Edited version of private advice

Authorisation Number: 1051788328953

Date of advice: 9 December 2020

Ruling

Subject: Fringe benefits tax

Question

Is travelling between home and work considered business travel for the purposes of section 10 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) for Managers who are considered itinerant employees providing specialised services to clients in the community?

Answer

Yes

This ruling applies for the following period

1 April 20XX to 31 March 20XX

The scheme commences on:

The scheme has already commenced

Relevant facts and circumstances

The organisation is a not-for-profit entity that provides community services.

The organisation provides cars to their employees.

Some of these employees have the role of Managers and their work could be considered itinerant in nature.

Some of the Duties of the Managers include: -

Visiting 2-3 clients per day.

They prepare their work from home for the following day.

May travel between multiple local areas. They are generally on the move and their travel is deemed essential to their job.

Attend and accompany clients/carers to the relevant meetings.

They are not required to attend the office before visiting clients.

Car and Travel Journeys

Managers use a company vehicle to perform their duties.

The vehicle is garaged at the Managers home at the end of the day.

A typical day scenario requires them to perform duties such as pick up consumables, authorise invoices, check appointments on computerised diary system and travel to the client's home or other location as required.

Motor Vehicle Types

The employer currently provides to the Managers:

•         Toyota Corolla Station Wagons

•         Holden Astras

•         Ford Station Wagons.

Equipment carried in cars

The supplies and equipment are normally stored at the employer's premises.

The equipment is sometimes carried by the Managers when visiting clients or they are delivered directly from the supplier to the client's home.

The type of equipment that maybe carried in the employer's cars varies in size and weight.

On- Call Duty

One Manager is required to be "on-call' for all clients until 9pm during the working days. After hours meetings are required. Limited telephone "on-call" service is provided for some clients. It is the discretion of the employee whether to visit the client after hours if requested to do so.

Allowances

Managers do not receive any travel or motor vehicle allowances for the travel undertaken in their assigned cars.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 7

Fringe Benefits Tax Assessment Act 1986 Subsection 10

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision

Relevant law

Section 7 of the FBTAA sets out the circumstances in which the use of a car will be a taxable fringe benefit. The Act provides two alternative methods of valuing the benefit. It is common to both methods that private use of the car by employees (or their associates) be identified.

Under the operating cost method of valuation established by section 10 of the FBTAA, the value of the benefit is determined by apportioning the total operating cost (as specified in that section) according to the proportion that the private kilometres travelled by employees in the car bears to the total kilometres travelled in the car. For these purposes the number of private kilometres is determined by subtracting from the total kilometres travelled in the car the number of kilometres travelled on business journeys as evidenced by log-book entries.

The distinction between business and private use of a car in circumstances where the car is being driven to or from the employee's home will be considered in this ruling.

The term 'private use' is defined in subsection 136(1) of the FBTAA to mean, in relation to a motor vehicle, any use by the employee or associate 'that is not exclusively in the course of producing assessable income of the employee'.

Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel (MT 2027) explains the relationship between private use and business use for fringe benefits tax purposes. The guidelines are drawn from established income tax principles.

Paragraph 14 of MT 2027 explains the general rule:

As discussed in Taxation Ruling IT 112, the decision in Lunney and Hayley v FCT (1958) 100 CLR affirmed the position that travel between home and a person's regular place of employment or business is ordinarily private travel.

There are exceptions to the general rule which include:

(1) travel while on stand-by duty

(2) travel between places of employment/business

(3) employment duties of an itinerant nature

(4) business trip on way to or from work

(5) travel incorporating the transport of equipment and

(6) certain sportsmen and shearers.

Paragraph 25 of MT 2027 states:

It has long been acknowledged that travel from an employee's home may constitute business travel where the nature of the office or employment is inherently itinerant (see, for example, the comments of Lords Wilberforce and Simon in Taylor v Provan (1975) AC 194 at pages 1213 and 1219 respectively). More recently, this issue was addressed in Australia in FCT v Wiener, 78 ATC 4006; 8 ATR 335 (Wiener's case), from which the following guidelines for the application of the principle have been adopted (see Taxation Ruling IT 2122). These are that travel will be indicated as business travel where the nature of the office or 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.

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

Paragraph 7 of TR 95/34 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 workplaces 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...

