Private ruling: FBT - car benefits
Date of advice: 22 July 2025
Published: 15 September 2025
Date scheme commenced: XX June 20XX

Ruling: Q1: Does a fringe benefit under subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) arise when a vehicle that is held by the Employer is used by the Employee for private purposes? | A1: Yes. | Q2: If the answer to Question 1 is 'Yes', does a 'car benefit' under subsection 7(1) of the FBTAA arise when a vehicle that is held by the Employer is used by the Employee for private purposes? | A2: Yes. This private ruling applies for the following periods: Fringe Benefits Tax (FBT) year ended 31 March 2021 FBT year ended 31 March 20YY FBT year ended 31 March 20YY FBT year ended 31 March 20YY FBT year ended 31 March 20YY FBT year ended 31 March 20YY The scheme commenced on: XX June 20XX

Relevant facts and circumstances: The Employee is the sole director and a shareholder of the Employer. The Employer purchased a vehicle on or around XX June 20XX, with $X paid by the Employee, and $X financed through a car loan under the Employer's name. From the date of the vehicle's purchase, the Employee used the vehicle exclusively for private purposes. The vehicle was purchased and registered in the Employer's name rather than in the Employee's name as it was recommended by the loan broker as an easier way to obtain the car loan. The Employee personally paid all other operating costs of the vehicle, including fuel, repairs and maintenance. The Employer paid for the vehicle's registration and loan repayments of $X monthly for X months. The loan had a X-month term. By the end of the loan term, the Employee personally paid off the balance of the car loan, being $X along with the final monthly loan repayment amount of $X. The Employer did not claim any expenses in relation to the vehicle provided to the Employee in any of its income tax returns for the relevant periods. The Employee did not pay the Employer any lease fees for the right to use the vehicle for private purposes. The Employer paid the Employee salary or wages for the services provided to the Employer's business. The Employer deducted Pay As You Go (PAYG) Withholding from the salary or wages paid to the Employee. In relation to the provision of the vehicle, there was no loan agreement between the Employer and the Employee in the Employee's capacity as a shareholder.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 Subsection 7(1) | Fringe Benefits Tax Assessment Act 1986 Subsection 136(1) | Income Tax Assessment Act 1997 Subsection 995-1(1) | Taxation Administration Act 1953 Schedule 1 Section 12-35

Reasons for decision: Summary: Yes. A 'fringe benefit' as defined in subsection 136(1) of the FBTAA arises when the vehicle that is held by the Employer is used by the Employee for private purposes. | Detailed Reasoning - Detailed reasoning: A 'fringe benefit' is defined in subsection 136(1) of the FBTAA, which requires the following conditions to be satisfied: 1. A benefit is provided at any time during the year of tax. 2. The benefit is provided to an employee or an associate of the employee. 3. The benefit is provided by: (i) their employer; or (ii) an associate of the employer; or (iii) a third party other than the employer or an associate under an arrangement between the employer or associate of the employer and the third party; or (iv) a third party other than the employer or an associate of the employer, if the employer or an associate of the employer: (A) participates in or facilitates the provision or receipt of the benefit; or (B) participates in, facilitates or promotes a scheme or plan involving the provision of the benefit; and the employer or associate knows, or ought reasonably to know, that the employer or associate is doing so; 4. The benefit is provided in respect of the employment of the employee. 5. The benefit is not one that is specifically excluded as per paragraphs (f) to (s) of the definition of a fringe benefit in subsection 136(1). A discussion is provided below in respect of whether each element or condition of the definition of a 'fringe benefit' is satisfied. | Detailed Reasoning - Is a benefit provided?: Subsection 136(1) of the FBTAA provides a broad definition of a 'benefit' as: any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under: (a) an arrangement for or in relation to: (i) the performance of work (including work of a professional nature), whether with or without the provision of property; ... The definitions of 'provide' and 'provider' in subsection 136(1) of the FBTAA are as follows: | Detailed Reasoning - provide:: (a) in relation to a benefit - includes allow, confer, give, grant or perform; and (b) ... provider, in relation to a benefit, means the person who provides the benefit. The Employee was provided with the right to use the Employer's vehicle for private purposes without paying a leasing fee under an arrangement for or in relation to the performance of the Employee's work. This constitutes the provision of a 'benefit' as defined in subsection 136(1) of the FBTAA. | Detailed Reasoning - Is a benefit provided to an employee or an associate of an employee?: An employee is defined in subsection 136(1) of the FBTAA to include a current, future and former employee. Subsection 136(1) defines a 'current employee' to mean a person who receives, or is entitled to receive, salary or wages. 