Edited version of private advice

Authorisation Number: 1052328311895

Date of advice: 4 December 2024

Ruling

Subject: FBT - car fringe benefit

Question 1

Will a 'car fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)arise when an employee is provided with a motor vehicle that is garaged at that employee's place of residence overnight?

Answer

Yes.

Question 2

Does the residual benefit exemption under subsection 47(6) of the FBTAA apply when an employee is provided with a motor vehicle which is garaged at that employee's place of residence overnight?

Answer

No.

Question 3

If the answer to Question 1 is 'Yes', will a fringe benefits tax (FBT) liability arise where the taxable value of the car fringe benefit is calculated using the operating cost method under section 10 of the FBTAA?

Answer

No.

Question 4

Having regard to the logbook record-keeping requirements in section 10A of the FBTAA, can a single logbook be applied to multiple vehicles that are used for the same purposes?

Answer

No.

This ruling applies for the following periods:

Fringe Benefits Tax (FBT) year ending 31 March 2023

FBT year ending 31 March 2024

FBT year ending 31 March 2025

The scheme commenced on:

1 April 2022

Relevant facts and circumstances

The Employer has a transport contract with Entity A.

The contract entails transporting children to and from school.

The Employer provides the transport vehicles and engages drivers to perform the transport.

The Employer pays for all motor vehicle expenses.

Contracted Drivers

The drivers are engaged by Entity A on a casual basis.

Drivers must hold a valid driver's licence.

Entity A runs regular checks on the drivers' driving licences.

Drivers have acknowledged and signed an agreement to confirm that the vehicles are to be used only for the purpose of performing the runs, and that that they carry out no private use of the vehicle.

Vehicles

Vehicles can be a sedan or people movers (8-seater vehicles).

The criterion of the car is determined by Entity A.

Cars are often swapped between drivers. The reasons for this include:

•         requirements set by Entity A

•         the number of students on the run changes, and

•         the need for mechanical repairs and regular checks.

Motor vehicles are retained by the drivers overnight at their personal residence.

It is a requirement to have a replacement car always available for emergency, and that make some cars sometimes stationery for weeks.

Routes

Each car provides a service to a different school and their students.

Entity A determines:

•         the students that are to be transported to and/or from school, and

•         the specified route that the driver is to take when collecting the students from their residences to school and vice versa.

The specified route includes:

i)     the designated stops

ii)    follows a specific sequence of collecting/dropping off students, and

iii)   pre-calculated daily kilometres.

The specified routes will have a maximum of X different sites (assistant pick-up/drop-off, student residences and school) visited.

The contractor's payment is determined based on the kilometres travelled.

The drivers must log into an app which tracks the movements and alerts of any deviation from the designation route.

The routes taken are the same every day unless there were any absences.

Any use of an alternative route must be reported to Entity A.

Only motor vehicles listed by Entity A on a particular run can be used on this run.

Logbooks

Logbooks were previously prepared as handwritten records that were converted to Microsoft Excel.

Some of the motor vehicles that were acquired recently are yet to prepare a logbook.

Where logbooks are available, the 'actual cost method' is to be used.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 (FBTAA)

•         Section 7 of the FBTAA

•         Section 8 of the FBTAA

•         Section 10 of the FBTAA

•         Section 10A of the FBTAA

•         Subsection 47(6) of the FBTAA

•         Subsection 136(1) of the FBTAA

Income Tax Assessment Act 1997 (ITAA 1997)

•         Section 28-120 of the ITAA 1997

•         Subsection 995-1(1) of the ITAA 1997

Reasons for decision

Question 1

Will a 'car fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) arise when an employee is provided with a motor vehicle that is garaged at that employee's place of residence overnight?

Summary

In circumstances where a sedan or an 8-seater people mover is provided by the Employer to an employee that is garaged at the employee's place of residence overnight, a 'car fringe benefit' - as that term is defined in subsection 136(1) of the FBTAA - has been provided. To determine the taxable value of each car fringe benefit provided, the 'statutory formula' method in section 9 of the FBTAA or the 'cost basis' method in section 10 of the FBTAA can be used. No exemptions are applicable in these circumstances.

Detailed reasoning

Relevant law

A 'car fringe benefit' is defined in subsection 136(1) of the FBTAA to mean a fringe benefit that is a car benefit.

The term 'fringe benefit' is defined in subsection 136(1) of the FBTAA. This definition requires that the following conditions are satisfied:

1.    A benefit is provided during or in respect of the fringe benefits tax (FBT) year (a 12-month period from 1 April to 31 March).

