ATO ID 2010/163: Exempt Benefits: motor vehicle not for private use- tram
Date of decision: 14 September 2010
Year of income: Year ended 31 March 2011
Business line: Superannuation and Employer Obligations

Issue
Where an employee is provided with a residual benefit consisting of the use of a tram, does this benefit constitute the use of a motor vehicle for the purposes of subsection 47(6) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Decision
No. A tram is not a motor vehicle for the purposes of subsection 47(6) of the FBTAA and therefore the use of a tram does not constitute the use of a motor vehicle.

Facts
An employer provides its employee with the use of a tram. Trams or light rail are a form of public transportation designed to operate on its own contained system which may in part or in whole utilise public roads. A tram is a flanged wheel passenger carrying vehicle which runs on a tramway. The tramway is powered by electricity fed from an external source which powers the tram's motor through a current collector from an overhead conductor wire. Trams are fitted with signalling devices, interact with motor vehicles and are subject to traffic rules.

Reasons for decision
Summary: Subsection 47(6) of the FBTAA provides an exemption for the provision or use of certain motor vehicles. The exemption excludes taxis on hire and most cars. The exemption is also subject to certain private use restrictions. Those exclusions and restrictions are not relevant to determining whether a tram is a motor vehicle. A tram is a vehicle propelled by a motor. However, whether a tram is a motor vehicle requires reference to the statutory definition of motor vehicle. Subsection 136(1) of the FBTAA defines motor vehicle for the purposes of that Act: Motor vehicle has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997 Subsection 995-1(1) of the Income Tax Assessment Act 1997 relevantly provides: Motor vehicle means any motor- powered road vehicle (including a 4 wheel drive vehicle). What constitutes a 'road vehicle' is not further defined. In DFC of T v. ICI Australia Operations Pty Ltd 87 ATC 4069; (1987) 18 ATR 313 Murray J considered whether a vehicle was a 'road vehicle' under the former Sales Tax (Exemptions and Classifications Act) 1935 (at ATC 4076; ATR 320): A vehicle may be a road vehicle and yet be exclusively used on roads within private property. The manager of a large cattle station may purchase a utility for use exclusively for travel on the property whether over rough country or on bush tracks but nevertheless the utility is still a road vehicle. Further at ATC 4077; ATR 321 It is fundamentally a vehicle and a vehicle of a kind which is designed for use on roads be they public roads or private roads. This position was also taken in the more recent Administrative Appeals Tribunal (AAT) decision in Dreamtech International Pty Ltd v. Federal Commissioner of Taxation [2009] AATA 365; 2009 ATC 10-091; (2009) 72 ATR 822. One of the questions before the AAT was whether a Hummer was a road vehicle as the term was used in A New Tax System (Luxury Car Tax) Act 1999 . In making its decision the AAT examined the use for which it was designed and concluded that it was designed as a civilian vehicle for on road and off road use. It therefore fell within the description of a motor powered road vehicle. That decision and reasoning has not been overturned in subsequent Federal Court appeals. For the purposes of the FBTAA, the question of whether a vehicle is a 'road vehicle' should also be determined by its inherent design characteristics rather than the use to which the vehicle is put. A tram is designed only to run on rails in the form of a tramway. A tramway is a discrete transport system which may overlap with, but remains distinct from, a road network. Tram rails may co-exist with a road over a major portion of the tramway, but this co-existence only arises from the sharing of that public space. Outside that shared space trams do not travel on roads and road vehicle do not travel on tramways. A tram is by design a rail vehicle. Although a tram is a vehicle that is motorised and which may share some roadways with motor vehicles, it does not constitute a road vehicle. Therefore, it is not a motor vehicle for the purposes of the FBTAA. Accordingly, an employee who has been provided use of a tram is not in receipt of a benefit exempted by subsection 47(6) of the FBTAA.

Legislative references: Fringe Benefits Tax Assessment Act (1986) subsection 47(6) subsection 136(1)
Case references: DFC of T v ICI Australia Operations Pty Ltd 87 ATC 4069 (1987) 18 ATR 313
Subject references: FBT motor vehicle Fringe benefits tax Fringe benefits Exempt benefits