Edited version of private advice

Authorisation Number: 1052199227520

Date of advice: 5 December 2023

Ruling

Subject: Itinerant employees

Question

Would car travel between an employee's residence and a client's residence be classified as a business journey for the purposes of determining the 'business use percentage' when calculating the taxable value of a car fringe benefit under the operating cost method pursuant to section 10 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes.

This ruling applies for the following periods:

1 April 2020 to 31 March 2021

1 April 2021 to 31 March 2022

1 April 2022 to 31 March 2023

1 April 2023 to 31 March 2024

The scheme commenced on:

1 April 2020

Relevant facts and circumstances

The employer is an institution that cares for disadvantaged members of society by providing nursing and personal care services to clients in their homes as part of their aged care services. It is registered as a charity with the Australian Charities and Not-for-Profits Commission (ACNC), with a charity subtype that includes 'Public Benevolent Institution' (PBI).

The employer provides cars to its employees which are garaged at their place of residence. They also provide cars through a salary packaging arrangement.

Employees do not perform any employment or business duties at their home.

The employees' roster varies constantly due to many factors e.g. Staff calling in sick, clients going to hospital or unexpected appointments, family outings etc.

Most employees call into the employer's base every day to collect meals; meet with senior staff; or collect equipment to use when visiting clients.

Each work car has a storage box in which personal protective equipment is kept, along with a spill kit, first aid box and wounds kit. All cars are kept locked.

Most equipment can be picked up a day before the visit.

Employees often travel between their residence and the employer's base and between their residence and the respective residence of clients.

Personal use is kept to an absolute minimum and staff are asked not to use cars for private use unless it is an emergency.

Motor vehicle recordkeeping

All staff complete logbooks manually which is provided to the Fleet department. In all instances, manual logbooks / log sheets are completed.

Travel

Travel is a fundamental part of the employee's work.

The terms of employment require the employee to perform duties at more than one place of employment.

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.

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

It is impractical for the employee to perform the duties without the use of a care.

The nature of the job itself makes travel in the performance of duties essential.

The employee is travelling in the performance of the employment duties from the time of leaving home.

The employee must carry bulky equipment and/or meals that are used when visiting clients.

Additional Information

1.    An employee generally visits 6 to 10 workplaces and varies from each service type.

2.    Non-work related private use of the vehicle is kept to an absolute minimum unless it is an emergency. Personal travel is infrequent and irregular.

3.    All logbooks are recorded manually and submitted to fleet with a vehicle inspection form.

4.    Staff are rostered for working shifts through the working week and during weekends.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 subsection 5B(1E)

Fringe Benefits Tax Assessment Act 1986 subsection 5B(1D)

Fringe Benefits Tax Assessment Act 1986 subsection 5E(2)

Fringe Benefits Tax Assessment Act 1986 subsection 7

Fringe Benefits Tax Assessment Act 1986 subsection 10

Fringe Benefits Tax Assessment Act 1986 section 57A

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

Question

Would car travel between an employee's residence and a client's residence be classified as a business journey for the purposes of determining the 'business use percentage' when calculating the taxable value of a car fringe benefit under the operating cost method pursuant to section 10 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Summary

The employer's employees who are the subject of this ruling are considered to be 'itinerant employees.' On this basis, the employees travelling directly from their residence to a client's residence are considered to be undertaking a business journey for the purposes of determining the 'business use percentage' when calculating the taxable value of a car fringe benefit under the operating cost method pursuant to section 10 of the FBTAA.

Detailed reasoning

Benefits provided to an employee of a registered Public Benevolent Institution (PBI) are exempt from Fringe Benefits Tax (FBT) under subsection 57A(1) of the FBTAA, up to a capping threshold of $30,000. If an employee of a registered PBI is provided with fringe benefits above the capping threshold, the PBI will be subject to FBT on the excess.

The employer is a registered PBI for the purposes of section 57A of the FBTAA. The entity provides cars to its employees which are garaged at the employee's place of residence.

An employer that is a PBI must determine its FBT liability, if any, for each year of tax. The employer must calculate the fringe benefits taxable amount in accordance with subsection 5B(1A) of the FBTAA (subject to subsection 5B(1D), which is the amount on which the employer must pay FBT.