2.    The benefit is provided to an employee or an associate of the employee.

3.    The benefit is provided in respect of the employment of the employee.

4.    The benefit is provided by the employer, an associate of the employer, or a third party.

5.    The benefit is not an exempt benefit, or a benefit that is excluded from being a fringe benefit.

A 'car benefit' is defined in subsection 136(1) of the FBTAA to mean a benefit referred to in subsection 7(1) of the FBTAA.

Under section 7 of the FBTAA, a 'car benefit' arises if:

1.    An employee or associate is provided with a car.

2.    The car is held by the employer (or an associate, or a third party under an arrangement). A car is 'held' where the car is owned, leased (or let on hire) or otherwise made available to the employer (or an associate, or a third party under an arrangement).

3.    The car is either:

(a)  applied to a private use by the employee or associate of the employee, or

(b)  taken to be available for the private use of the employee or associate of the employee.

When does an employee apply a car for private use?

Private use is everything else other than in the exclusive course of working, running a business or otherwise earning income. This means that private use of a car includes any use that is dual purpose and has both private and business aspects to it. The term 'applied' means actual private use of the car by the employee or where the employee (or a third party) has used the car in accordance with the directions given by the employer or another person that the car be used for their private use. Private use means any use. It does not just mean driving the car.

When is a car 'taken to be available' for private use?

A car benefit can arise where a car is taken to be, or made available, for the employee's private use (whether or not the employee actually uses it).

Two circumstances commonly arise where a car is made available to the employee for private use:

• the car is garaged or kept at or near the employee's residence
• the car is not at the employer's business premises and the employee has use, custody or control of the car, or is entitled to use it for their private use.

A car will not be taken to be available for the employee's private use where:

• the car is somewhere other than the employer's business premises (such as in a commercial storage facility)
• the custody and control of the car has been removed from the employee, and
• the employee is not entitled to use the car for private use.

A car can be taken to be available for private use even where the car is used in accordance with the directions, instructions or wishes of a person (including an employer or their associate, employee or another person).

If an employer has rules in place to disallow private use of company or business cars, they must be clear and straightforward. A general instruction or understanding between the employer and the employee is not sufficient. It is recommended that employers:

• put these rules in writing
• have a plan or course of action that checks and verifies odometer readings and private use, and
• always enforce these rules against private use.

Employers must consistently enforce any rules that they have that disallow private use of the car, otherwise the car may still be taken to be available for private use.

The issuing of a minute or a directive stating the rules without further training, auditing and enforcement is not considered to be sufficient for employers to access this exemption.

A car benefit will not arise if the employer removes custody and control of the car from the employee. An employee must relinquish possession (for example, by surrendering the keys) to divest themselves of custody and control.

Where a car is in a workshop for extensive repairs (for example, following a motor vehicle accident) it is not available for private use of the employee. However, a car is considered to be available for private use where it is in the workshop for routine servicing or maintenance.

What is a 'car'?

A 'car' is defined in subsection 136(1) of the FBTAA to have the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). That provision defines a 'car' as 'a motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers'.

Application to the Employer's circumstances

Are the Employer's employees provided with a 'car benefit'?

Having regard to the conditions of a 'car benefit' in section 7 of the FBTAA, the motor vehicles provided by the Employer to employees can be a sedan or a people mover (8-seater vehicle). A sedan and an 8-seater people mover each meet the definition of a 'car'.

These cars are 'held' by the Employer.

In terms of whether these cars are applied to a private use by the Employer's employees, or taken to be available for the private use of the employee, it is accepted that this condition is satisfied. This is because employees are prohibited from private usage, including any incidental travel. Employees are required to take the car home for garaging at their residential premises overnight. A car that is garaged at an employee's 'place of residence' is deemed as being available for the private use of the employee regardless of whether or not the employee has permission to use it privately under subsection 7(2) of the FBTAA.

Employees are required to carry out the travel routes for school drop-off and pick-up from their residential premises. Employees are not required to commence work at or before they leave home to travel to work. Contracted employees can travel between X different sites each route. Each route is travelled twice per day (drop-off and pick-up).

Contracted employees are required to have a driver's licence as part of their employment contract because travel, particularly travel by car, is a fundamental part of the employees' work. The Employer provides cars for use by employees to fulfil the responsibilities of the relevant roles.

Therefore, as all of the conditions in section 7 of the FBTAA are satisfied, it is accepted that a 'car benefit' is provided in circumstances where a sedan or an 8-seater people mover is provided by the Employer to an employee that is garaged at the employee's place of residence overnight.

