Private ruling: pooled cars and the reportable fringe benefits exclusions
Published: February 2012
Ruling period: Year ended 31 March 2013 | Year ended 31 March 2014 | Year ended 31 March 2015
Date scheme commenced: 1 April 2008

Ruling: Q1: Is the car benefit provided to two or more employees, considered to be excluded fringe benefit to both employees as prescribed by Regulation 3F of the Fringe Benefits Tax Regulations 1992 (FBTR), where the cars are swapped between the two employees, to maximise car fleet usage, under the direction or consent of the employer during the same FBT year? | A1: Yes

Relevant facts and circumstances: The employer has a written agreement with employees who are entitled for the private use of a car. The employer owns the cars, which are part of a fleet of vehicles. A specific car is assigned to an employee who as part of the agreement agrees to travel 25,000 kilometres within a fringe benefits tax (FBT) year. Where a car is likely not to travel 25,000 kilometres it may be swapped with another employees car for a period of time so as to ensure that the car travels at least 25,000 kilometres. The alternative is that the employee make a post tax employee contribution to reduce the FBT liability to the same as if the car had achieved 25,000 kilometres. Car benefits are calculated using the statutory formula method and when the agreement was drafted the 25,000 kilometre target was the point where statutory percentage changed from 20% to 11%.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 (FBTAA) section 5E FBTAA Section 7. | FBTAA Section 9. | FBTAA Section 135P. | FBTR Regulation 3F

Reasons for decision: Summary: Regulation 3F of the FBTR states 3F(1) For paragraph 5E(3)(i) of the Act, a benefit is an excluded fringe benefit if, during a year of tax: (a) the benefit is a car benefit, as described in subsection 7(1) of the Act, that is: (i) a fringe benefit within the meaning of subsection 136(1) of the Act; or (ii) a benefit that: (A) is an exempt benefit; and (B) would have been a fringe benefit except that the benefit is an exempt benefit; and (b) the car benefit relates to a car the provision of which gives rise to the benefit described in paragraph (a) for more than 1 employee. Example: The employer of 3 employees makes 1 car available to the employees, for private use, at different times during the year of tax. 3F(2) The fringe benefit is an excluded fringe benefit in relation to each of those employees. 3F(3) The fringe benefit is an excluded fringe benefit in relation to: (a) the year of tax starting on 1 April 2007; and (b) each later year of tax. This regulation has the effect of excluding car benefits in accordance with paragraph 5E(3)(i) of the FBTAA that arise for cars that an employer has made available for the private use of more than one employee throughout a FBT year when determining the employee's individual fringe benefits amount under section 5E of the FBTAA.. This has a flow on effect when determining the employee's reportable fringe benefits amount under section 135P of the FBTAA as although FBT is still payable on the car benefits provided the taxable value of the car benefits will be excluded from the reportable fringe benefits calculation. In this case an employee is allocated a car for their private use outside of business hours. Under section 7 of the FBTAA a car benefit arises where a car is made available for the private use of an employee. Therefore when an employee is provided the use of a car a car benefit will arise. The employer uses the statutory formula method contained in section 9 of the FBTAA to calculate their car benefits and under the agreement the employee agrees to travel 25,000 kilometres within an FBT year. If the employee is notified that they may not reach this target and then arranges a swap with another employee who is ahead of their target then the swap will result in the car benefit that arises from the use of both cars being provided to more than one employee. Once the swap is made all the requirements under regulation 3F(1) of the FBTR will have been satisfied and the car benefits are excluded from the reportable fringe benefits amount and not shown on the either employee's payment summaries. | Detailed Reasoning - Note:: The 25,000 kilometre target was the point where statutory percentage changed from 20% to 11%. However this is being phased out with a flat 20% applying to new car commitments (new referring to commitment and not car) entered into from 1 April 2014. In addition for new car commitments entered into from 1 April 2013 the statutory for kilometres travelled up 40,000 kilometres will be 20%.

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