ATO ID 2003/1099: Car fringe benefits: logbook requirements - exercise of the Commissioner's discretion
Date of decision: 4 December 2003
Year of income: Year ending 31 March 2004
Business line: Private Groups and High Wealth Individuals

Issue
Will the Commissioner, in the course of reviewing the affairs of an employer, exercise his discretion under subsection 123B(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) to waive the substantiation rules, when considering a log book which records business kilometres but fails to record opening and closing odometer readings for each business journey?

Decision
Yes. Where the Commissioner is satisfied that the calculation of business kilometres is accurate, the discretion under subsection 123B(1) of the FBTAA to waive strict log book substantiation requirements will be exercised.

Facts
The employer elects to calculate the taxable value of car fringe benefits under the operating cost method. The employer maintains an electronic logbook for a 12-week period for each car. The log book records the following information: The log book does not record odometer readings at the start and end of each business journey. At the end of the 12-week log book period the address details of each business journey are sent to a specialist third-party to independently and accurately calculate the kilometres for each business journey on the basis of the shortest possible direct road route. The employer is the subject of an audit of its FBT return by the Australian Taxation Office.

Reasons for decision
Summary: Car fringe benefits valued under the provisions of section 10 of the FBTAA are subject to the requirement in section 10A to maintain, amongst other things, 'log book records'. 'Logbook records' are defined in subsection 136(1) of the FBTAA and require the following entries to be made in respect of each business journey: However, specific relief from the substantiation requirements exists in the form of a Commissioner's discretion under section 123B of the FBTAA which states that the substantiation rules do not apply in relation to a benefit if the nature and quality of evidence that a person has satisfies the Commissioner that the taxable value of the benefit is not greater than the amount specified in the taxpayer's return for the FBT year as the taxable value of that benefit. At the time that section 123B was incorporated into the FBTAA, it was stated that the intention was to give the Commissioner a similar discretion to that which operates under the income tax legislation. The similar requirements of the FBTAA and the Income Tax Assessment Act 1997 means that Taxation Ruling TR 97/24 Income tax: relief from the effects of failing to substantiate, is also useful when considering the application of section 123B of the FBTAA. Taxation Ruling TR 97/24 at paragraph 41 has this to say about the nature of 'sufficient evidence': It is not possible to specify the nature and quality of supporting evidence that satisfies the Commissioner in all circumstances. Each case must be considered on its own merits and a common sense approach applied. Regard has to be had to the overall purpose of a log book when calculating a car fringe benefit under section 10 of the FBTAA. The Explanatory Memorandum to the FBTAA at Clause 10 says that a 'log book or similar document is required to be maintained to substantiate the number of kilometres on business journeys...' Accordingly, the lack of opening and closing odometer readings for each business journey does not impact on the overall integrity of the log book. The employer has in place a system which results in the accurate calculation of business kilometres. The Commissioner's discretion under section 123B of the FBTAA will therefore be exercised in these circumstances to waive the strict log book requirements, as the employer is able to substantiate the number of business kilometres travelled. The employer is therefore able to use the operating cost method and make the reduction for the number of business kilometres travelled.

Legislative references: Fringe Benefits Tax Assessment Act 1986 section 10 section 10A subsection 136(1) section 123B
Related public rulings and determinations: Taxation Ruling TR 97/24
Related ATO interpretative decisions: ATO ID 2002/925
Other references: Explanatory Memorandum to the Fringe Benefits Tax Assessment Act 1986
Subject references: Car fringe benefits FBT business journey FBT business kilometre FBT car substantiation FBT log book records FBT operating cost Fringe benefits tax