In applying the conditions of a 'fringe benefit', as that term is defined in subsection 136(1) of the FBTAA, it is accepted that the provision of the cars (the sedans and 8-seater people movers) are a benefit that is provided by the Employer to its employees, in respect of the employees' employment.

Therefore, as the cars are garaged at the homes of the Employer's employees, a car fringe benefit will arise under subsection 136(1) of the FBTAA, unless the benefit is an exempt benefit.

A potential exemption is found in section 8 of the FBTAA, pertaining to work-related cars.

The exemption in section 8 of the FBTAA requires that:

1.      the car be a work-related car, and

2.      there was no private use of the car during the year of tax and at a time when the benefit was provided other than:

a.   work-related travel, and

b.   other private use by the employee that was minor, infrequent and irregular.

A 'work-related car' is:

1.    a panel van or utility truck, designed to carry a load of less than 1 tonne; or

2.    used for taxi travel, designed to carry a load of less than 1 tonne, and not a limousine; or

3.    any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers).

In applying these criteria to the Employer's circumstances, the cars provided - specifically sedans and 8-seater people movers - do not meet the definition of a 'work-related car'. Therefore, the exemption in section 8 of the FBTAA cannot apply in circumstances where sedans and 8-seater people movers are provided to the Employer's employees that are garaged at employees' residences overnight.

Therefore, it is considered that all of the conditions of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA are satisfied in circumstances where the Employer provides its employees with sedans and 8-seater people movers that are garaged at employees' residences overnight.

As it has been concluded above that both the definitions of a 'car benefit' and a 'fringe benefit' are satisfied in circumstances where the Employer provides its employees with sedans and 8-seater people movers that are garaged at employees' residences overnight, the definition of a 'car fringe benefit' as defined in subsection 136(1) of the FBTAA is also satisfied.

Conclusion

In circumstances where a sedan or an 8-seater people mover is provided by the Employer to an employee which is garaged at the employee's place of residence overnight, a 'car fringe benefit' - as that term is defined in subsection 136(1) of the FBTAA - has been provided. To determine the taxable value of each car fringe benefit provided, the 'statutory formula' method in section 9 of the FBTAA or the 'cost basis' method in section 10 of the FBTAA can be used. No exemptions are applicable in these circumstances.

Question 2

Does the residual benefit exemption under subsection 47(6) of the FBTAA apply when an employee is provided with a motor vehicle which is garaged at that employee's place of residence overnight?

Summary

Subsection 47(6) of the FBTAA requires that a 'residual benefit' consisting of the provision or use of a motor vehicle be provided, and that the motor vehicle not be a vehicle used for taxi travel let on hire or a car (other than a panel van or utility truck or any other road vehicle designed to carry a load of less than 1 tonne and not designed for the principal purpose of carrying passengers). As per the response to Question 1, the provision of the cars to the Employer's employees constitutes a 'car fringe benefit', not a 'residual benefit'. Further, the motor vehicles provided to the Employer's employees do meet the definition of a 'car'. As such, the residual benefit exemption in subsection 47(6) of the FBTAA does not apply in the Employer's circumstances.

Detailed reasoning

The private use of a motor vehicle (a 'car' or otherwise) is exempt from FBT under either subsections 8(2) or 47(6) of the FBTAA if all of the following conditions are satisfied:

•         the vehicle is a panel van, utility or other commercial vehicle (that is, one not designed principally to carry passengers), and

•         the employee's private use of such a vehicle is restricted to:

§  travel between home and work

§  travel that is incidental to travel when undertaking employment duties, and

§  non-work related use that is minor, infrequent and irregular.

Subsection 47(6) of the FBTAA provides, where:

(a)  a residual benefit consisting of the provision or use of a motor vehicle is provided in a year of tax in respect of the employment of a current employee; [Emphasis added]

(aa) the motor vehicle is not:

                      i.        a vehicle used for taxi travel (other than a limousine) let on hire to the provider; or

                     ii.        a car, not being:

(A)  a panel van or utility truck; or

(B)  any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers); and [Emphasis added]

(b)  there was no private use of the motor vehicle during the year of tax and at a time when the benefit was provided other than:

                      i.        work-related travel of the employee; and

                     ii.        other private use of the motor vehicle by the employee or an associate of the employee, being other use that was minor, infrequent and irregular;

the benefit is an exempt benefit in relation to the year of tax.

A 'car' is defined in subsection 995-1(1) of ITAA 1997 to mean a 'motor vehicle' (except a motorcycle or similar vehicle) designed to carry a load of less than one tonne and fewer than 9 passengers. The car limit applies to both new and second-hand cars. Station wagons and 4-wheel drives are also treated as cars unless they specifically fall outside the definition of 'car' or 'motor vehicle.

