ATO ID 2011/28: Car fringe benefits: car destroyed in natural disaster
Date of decision: 5 April 2011
Year of income: Year ended 31 March 2011
Business line: Superannuation and Employer Obligations

Issue
Where a car is destroyed in a natural disaster, is it still considered to be a car that is held by the employer for the purposes of subsection 7(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Decision
No. It is no longer considered to be a car from the date it was destroyed for the purposes of subsection 7(1) of the FBTAA.

Facts
A car which is held by an employer in an FBT year is provided to an employee for their exclusive private use. Part-way through the FBT year the car is burnt out in a bushfire. Prior to being removed some time later, it remained at the employee's residence where it had been incinerated. Due to the scale of the natural disaster, insurance assessors cannot determine any claims for a considerable time after the bushfire.

Reasons for decision
Summary: A car fringe benefit will arise under subsection 7(1) of the FBTAA only where a car held by the provider is available for the private use of an employee. Under section 162 of the FBTAA, a car is held by a person where it is owned, leased or otherwise made available to the person by another person. A car is defined under subsection 136(1) of the FBTAA as having the same meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). A car is defined in subsection 995-1(1) of the ITAA 1997 as a 'motor vehicle...'. In turn, motor vehicle is defined in subsection 136(1) of the FBTAA as having the same meaning given by subsection 995-1(1) of the ITAA 1997. The definition of motor vehicle in subsection 995-1(1) of the ITAA 1997 is 'any motor-powered road vehicle (including a 4 wheel drive).' Where a car has been destroyed as a result of a natural disaster, then it ceases to be a motor-powered road vehicle from the date of the natural disaster. The vehicle is simply no longer capable of operating as a road vehicle and is therefore no longer a car as defined for the purposes of the FBTAA. As such the holding period also ends at that time in accordance with section 162C of the FBTAA. There is no requirement that an insurance assessor make a determination that the vehicle is a 'write-off'. In these circumstances the calculation of the taxable value of the car fringe benefits provided will only take into account the period up to the date of the natural disaster. After the natural disaster the vehicle is no longer considered to be a car.

Legislative references: Fringe Benefits Tax Assessment Act (1986) subsection 7(1) subsection 136(1) section 162 section 162C
Subject references: Fringe benefits tax Fringe benefits Car fringe benefits FBT car FBT motor vehicle