in the employee’s regular employment exists

● employee travel to their employer’s office only once a week to attend meetings, complete training, seek guidance on complex cases and prepare for the next week. On these days they still undertake at least two in-home client assessments before driving the car back to their home

● in our view the degree of uncertainty of location for an employee is not a strong indicator of itinerancy because:

● they can access their list of assessments via the service portal up to two weeks in advance

● the job requires them to provide a certain number of assessments in client’s homes within their region each week and they know they may need to drive long distances across the region to do so

● clients are allocated by a scheduler according to geographical location. We expect employees would generally be familiar with the boundary of their region. Even where client visits may change on the day if an employee is required to cover unplanned leave of another employee, we don’t think this significantly raises the degree of uncertainty of location in their employment.

● employees don’t start work in their home and travel to a worksite to continue or complete that work. Their job is to travel to client’s homes and assess the clients. Employees complete client documentation and referrals to other relevant services in the field using a laptop computer provided by their employer. They may choose to log on and do some work/finish up at home but it’s not a job requirement. In our view the employee’s home is not a base of operations.

Conclusion

Based on the characteristics listed at a), b) and c) in paragraph 7 of TR 95/34, we accept that the duties of the employee are itinerant in nature.

Our conclusion was not affected by our assessment of ‘other factors’ listed at d) regarding the degree uncertainty of location in the job and whether the employee’s home constitutes a base of operations.

Question 2

Summary

The travel from the employee's home to the home of a client of the employer is considered a business journey as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

Detailed reasoning

Paragraph 25 of Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel (MT 2027) states that travel will be indicated as business travel where the nature of the employee's employment is such that:

a) it is inherently itinerant

b) travel is a fundamental part of the employee's work

c) it is impractical for the employee to perform the duties without the use of a car

d) the terms of employment require the employee to perform duties at more than one place of employment

e) the nature of the job itself makes travel in the performance of duties essential; and

f) it can be said of the employee that he or she is travelling in the performance of the employment duties from the time of leaving home.

We applied the above characteristics to characteristics of the employee’s employment as follows:

● we determined at Question 1 that the travel is inherently itinerant

● their employment requires them to travel daily to client’s homes to undertake an assessment which makes travel a fundamental part of their work

● they must hold a current drivers licence and be willing to use it for work purposes which can include driving long distances across the region. Without the use of the car performance of the work duties would not be possible

● the terms of employment require the employees to perform duties at more than one place of employment each day – they must undertake a minimum number of in-home assessments each week. The provision of a car by the employer will allow them to effectively perform their duties

● they only travel to their employer’s office once a week to attend meetings, complete training, seek guidance on complex cases and prepare for the next week. On these days they still undertake at least two in-home client assessments before driving the car back to their home

● we consider that an employee is travelling in the performance of their employment duties from the time they leave their home because:

● they have no fixed place of employment to travel to (and from which they would travel to the first client’s home). Instead, they travel directly from their home to their first place of work, being the first client’s home. The clients are new clients each day. They continually travel throughout the day completing work in the field before returning home

● the car is not used for private use for any part of the journey from home to work (or any other part of the return journey home). Internal policy prohibits any private use of the car

Conclusion

The nature of an employee’s employment has all the characteristics of business travel listed in MT 2027.

We therefore consider the travel from the employee’s home to a client's home is a business journey for fringe benefits tax (FBT) purposes.