Subsection 995-1(1) of the ITAA 1997 defines 'motor vehicle' to mean any motor-powered road vehicle (including a 4-wheel drive vehicle).

In applying the conditions in subsection 47(6) of the FBTAA, the provision of the cars (sedans and 8-seater people movers) to the Employer's employees constitutes a 'car fringe benefit' (as per the response to Question 1 of this Ruling). As the applicable benefit provided to employees in these circumstances is not a 'residual benefit', paragraph 47(6)(a) of the FBTAA is not satisfied. Further, paragraph 47(6)(aa) of the FBTAA is also not satisfied on the basis that the motor vehicles provided to the Employer's employees do meet the definition of a 'car' (as that term is defined in subsection 136(1) of the FBTAA). As such, subsection 47(6) of the FBTAA does not apply.

Conclusion

The residual benefit exemption in subsection 47(6) of the FBTAA does not apply in the Employer's circumstances.

Question 3

If the answer to Question 1 is 'Yes', will a FBT liability arise where the taxable value of the car fringe benefit is calculated using the operating cost method under section 10 of the FBTAA?

Summary

As business usage is 100% or very limited, in both circumstances where cars are garaged at the business premises and where they are garaged at the employees' premises, there will be no FBT liability where the taxable value of the car fringe benefit is calculated using the operating cost method under section 10 of the FBTAA.

Detailed reasoning

Taxable value of car fringe benefit - Operating Cost Method

In these circumstances, the cost basis method is appropriate because of the level of business use. A logbook must be kept to substantiate its requirements. It is noted that an electronic tracking system meets these requirements.

Under section 10 of the FBTAA, the taxable value of a car fringe benefit is the total cost of operating the car during the FBT year calculated using the formula:

(C × (100% − BP)) − R

Where:

C = operating cost of the car

BP = business use percentage

R = the amount of any employee contribution

Therefore, the taxable value of the car fringe benefit will be reduced by the business use percentage applicable to the car during the period.

The business use percentage is a percentage of business travel compared to total travel of the car during the period.

Logbook and odometer records are required to be maintained for the purposes of calculating the business use percentage.

Application to the Employer's circumstances

In this case, contracted employees are required to have a driver's licence as part of their employment contract because travel, particularly travel by car, is a fundamental part of the employees' work. The Employer provides motor vehicles for use by employees to fulfil the responsibilities of the relevant roles.

Employees are prohibited from private usage, including any incidental travel. Employees are required to take the vehicle home for garaging at their residential premises. Staff are required to carry out the travel routes for school drop-off and pick-ups from their residential premises. Employees are not required to commence work at or before they leave home to travel to work.

Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel (MT 2027) explains the situations where home to work travel is considered to be business travel. One of these situations is where the nature of the employees' employment is inherently itinerant.

Paragraph 25 of MT 2027 lists the characteristics which indicate employment duties of an itinerant nature. These are:

•         it is inherently itinerant;

•         travel is a fundamental part of the employee's work;

•         it is impractical for the employee to perform the duties without the use of a car;

•         the terms of employment require the employee to perform duties at more than one place of employment;

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

•         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.

It is considered that all of the above characteristics can be identified in this case.

Paragraph 7 of Taxation Ruling 95/34 - Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses (TR 95/34) also lists characteristics which indicate when an employee's work is itinerant, including:

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

•         the existence of a 'web' of workplaces in the employee's regular employment, that is, the employee has no fixed place of work

•         the employee continually travels from one work site to another. An employee must regularly work at more than one work site before returning to their usual place of residence

•         Other less significant factors may indicate itinerancy including:

(i)      The employee having a degree of uncertainty of location in their employment.

(ii)     The employee's home constitutes a base of operations.

(iii)    The employee is required to carry bulky equipment from home to different work sites; and

(iv)    The employee is provided with an allowance from his/her employer in relation to any travel that is undertaken.

Paragraph 8 of TR 95/34 states that no single factor in itself will necessarily determine whether employment can be regarded as being itinerant. A finding that the employment is itinerant requires that several of the above characteristics are satisfied.

The following discussion is an examination of the above itinerant factors listed in paragraph 7 of TR 95/34.

Travel is a fundamental aspect of employment

Travel can be characterised as an essential feature of the Employer's contracted workers. They are required to travel to the students' homes and schools to perform their duties, generally visiting up to X different sites per route, and the use of a car will be required to achieve this.