'Salary or wages', as defined in subsection 136(1) of the FBTAA, means payments from which an amount must be withheld under section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA). The Employee is paid salary or wages from which an amount is withheld by the Employer under section 12-35 of Schedule 1 to the TAA. The Employee is therefore considered to be a 'current employee' of the Employer as that term is defined in subsection 136(1) of the FBTAA. As the benefit is provided to an employee of the Employer, this condition is therefore satisfied. | Detailed Reasoning - Is the benefit provided by an employer, an associate of the employer or a third party?: The term 'employer' is defined in subsection 136(1) of the FBTAA to mean a current, future or former employer. Subsection 136(1) of the FBTAA defines a 'current employer' to mean a person who pays, or is liable to pay, salary or wages.As per the Facts, the Employer pays salary or wages to the Employee and thus meets the definition of an 'employer' in subsection 136(1) of the FBTAA. Therefore, as the benefit is provided by the Employer (the Employee's employer), this condition is satisfied. | Detailed Reasoning - Is the benefit provided in respect of employment?: As per subsection 136(1) of the FBTAA, the term 'in respect of', in relation to the employment of an employee, includes by reason of, by virtue of, or for or in relation directly or indirectly to, that employment. Subsection 148(1) of the FBTAA stipulates that a benefit will be provided in respect of the employment of an employee: • whether or not the benefit also relates to some other matter or thing • whether the employment is past, present or future • whether or not the benefit is surplus to the recipient's requirements • whether or not the benefit is also provided to another person • whether or not the benefit is offset by any inconvenience or disadvantage • whether or not the benefit is provided or used, or required to be provided or used, in connection with any employment • whether or not the provision of the benefit is in the nature of income, and • whether or not the benefit is provided as a reward for services rendered, or to be rendered, by the employee. In J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22 ( Knowles ), the full Federal Court - in examining the meaning of 'in respect of' an employee's employment - held that the phrase required a 'nexus, some discernible and rational link, between the benefit and employment', though noted that 'what must be established is whether there is a sufficient or material, rather than a causal, connection or relationship between the benefit and the employment'. A similar view was also held in Essenbourne Pty Ltd v FC of T 2002 ATC 5201 and Starrim Pty Ltd v FCT (2000) 102 FCR 194; [2000] FCA 952; 2000 ATC 4460; (2000) 44 ATR 487. The full Federal Court in Knowles also suggested that it would be useful to ask 'whether the benefit is a product or incident of the employment'. To establish whether a sufficient or material connection exists between the provision of the benefit (that is, the right to use the vehicle for private purposes) and the employment of the Employee, it is necessary to consider the circumstances in which the benefit has been provided. If it were not for the employment relationship between the Employer and the Employee, where the Employee was involved in the day-to-day operation of the Employer's business, the Employee would not have received the benefit. Therefore, the connection between the benefit received by the Employee and the Employee's employment is material and sufficient. On this basis, the benefit provided to the Employee would be considered to be 'in respect of the employee's employment'. As such, this condition is satisfied. | Detailed Reasoning - Is the benefit excluded from the definition of a 'fringe benefit'?: A benefit which comes within paragraphs (f) to (s) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA is excluded from being a fringe benefit. It is considered that the benefit provided by the Employer in the current circumstances is not one that is specifically excluded as per paragraphs (f) to (s) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA. Therefore, this condition is satisfied. | Detailed Reasoning - Conclusion: Each of the relevant condition of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA is satisfied. Therefore, when a vehicle that is held by the Employer is used by the Employee for private purposes, a 'fringe benefit' as defined in subsection 136(1) of the FBTAA will arise. | Detailed Reasoning - Question 2: If the answer to Question 1 is 'Yes', does a 'car benefit' under subsection 7(1) of the FBTAA arise when a vehicle that is held by the Employer is used by the Employee for private purposes? | Summary: Yes. A 'car benefit' as defined in subsection 7(1) of the FBTAA arises when the vehicle that is held by the Employer is used by the Employee for private purposes. | Detailed