Importantly, TR 95/34 considers that the above characteristics are:

•         not exhaustive

•         no single factor on its own is decisive

•         the individual's occupation or industry does not determine if they are engaged in itinerant work, it is the nature of the individual's duties that determines it, and

•         itinerant work may be permanent or temporary in an employee's duties.

•         The characteristics mentioned in MT 2027 and TR 95/34 are considered in your case as follows:

Travel a fundamental part of employee's work

The ATO publication Fringe benefits tax: a guide for employers in Chapter 7.5 considers employment duties of an itinerant nature and states:

Travel from an employee's home may be considered business travel where the nature of the office or employment is itinerant. Examples include commercial travellers and government inspectors whose homes are a base of operations, from which they travel to one of a number of locations throughout the day, over a continuing period.

Commonly, in these cases the employee works at the employer's office periodically (for example, once a week) to complete or file reports, pick up supplies or organise future trips. Travel between home and the office made in these limited circumstances is accepted as an ordinary incident of the business travel and, as such, is also treated as business travel.

On the basis that Managers usually do not travel to the same locations each day and are required to visit several locations during a day demonstrates the nature of the job requires travel. It is impractical for them to perform all of their duties without the use of a vehicle and therefore this requirement is satisfied.

Web of workplaces or employee has no fixed place of work

A web of workplaces exists where the employee performs duties at several work sites in a day.

Paragraph 28 of TR 95/34 refers to Weiner's case for an example of a 'web' of workplaces where a teacher was required to instruct pupils at four to five different schools each day.

In your case, there is no degree of certainty about where Managers may be physically located on any given day. The nature of work requires case managers to travel to several workplaces which would be considered to be a 'web' of workplaces (refer to paragraph 30 of TR 95/34).

Accordingly, this requirement is satisfied.

Continual travel from one worksite to another

Paragraph 34 of TR 95/34 states:

In certain work situations continual unsettled travel from one workplace to another is a common factor. In some instances, an employee's ongoing engagement may require him or her to attend various sites in different localities nominated by the employer. In most such cases the need to travel from place to place would be a necessary condition of employment.

On the basis that Managers attend to several different clients in a typical day it is considered their travel is continually unsettled and they satisfy this characteristic.

Other factors

(i)            Uncertainty of location

TR 95/34 refers to Case T106 86 ATC 1192; AAT Case 17 (1987) 18 ATR 3093 (case T106) where an 'off-sider' in the building industry was required to be continually dispatched to sites at various locations as an example of a taxpayer's employment being of an itinerant nature.

On the basis that Managers attend to several clients in a typical day it is considered they would not have the continual certainty of the places to which they are directed to travel. Therefore, it is considered this characteristic is satisfied.

(ii)           Home as a base of operations

TR 95/34 at paragraph 56 states:

An employee's home may constitute a base of operations if the work is commenced at or before the time of leaving home to travel to work and the responsibility for completing it is not discharged until the taxpayer attends at the work site. Whether an employee's home constitutes a base of operations depends on the nature and the extent of the activities undertaken by the employee at home.

On the basis that Managers conduct various administrative duties at home it is considered that their home would be a base of operations.

(iii)          Requirement to carry bulky equipment

Paragraph 63 of TR 95/34 explains that if the transport of bulky equipment is the necessary reason for incurring transport costs, rather than any private reasons, then those costs may be allowable as deductions.

Although the Managers may occasionally carry supplies and equipment, it is not considered a necessary reason for incurring transport costs. Therefore, this characteristic is not satisfied.

(iv)          The employer provides an allowance

In your case, the employer does not provide any travel or motor vehicle allowances as it provides the use of the motor vehicles.

Paragraph 72 of TR 95/34 confirms that the payment of an allowance would not by itself indicate that travelling is a necessary element of employment. The payment or absence of an allowance is just one of the many factors to be considered when determining whether the employment is itinerant in nature.

It is considered that for Managers the absence of an allowance neither supports nor denies a conclusion that the duties are itinerant in nature.

Conclusion

It is considered that the use of the vehicles by Managers satisfies the majority of the characteristics mentioned in MT 2027 and TR 95/34 as outlined above.

As Managers are considered itinerant employees, the private travel, that is, the journeys to and from home to work will be considered business journeys. Accordingly, for the purposes of calculating the taxable value of car fringe benefits under the operating cost method pursuant to section 10 of the FBTAA, the employer can classify those journeys as business.