The taxpayer is required to travel to a 'web' of workplaces

Paragraph 28 of TR 95/34 requires that, for a 'web' of workplaces to exist, the employee performs work at a single site and then moves to other sites on a regular basis. In FC of T v Wiener 78 ATC 4006; (1978) 8 ATR 335 (Wiener's case), a schoolteacher was treated as travelling to a 'web' of workplaces, because she had to attend five separate schools each day and she did not have an office or other fixed place of employment to carry out her work.

Paragraph 30 provides an example of an employee who attends the employer's office monthly to complete paperwork and is required to travel to many clients each day. The employee's work required him to travel to several workplaces (a 'web' of workplaces). As the employee performed duties at many different locations, his employment was regarded as itinerant. In the current case, travel is a fundamental part of the work. The employees travel to perform their duties at different locations during the day, including the employer's office. It is considered that they have a web of workplaces.

There is a continual travel from one work site to another

Paragraph 37 of TR 95/34 provides guidelines on the meaning of 'continuous travel':

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.

Based on the facts provided, the contracted employees travel continuously to different locations to collect the students at their homes during the morning and drop them to school. The same occurs in the afternoon when the contracted employees travel continuously to collect the students from their school and drop them off at different locations at their homes. It is considered that the employees are required to undertake continuous travel from one work location to another.

Other factors that may indicate the employees' duties are itinerant in nature

The factors listed in paragraph 7(d) of TR 95/34 are not satisfied in this case for the following reasons.

(i)    While there is certainty for these employees to visit clients as per the daily planned schedule of the employer, there is a low degree of uncertainty where there are late changes set by the team leader due to varying needs of the clients.

(ii)   The 'base of operations' factor does not apply to the Employer's employees because they are not required to commence work at or before they leave home to travel to work.

(iii)  Based on information provided to us, the Employer's employees do not carry bulky equipment.

(iv)  The Employer's employees are not provided with a travel or car allowances for the motor vehicle travels undertaken.

Therefore, the 'other factors' referred to in paragraph 7(d) of TR 95/34 point to the employee's duties not being regarded as itinerant in nature. However, because these are regarded as less significant than the factors listed in paragraphs 7(a) to 7(c), these factors are by no means decisive.

In analysing the use of the vehicles, we have determined that the 3 significant factors in paragraphs 7(a), 7(b) and 7(c) of TR 95/34 have been satisfied when considering itinerancy. Therefore, on balance, the contracted employee duties should be regarded as itinerant in nature. Accordingly, travel by the Employer's contracted employees from their home to the students' homes, and between the students' homes and their schools, daily, will be treated as business travel. As such, the business use percentage will be 100% due to the itinerant nature of the employees' work. The taxable value of the car fringe benefit will be reduced by the business use percentage applicable to the car during the period (100%).

Conclusion

While a car fringe benefit arises, there will be no FBT liability where the taxable value of the car fringe benefit is calculated using the operating cost method under section 10 of the FBTAA. This is because the business use percentage would be 100%, and so the taxable value of the fringe benefits provided would be nil.

Question 4

Having regard to the logbook record-keeping requirements in section 10A of the FBTAA, can a single logbook be applied to multiple vehicles that are used for the same purpose?

Summary

A single maintained logbook cannot to applied to multiple vehicles, as each individual vehicle should have its own maintained logbook.

Detailed reasoning

Section 10A of the FBTAA states:

Where one or more car fringe benefits in relation to an employer in relation to a year of tax relate to a car while it was held by a particular person (in this section called the provider ) during a particular period (in this section called the holding period ) in a year of tax that is a log book year of tax of the employer in relation to the car, the employer is entitled to a reduction in the operating cost of the car on account of business journeys undertaken in the car during the holding period if, and only if:

(a) log book records and odometer records are maintained by or on behalf of the provider for an applicable log book period in relation to the car; and

(b) odometer records are maintained by or on behalf of the provider for the holding period; and

(c) if the provider is not the employer--those log book records and odometer records are given to the employer before the declaration date; and

(d) the employer specifies the employer's estimate of the number of business kilometres travelled by the car during the holding period; and

(e) the employer specifies a percentage as the business use percentage applicable to the car in relation to the provider for the holding period.

Additionally, subsection 28-120(3) of the ITAA 1997 states:

If you want to use the "log book" method for 2 or more * cars for the same income year, the log books for those cars must cover periods that are concurrent.

Therefore, each vehicle must maintain its own logbook, specific to its make, mode, engine type and odometer.

However, if you wish to use the same FBT calculation method (operating cost method) against all vehicles for the FBT financial year, then all vehicles must be assessed against the same 12-week period.

Conclusion

A single logbook cannot be maintained and used to calculate the FBT liability for multiple vehicles. Each individual vehicle must maintain its own logbook.