Reasoning - Detailed reasoning: A 'car benefit' is defined in subsection 136(1) of the FBTAA to mean a benefit referred to in subsection 7(1) of the FBTAA. Subsection 7(1) of the FBTAA describes what constitutes a 'car benefit': Where: (a) at any time on a day, in respect of the employment of an employee, a car held by a person (in this subsection referred to as the provider): (i) is applied to a private use by the employee or an associate of the employee; or (ii) is taken to be available for the private use of the employee or an associate of the employee; and (b) either of the following conditions is satisfied: (i) the provider is the employer, or an associate of the employer, of the employee; (ii) the car is so applied or available, as the case may be, under an arrangement between: (A) the provider or another person; and (B) the employer, or an associate of the employer, of the employee; that application or availability of the car shall be taken to constitute a benefit provided on that day by the provider to the employee or associate in respect of the employment of the employee. Under the above definition, a 'car benefit' arises if: 1. an employee or an associate of the employee is provided with a car • Subsection 136(1) of the FBTAA provides that a 'car' has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). A 'car' is defined in subsection 995-1(1) of the ITAA 1997 to mean 'a motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers'. 2. the car is held by the employer (or an associate, or a third party under an arrangement). • A car is 'held' where the car is owned, leased (or let on hire) or otherwise made available to the employer (or an associate, or a third party under an arrangement). 3. The car is either: (a) applied to a private use by the employee or associate of the employee, or (b) taken to be available for the private use of the employee or associate of the employee. | Detailed Reasoning - When does an employee apply a car for private use?: Private use is everything else other than in the exclusive course of working, running a business or otherwise earning income. This means that private use of a car includes any use that is dual purpose and has both private and business aspects to it. The term 'applied' means actual private use of the car by the employee or where the employee (or a third party) has used the car in accordance with the directions given by the employer or another person that the car be used for their private use. Private use means any use. It does not just mean driving the car. | Detailed Reasoning - When is a car 'taken to be available' for private use?: A car benefit can arise where a car is taken to be, or made available, for the employee's private use (whether or not the employee actually uses it). Two circumstances commonly arise where a car is made available to the employee for private use: • the car is garaged or kept at or near the employee's residence • the car is not at the employer's business premises and the employee has use, custody or control of the car, or is entitled to use it for their private use. A car will not be taken to be available for the employee's private use where: • the car is somewhere other than the employer's business premises (such as in a commercial storage facility) • the custody and control of the car has been removed from the employee, and • the employee is not entitled to use the car for private use. A car can be taken to be available for private use even where the car is used in accordance with the directions, instructions or wishes of a person (including an employer or their associate, employee or another person). If an employer has rules in place to disallow private use of company or business cars, they must be clear and straightforward. A general instruction or understanding between the employer and the employee is not sufficient. It is recommended that employers: • put these rules in writing • have a plan or course of action that checks and verifies odometer readings and private use, and • always enforce these rules against private use. A car benefit will not arise if the employer removes custody and control of the car from the employee. An employee must relinquish possession (for example, by surrendering the keys) to divest themselves of custody and control. Where a car is in a workshop for extensive repairs (for example, following a motor vehicle accident) it is not available for private use of the employee. However, a car is considered to be available for private use where it is in the workshop for routine servicing or maintenance. In the current circumstances, it is considered that: 1. the Employee is provided with a vehicle which constitutes a 'car' as defined in subsection 995-1(1) of the ITAA 1997 2. the car is 'held' by the Employer because the Employer is the legal owner of the car, and 3. the car is either applied to a private use by the Employee, or taken to be available for the private use of the Employee. Therefore, as all of the conditions in subsection 7(1) of the FBTAA are satisfied, it is accepted that a 'car benefit' arises when the car that is held by the Employer is used by the Employee for private purposes.