For a PBI, the employer's fringe benefits taxable amount is increased by the employer's aggregate non-exempt amount for the year of tax under subsection 5B(1D) of the FBTAA:

If any benefits provided in respect of the employment of an employee of an employer are exempt benefits under section 57A, the employer's fringe benefits taxable amount for the year of tax beginning on 1 April 2000 or a later year of tax as worked out under subsection (1A) is increased by the employer's aggregate non-exempt amount for the year of tax concerned.

An employer's 'aggregate non-exempt amount' is worked out in accordance with subsection 5B(1E) of the FBTAA. This is calculated by determining each employee's 'individual grossed-up non-exempt' amount which is effectively the amount of any fringe benefits above the capping threshold.

In order to determine each employee's individual grossed-up non-exempt amount, the employer must work out the amount that would be each employee's 'individual fringe benefit amount'. Each benefit must be treated as if it were a fringe benefit where:

•         it is provided in respect of the employment of the employee

•         it is exempt according to section 57A, and

•         aside from section 57A, would be a fringe benefit.

As stated subsubsection 5E(2) of the FBTAA:

The individual fringe benefits amount is the sum of the employee's share of the taxable value of each fringe benefit that relates to the year of tax and is provided in respect of the employment other than an excluded fringe benefit.

Therefore, in the current circumstances, in order to determine the individual fringe benefits amount, if any, for an employee using the employer's car, it is necessary to firstly consider if a car benefit has been provided to the employee, and if so, to calculate the taxable value as if the benefit were a car fringe benefit.

Is a car benefit provided?

Subsection 7(1) of the FBTAA describes what constitutes a 'car benefit':

Where:

(a)  at any time on a day, in respect of the employment of an employee, a car held by a person (in this subsection referred to as the "provider"):

(i)    is applied to a private use by the employee or an associate of the employee; or

(ii)    is taken to be available for the private use of the employee or an associate of the employee; and

(b)  either of the following conditions is satisfied:

(i)    the provider is the employer, or an associate of the employer, of the employee;

(ii)    the car is so applied or available, as the case may be, under an arrangement between:

(A)  the provider or another person; and

(B)  the employer, or an associate of the employer, of the employee;

that application or availability of the car shall be taken to constitute a benefit provided on that day by the provider to the employee or associate in respect of the employment of the employee.

Therefore, a car benefit will arise on a day that a car is either:

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

•         taken to be available for the private use of an employee or an associate of an employee.

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.

Subsection 7(5) of the FBTAA provides that a car is 'applied' by a person if it is applied in accordance with the directions, instructions or wishes of the person - that is, it will cover situations where the employee does not personally apply the car to a private use but directs some other person to do so. In applying these provisions, a car benefit would arise if the car is applied to a private use by the employee.

Under subsection 7(2) of the FBTAA, a car will be taken to be available for the private use of an employee on any day that the car is garaged or kept at or near a place of residence of the employee. The effect of this provision is that a car benefit would be deemed to arise on each day the car is garaged at the residence of an employee of the employer.

The Commissioner therefore considers that the employer will be providing a car benefit to its employees in accordance with subsection 7(1) of the FBTAA.

Taxable value of a car fringe benefit under the operating cost method

In general terms, the taxable value of a car fringe benefit under the operating cost method set out in section 10 of the FBTAA will be a percentage of the operating costs of the car. The relevant percentage will be determined by the number of 'business kilometres' travelled by the car during the holding period as compared to the total number of kilometres travelled by the car during the holding period.

'Business kilometre' is defined in subsection 136(1) of the FBTAA to mean 'a kilometre travelled by the car in the course of a business journey'.

'Business journey' is defined in subsection 136(1) of the FBTAA to mean:

for the purposes of the application of Division 2of Part III in relation to a car fringe benefit in relation to an employer in relation to a car - 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.

Therefore, a journey travelled by the car while it is being driven by an employee will be a business journey if the car is not applied to a private use that results in the provision of a fringe benefit.

In the current circumstances, employee's travel between their residence and the employer's base and between their residence and respective residences of their clients. Employees generally visit 6 to 10 clients per day. It is therefore necessary to determine whether such travel would constitute a business journey.

Does the employee's travel constitute a business journey?

Guidance for determining whether a journey between home and work is a business journey is provided in Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel (MT 2027).

Paragraph 14 of MT 2027 provides that 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. While travel to work is a necessary pre-requisite to earning income, it is not undertaken in the course of earning that income. Put at its simplest, travel to work is private; travel on work is business.

