Private ruling: Fringe benefits tax and exempt vehicles
Published: July 2014
Ruling period: Year ended 31 March 2015
Date scheme commenced: 1 April 2014

Ruling: Q1: Is a Mitsubishi NW Pajero GLX-R Wagon (Model Number NW6S45) eligible for the exemption under subsection 8(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: No | Q2: Is a Mitsubishi NW Pajero GLX Wagon (Model Number NW6S45) eligible for the exemption under subsection 8(2) of the FBTAA? | A2: Yes

Relevant facts and circumstances: Mitsubishi NW Pajero GLX-R (20XX GLX-R) The product specifications published by Mitsubishi Motors (product specifications), state this is a 7 seat model with a maximum payload of 740/750 kilograms. The specifications do not list the cargo capacity of the vehicle with the third row of seats in use. However it lists the capacity with the third down folded as 1081 litres and with the thirds and second rows of seats folded as 1789 litres. Mitsubishi NW Pajero GLX (20XX GLX) The product specifications state this is a 5 seat model and has the same maximum payload as the 20XX GLX-R. Although there is not a third row of seats the same specifications were provided in respect of cargo capacity as in the 20XX GLX-R. Earlier models listed as being eligible for exemption The is a list of vehicles that would be eligible and ineligible for the exemption under subsection 8(2) of the FBTAA on our website www.ato.gov.au and in respect of the Pajero it lists the following models as being eligible: 2012 NW Pajero GLX 4WD 3.2L diesel manual (5 seat) NW Pajero GLX 4WD 3.2L diesel automatic (5 seat) 2009 GL 3.2L Diesel Manual LWB Wagon GL 3.2L Diesel Automatic LWB Wagon It lists the following models as not being eligible for exemption 2009 GLS 3.8L Petrol Manual LWB Wagon GLS 3.8L Petrol Automatic LWB Wagon GLS 3.2L Diesel Manual LWB Wagon GLS 3.2L Diesel Automatic LWB Wagon In looking at the 2009 models the GL is a 5 seat model and the GLS is a 7 seat model. This ruling is not looking at whether the restrictions on private use in paragraph 8(2)(b) of the FBTAA have been satisfied.

Relevant legislative provisions: FBTAA subsection 8(2)

Reasons for decision: Summary: Subsection 8(2) of the FBTAA exempts certain car benefits provided the conditions set down in the subsection are satisfied. This subsection states: A car benefit provided in a year of tax in respect of the employment of a current employee is an exempt benefit in relation to the year of tax if: (a) the car is: (i) a taxi, panel van or utility truck, designed to carry a load of less than 1 tonne; or (ii) any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers); and (b) there was no private use of the car during the year of tax and at a time when the benefit was provided other than: (i) work-related travel of the employee; and (ii) other private use by the employee or an associate of the employee, being other use that was minor, infrequent and irregular. The Commissioner has looked at how subsection 8(2) of the FBTAA would apply in respect of dual cab vehicles in Miscellaneous Taxation Ruling MT 2024 Fringe benefits tax: dual cab vehicles eligibility for exemption where private use is limited to certain work-related travel . MT 2014 provides a method of determining whether a dual cab 'is designed for the principal purposes of carrying passengers' by examining the total carrying capacity and the passenger carrying capacity. However the Commissioner has also determined that this method only applies to dual cab vehicles. This determination is contained in paragraph 1 of Taxation Determination TD 94/19 Fringe benefits tax: is the method outlined in Taxation Ruling MT 2024 appropriate for determining whether a vehicle, other than a dual or crew cab, is 'designed for the principal purpose of carrying passengers' and thereby ineligible for the work-related use exemption available under subsection 8(2) of the Fringe Benefits Tax Assessment Act 1986?. In this case neither the 20XX GLX-R or the 20XX GLX is a dual cab so the method contained in MT 2024 cannot be used to determine if either vehicle 'is designed for the principal purposes of carrying passengers'. In respect of vehicles that are not dual cabs and whether they are designed for the principal purposes of carrying passengers paragraph 2 of TD 94/19 states: In determining the principal purpose for which any other vehicle was designed, regard should be had to factors including, but not limited to, the following: • the appearance and presentation of the vehicle • any relevant promotional literature • the emphasis evident in marketing • the vehicle's specifications • load carrying capacity • passenger carrying capacity The Commissioner has already applied these factors when looking at earlier Pajero models (which are listed in the facts above). In these earlier models the Commissioner has concluded that the 5 seat models would be eligible for the exemption under subsection 8(2) of the FBTAA but the 7 seat models would not be eligible for the exemption. In other words he has concluded that the 7 seat models were designed for the principal purposes of carrying passengers but the 5 seat models were not. In looking at the factors in paragraph 2 of TD 94/19 it is the third row of seating in the design of the 20XX GLX-R (and the earlier 7 seat models), that results in it being 'a vehicle designed for the principal purpose of carrying passengers'. In looking at the two models under review here the specifications are identical in respect of load carrying capacity. They also have the same cargo capacity (where the seats are folded away). In the 20XX GLX (and the earlier 5 seat models) the lack of the extra row of seats means that as part of the design of this model is an area exclusively available for cargo. In looking at the carrying capacity of 740/750 kilograms (and removing the Australian design standard of 68 kilograms per person), this cargo area is able to carry 400/410 kilograms of cargo. In the 20XX GLX-R the area available exclusively for cargo is reduced. Part of the area exclusively available in the 2014GLX can carry passengers in the 20XX GLX-R. In addition the weight of cargo that can be carried when the 2014 GLX-R (when carrying 7 people) is reduced to 264/274 kilograms. In other words the 20XX GLX-R offers an extra level of versatility absent in the 2014 GLX but that versatility is its ability to carry more passengers. The ability to be able to fold the seats to increase the cargo capacity does not alter the overall design which allows the 7 seat model to carry an extra row of passengers. Therefore it can be concluded that the 20XX GLX-R is designed for the principal purposes of carrying passengers and is not eligible for the exemption under subsection 8(2) of the FBTAA. In respect of the 20XX GLX although it is designed to carry 5 people it (along with the other 5 seat Pajero models) is not principally designed to carry those 5 people. Therefore the 20XX GLX is eligible for the exemption under subsection 8(2) of the FBTAA.