41062

EDITED VERSION OF NOTICE OF PRIVATE RULING

Authorisation Number: 41062

This Ruling is a 'Private Ruling' for the purposes of Part IVAA of the Taxation Administration Act 1953.

YEAR(S) OF INCOME TO WHICH THIS RULING APPLIES:

Year ended 30 June 2000

Year ended 30 June 2001

Year ended 30 June 2002

Year ended 30 June 2003

Year ended 30 June 2004

TAX LAW:

Income Tax Assessment Act 1997 Section 8-1.

Income Tax Assessment Act 1997 Paragraph 8-1(2)(d).

Income Tax Assessment Act 1997 Section 995-1.

Income Tax Assessment Act 1936 Section 51AF.

WHAT THIS RULING IS ABOUT:

Are you entitled to claim a deduction for motor vehicle expenses you incur in respect of your employment?

THE SUBJECT OF THE RULING:

You are employed as a sales representative and are required to travel on the road as part of your day-to-day job.

You fully novate a lease through your employer to finance the lease on your car. To do this you have a salary sacrifice arrangement in place.

Your employer also provides you with a motor vehicle allowance, which does not cover you for parking and toll fees.

You are entitled to use the car for private purposes.

COMMENCEMENT OF ARRANGEMENT:

1 July 1999

RULING:

Are you entitled to claim a deduction for motor vehicle expenses you incur in respect of your employment?

No.

EXPLANATION: (This does not form part of the Notice of Private Ruling)

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a capital private or domestic nature.

Expenses in using your car for work purposes are considered for deduction under this section.

However, paragraph 8-1(2)(d) of the ITAA 1997 provides that a loss or outgoing is not deductible if a provision of 'this Act' prevents the deduction. 'This Act' is defined to include the Income Tax Assessment Act 1936 (ITAA 1936) (section 995-1 of the ITAA 1997).

You have told us that you are maintaining a full novation lease arrangement through your employer. Taxation Ruling TR 1999/15 discusses the taxation consequences of motor vehicle lease novation arrangements. In a full novation lease arrangement, the lease obligations are transferred to the employer, who becomes the lessee for the novation period and is therefore responsible for the lease obligations.

Section 51AF of the ITAA 1936 provides that where an employer provides a car for the exclusive use of an employee (or a relative of the employee) and the employee is allowed to use the car for private purposes, expenses incurred by the employee (or relative of the employee) in connection with the car are not deductible.

In your case, as your employer is responsible for the lease obligations on your car, your employer is considered to be providing a car for your use as an employee, and as you are allowed to use the car for private purposes, any expenses incurred by you in connection with the car are not deductible.

Further, the Administrative Appeals Tribunal (AAT) has held in Schott v. FC of T 99 ATC 2234; 42 ATR 1067 that petrol expenses incurred by an itinerant employee in respect of a motor vehicle supplied by the employer were not deductible.

The facts of this case were that the taxpayer was provided with a motor vehicle by her employer which was used by her for both business and private purposes. She was also paid a travel allowance for motor vehicle expenses. The taxpayer claimed a deduction for petrol expenses incurred for business purposes equal to the amount of the allowance. Following an audit, the deduction was disallowed.

The AAT considered that the taxpayer, although an itinerant employee, was barred from claiming a deduction under the terms of section 51AF of the ITAA 1936 as the section excludes a deduction for car expenses incurred over any period in which an employer provides a car to an employee or a relative of the employee, and the employee or relative is entitled to use the car for private purposes.

Therefore the motor vehicle expenses incurred by you in connection with your car are not deductible under section 51AF of the ITAA 1936.

Note

You will note that although you are not entitled to claim for your motor vehicle expenses, you may be able may be entitled to claim for your parking and bridge tolls.

Parking and Bridge Tolls

These expenses are generally considered to be private in nature when you are travelling between your normal place of residence and your regular place of employment and deductions are not allowable.

However, parking fees (but not fines) and bridge toll fees may be deductible expenses which form part of your travelling expenses (Case Y43 91 ATC 412; Case 7273 (1991) 22 ATR 3402).

Deductions are allowable if the expenses are incurred while travelling:

    � between two separate places of work,

    � to a place of education for self-education purposes,

    � in the normal course of duty and the travelling expenses are allowable deductions.

Disclaimer

The Register of Private Binding Advice is published as a public record of the binding advice issued by the ATO. Each piece of advice is based on a specific set of circumstances advised to the ATO and the law in force at the time of the advice, and is considered binding only in respect of the person/s or entity/ies on whose behalf the advice was sought. The Register is a historical record of advice provided, and is not updated to reflect changes in the law, withdrawal of advice or any other change in circumstance. Each piece of advice has been edited to avoid disclosing the identity of the person or entity on whose behalf advice was sought and published advice may therefore not disclose all the relevant facts or circumstances on which the advice was based. For these reasons, advice published in this Register cannot be relied upon as precedent for any other person or entity.