ATO ID 2003/584: Car fringe benefits: statutory formula method - 'earliest holding time'
Date of decision: 3 April 2003
Year of income: Year ended 31 March 2004
Business line: SEO

Issue
When using the statutory formula method and where the foreign car company is an associate of the provider, is the time the car was first held by the foreign car company that manufactures the car, the 'earliest holding time' for the purposes of paragraph 9(2)(b) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Decision
Yes. The time the car was first held by the foreign car company is the earliest time before the 'current time' when the car was held by the provider or an associate of the provider.

Facts
The foreign car company manufactures the car outside of Australia. On the day the manufacturing process is completed, the car commences to exist as a 'car' as defined in subsection 136(1) of the FBTAA. On this day, the foreign car company owns the car. The Australian company is a wholly owned subsidiary of the foreign car company. The Australian company purchases the car from the foreign car company and imports the car into Australia. The costs of importing the car into Australia include transport costs, customs duty and import duty. These costs are incurred by the Australian company. The Australian company is the employer of the employee, and during the year it maintains the car and allows its employee to use the car for private and work-related purposes. The Australian company uses the statutory formula method for returning its car fringe benefits. These facts are common in the 'Related ATO Interpretative Decisions' below.

Reasons for decision
Summary: When using the statutory formula method to determine the taxable value of car fringe benefits, the taxable value is calculated by reference to the base value of the car and by reference to the 'earliest holding time'. Paragraph 9(2)(b) of the FBTAA provides that: the earliest holding time, in relation to a car held by the provider at a particular time (the "current time"), is the earliest time before the current time when the car was held by the provider or an associate of the provider. Subsection 162(1) of the FBTAA refers to a car 'held' by a person if the car is owned by the person, leased to the person, or otherwise made available to the person by another person. Subsection 162(2) does not apply when using the statutory formula method. The Australian company is the provider of the car fringe benefit and 'held' the car (by ownership) at the 'current time'. Sections 158 and 159 of the FBTAA apply so that parent and subsidiary companies will be 'associates' of each other for the purposes of the FBTAA. Thus, the Australian company and the foreign car company are associates. The foreign car company, which is an associate of the Australian company, first 'held' the car (by ownership) on the day the manufacturing process was complete and the car come into existence. This day will be the 'earliest holding time' under paragraph 9(2)(b) of the FBTAA.

Legislative references: Fringe Benefits Tax Assessment Act 1986 paragraph 9(2)(b) subsection 136(1) section 158 section 159 subsection 162(1) subsection 162(2)
Related ATO interpretative decisions: ATO ID 2003/585 | ATO ID 2003/586 | ATO ID 2003/587
Subject references: Fringe benefits tax Car fringe benefits FBT base value FBT cost price FBT statutory formula FBT Car