As per paragraph 15 of MT 2027, the fact that the car may be used during the day in the course of business operations would not alter this result unless it is concluded that the office or employment is essentially itinerant in nature.

Paragraph 25 of MT 2027 explains the nature of an 'itinerant employee'

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, 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 p art 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.

Guidelines for determining whether an employee is carrying out itinerant work are provided by Taxation Ruling TR 95/34. Income tax: employees carrying out itinerant work- deductions, allowances and reimbursements for transport expenses (TR 95/34. Paragraph 7 of TR 95/34 explains when an employee's work is itinerant:

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 park 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.

Having regard to the indicators of itinerancy in paragraph 7 of TR 95/34, the Commissioner considers that the nature of the employees' employment is inherently itinerant. This is based on the following:

(a) Travel is a fundamental part of the employee's work

The travel must be a fundamental part of the employee's duties (FC of T v Weiner 78 ATC 4006; (1978) 8 ATR 335) (Weiner) and it is not sufficient for the employee to choose to perform their duties in another location (Taylor v. Provan [1975] AC 194).

In the employer's circumstances, the travel is a fundamental part of the employee's work in order to provide nursing and personal care in the client's homes. The terms of employment require the employee to perform duties at more than one place of employment.

(b) the employee has a 'web' of workplaces - no fixed place of work

TR 95/34 explains that if an employee performs work at a single site and then moves to other sites on a regular basis, a web of workplaces exists. In Weiner's case, the taxpayer went to four or five schools a day, and this was considered a web of workplaces. As per paragraph 31 of TR 95/34, if the taxpayer in that case had only gone to one school each day, each school would be a regular place of employment and a web of workplaces would not exist because each school would be considered a regular place of employment.

In this case, the employee does not have a fixed place of work. The employee must regularly work at more than one work site (visiting 6 to 10 clients per day) to perform their duties of employment before returning to his or her usual place of residence. Most employees call into the employer's base every day to collect client meals; meet with senior staff; or collect equipment to use when visiting clients.

The employee therefore has a web of workplaces.

(c) The employee continually travels from one work site to another

TR 95/34 states that:

34. 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.

....

37. Continual travel refers to the frequency with which an employee moves from one work site to another. It envisages that the employee regularly works at more than one work site before returning to his or her usual place of residence. If an employee stays at a particular work site for a short period (e.g., several days or a few weeks) they may still be regarded as engaged in itinerant employment provided their usual pattern of work involves continual travel to more than one work site before returning to their usual place of residence.

In this case, it is impractical for the employee to perform their duties without the use of a car. The employee must regularly work at more than one work site (visiting 6 to 10 clients per day) to perform their duties of employment before returning to his or her usual place of residence.

Most employees call into the employer's base every day to collect client meals; meet with senior staff; or collect equipment to use when visiting clients. That is, the employee's usual work pattern involves continual travel to more than one work site before returning to their usual place of residence.

(d) Other factors

Uncertainty of location in his or her employment (that is, no long-term plan and no regular pattern exists)

TR 95/34 states:

47. The element of uncertainty of location is generally another distinct characteristic of itinerant employment. Unlike an ordinary worker who makes the daily journey to his or her regular place of work, the itinerant work often cannot be certain of the location their work sites.

48. 'Uncertainty' in this context, relates only to uncertainty of location, and not to uncertainty of employment.

In this case, the chauffeur does not have certainty around the location of their work sites. Their work sites depend on the direction of the designated employee or Fleet Co-ordinator.

As per the facts, 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). In particular, the employee's roster varies constantly due to many factors e.g. staff calling in sick, clients going to hospital or unexpected appointments, family outings etc.

Requirement to carry bulky equipment

The employees are required to carry equipment and/or meals that are used when visiting the clients. Equipment including bulky equipment are collected from the work base and not taken from home.

Conclusion

As the employee's work is considered inherently itinerant in nature, the journeys from the employee's residence to a client's residence will be accepted as being business journeys for the purposes of determining the 'business use percentage' when calculating the taxable value of a car fringe benefit under the operating cost method pursuant to section 10 of the FBTAA.

As a consequence of these journeys being considered business journeys, there would not be any FBT liability under section 10 of the FBTAA. As such, there would not be any amounts to take into account (in respect of the business journeys) for the purposes of calculating the 'aggregate non-exempt amount' under subsection 5B(1E) of the FBTAA.