ATO ID 2014/18: Car expense - cost of map update of in-built satellite navigation system
Date of decision: 19 May 2014
Year of income: Year ended 31 March 2014
Business line: Private Groups and High Wealth Individuals

Issue
Is the cost of a map update of an in-built satellite navigation system a 'car expense' within the meaning in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Decision
Yes. The cost of a map update of an in-built satellite navigation system is a 'car expense' within the meaning in subsection 136(1) of the FBTAA as the expense is incurred in respect of repairs to or maintenance of the car.

Facts
An employee is provided with a car benefit by his employer for the purposes of section 7 of the FBTAA. The car has an in-built satellite navigation system that is part of the car. During the FBT year, as part of a service of the car, a map update of the satellite navigation system was installed. The update allowed the employee to navigate to locations along roads constructed or altered after the system was installed.

Reasons for decision
Summary: In subsection 136(1) of the FBTAA 'car expense', in relation to a car, means: an expense incurred in respect of: (a) the registration of, or insurance in respect of, the car; (b) repairs to or maintenance of the car; or (c) fuel for the car. In the situation being considered, the relevant paragraph of the definition is paragraph (b). In considering whether the map update of the in-built satellite navigation system is a repair to the car, guidance can be obtained from Taxation Ruling TR 97/23 Income tax: deduction for repairs (TR 97/23). Although TR 97/23 explains the circumstances in which expenditure incurred by a taxpayer for repairs is an allowable deduction under section 25-10 of the Income Tax Assessment Act 1997, the discussion can be applied in determining whether an expense is a repair within the meaning of 'car expense' in subsection 136(1) of the FBTAA. In discussing the meaning of the term 'repairs', paragraphs 13 and 15 of TR 97/23 state: 13. The word 'repairs' has its ordinary meaning. It ordinarily means the remedying or making good of defects in, damage to, or deterioration of, property to be repaired (being defects, damage or deterioration in a mechanical and physical sense) and contemplates the continued existence of the property. 15. Repair for the most part is occasional and partial. It involves restoration of the efficiency of function of the property being repaired without changing its character and may include restoration to its former appearance, form, state or condition. A repair merely replaces a part of something or corrects something that is already there and has become worn out or dilapidated. Works can fairly be described as 'repairs' if they are done to make good damage or deterioration that has occurred by ordinary wear and tear, by accidental or deliberate damage or by the operation of natural causes (whether expected or unexpected) during the passage of time. The term 'maintenance' is not defined in the FBTAA. It, therefore, takes its ordinary meaning. The Macquarie Dictionary, Sixth Edition, October 2013, defines the term 'maintenance' as: 1. the act of maintaining. 2. the state of being maintained. Relevantly, the term 'maintain' is defined as: 2. to keep in due condition, operation, or force; keep unimpaired. In ACT Construction Co Ltd v. Customs and Excise Commissioners [1979] 2 All ER 691 Drake J stated at 695: ...In my judgment, repair to a building necessarily involves the putting into good order or restoration of the condition of some existing building, whilst maintenance of a building is the keeping of the building in good repair. The two may and often will overlap... In applying the meaning of the terms 'repairs' and 'maintenance' to the map update, the update involves a restoration of the functionality of the satellite navigation system and does not change its character. Without the update, the system is not able to navigate to locations along roads constructed or altered after the system was installed. The map update also preserves and keeps the satellite navigation system unimpaired and in due condition and operation. Therefore, the cost of the map update of the in-built satellite navigation system can be seen as both a repair to and maintenance of the car. Accordingly, the cost of the map update of the in-built satellite navigation system is a 'car expense' within the meaning in subsection 136(1) of the FBTAA as the expense is incurred in respect of repairs to or maintenance of the car.

Legislative references: Fringe Benefits Tax Assessment Act 1986 section 7 subsection 136(1)
Case references: ACT Construction Co Ltd v. Customs and Excise Commissioners [1979] 2 All ER 691
Related public rulings and determinations: Taxation Ruling TR 97/23 Income tax: deductions for repairs
Other references: Macquarie Dictionary Sixth Edition, October 2013
Subject references: FBT car expenses Fringe benefits tax