Private ruling: Fringe Benefits Tax - Provision of Motor Vehicles to Outreach Employees
Date of advice: 19 July 2016
Published: August 2016
Ruling period: 1 April 2016 to 31 March 2017 | 1 April 2017 to 31 March 2018 | 1 April 2018 to 31 March 2019 | 1 April 2019 to 31 March 2020
Date scheme commenced: 1 April 2011

Ruling: Q1: Is travelling from an outreach employee's home to a client and from the client to the outreach employee's home considered business use for the purposes of section 10 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Yes.

Relevant facts and circumstances: 1. We are a public benevolent institution. 2. We support the recovery of people living with health issues. 3. We operate in most Australian States and propose to open in others. 4. As part of our operations, we conduct an outreach service whereby our employees make regular home visits to clients. 5. The role of an outreach employee is to visit clients at their place of residence. An outreach employee may also take clients out shopping and to various appointments the client may have including medical appointments. 6. We own a fleet of motor cars which we make available to outreach employees to enable them to fulfil their employment duties. 7. We currently service clients throughout metropolitan and regional areas. 8. Outreach employees travel extensively around these areas in company cars to visit clients. 9. Depending on the time spent with each client, an outreach employee could visit a minimum of four clients per day. 10. To date, most outreach employees have commenced their working day driving their personal vehicle to our office to pick up a company car. These outreach employees will then use the company car to visit clients and return the company car to our office at the end of the day before returning home using their personal vehicle. 11. A small number of outreach employees commence their working day by driving to a client using a company car and not at the office. These employees garage the company car at their home outside of business hours. 12. We are commencing a new service delivery model where all outreach employees throughout Australia will garage company cars at their home and then travel directly from their home to a client and back home. 13. When company cars are garaged at the home of the outreach employee after hours, outreach employees do not have the right to any personal use of the car after hours. This is consistently enforced. 14. Other than office visits at the beginning and end of each working day to pick up company cars, outreach employees generally only visit our office once per week to attend team meetings. 15. Excluding team meetings and picking up or returning a company car, the time an outreach employee would spend at the office during an office visit would generally be less than one hour. During that time, the outreach employee would generally prepare case note entries for clients visited and pick up items from the office. 16. Outreach employees do not have a designated desk space at our office. They operate a 'hot desk' system. While these employees are required to attend our office for meetings, supervision and to pick-up/return the company car, their main role is to make home visits to clients. 17. Travel is a fundamental part of each outreach employee's employment with us. 18. Outreach employees do not get paid a travel allowance. 19. We require all outreach employees maintain vehicle log books to evidence their visits to clients. As part of the procedures to ensure employees are complying with record keeping requirements regarding the log book record of car use: • quarterly checks are undertaken on motor vehicles. This is completed by service managers who also check the log books as part of the inspection • managers check the odometer readings to ensure the vehicle is not being used for non-work related purposes • the fleet department checks the reports from fuel companies and perform a reasonable test to ensure there is no excessive use of fuel • reconciliation between our data base and log books is performed to confirm that travel is work related, and • when employees go on leave, company cars are left at work premises. 20. We are introducing a new service delivery model, so that: • all outreach employees throughout Australia will commence their working day driving to a client visit from home using a company car • company cars will be required to be garaged at the outreach employee's home after hours • outreach employees will generally only visit the office once per week for team meetings, and • all states and territories in Australia will align with the current practice and provide consistency for all our employees.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 Section 7 | Fringe Benefits Tax Assessment Act 1986 Section 10 | Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision: Detailed Reasoning - Detailed reasoning: Section 7 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) sets out the circumstances in which the use of a car will be a taxable fringe benefit. Subsection 7(1) of the FBTAA provides that where a car is made available to an employee (or associate) in respect of their employment and is applied for private use or is available for private use by the employee (or associate), the private use or availability is a benefit provided by the employer. In terms of subsection 7(1): [Car applied to, available for employee's private use] 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 associate of the employee; or (ii) is taken to be available for the private use of the employee or of 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 an associate in respect of the employment of the employee. Subsection 7(2) of the FBTAA provides that where a car is garaged at or near an employee's (or associate's) residence, the car is taken to be available at that time for the private use of the employee (or associate). Additionally, under subsection 7(3) of the FBTAA, where the car is not garaged at the business premises of the employer (or an associate of the employer or with whom the employer has an arrangement) and (c) any of the following conditions is satisfied: (i) the employee is entitled to apply the car to a private use; (ii) the employee is not performing the duties of his or her employment and has custody or control of the car; (iii) an associate of the employee is entitled to use, or has custody or control of, the car; the car shall be taken, … to be available … for private use of the employee (or associate)… . Where a contract or agreement between the employee and employer prohibits the application of the car to private use, subsection 7(4) of the FBTAA provides that unless the prohibition is consistently enforced, the employee shall be deemed to be entitled to use the car for private use notwithstanding the prohibition. In your case, under the new delivery service model, company cars will be required to be garaged at the outreach employee's home after hours. Under this proposal, employees do not have the right to any personal use of the car after hours and this will be consistently enforced. Therefore, it is considered that a company car garaged at an outreach employee's home will not be available for private use under section 7 of the FBTAA and will not be subject to car fringe benefits. When outreach employees drive a car provided by you from their homes to their clients' homes at the start of the day and then returning from their clients' homes to their homes at the end of the day, those journeys would be travel to and from work and therefore private use of the car. Therefore, the car benefit is a 'car fringe benefit' within the meaning of subsection 136(1) of the FBTAA. The distinction between business and private use of a car in circumstances where the car is being driven to or from the employee's home is now considered. The term 'private use' is defined in subsection 136(1) of the FBTAA to mean, in relation to a motor vehicle, any use by the employee or associate 'that is not exclusively in the course of producing assessable income of the employee'. Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel (MT 2027) explains the relationship between private use and business use for fringe benefits tax purposes. The guidelines are drawn from established income tax principles. Paragraph 14 of MT 2027 explains the general rule: As discussed in Taxation Ruling IT 112, the decision in Lunney and Hayley v FCT (1958) 100 CLR affirmed the position that travel between home and a person's regular place of employment or business is ordinarily private travel. There are exceptions to the general rule which include: • travel while on stand-by duty • travel between places of employment/business • employment duties of an itinerant nature • business trip on way to or from work • travel incorporating the transport of equipment and • certain sportsmen and shearers. Paragraph 25 of MT 2027 states: It has long been acknowledged that travel from an employee's home may constitute business travel where the nature of the office or employment is inherently itinerant (see, for example, the comments of Lords Wilberforce and Simon in Taylor v Provan (1975) AC 194 at pages 1213 and 1219 respectively). More recently, this issue was addressed in Australia in FCT v Wiener , 78 ATC 4006; 8 ATR 335 (Wiener's case ) , from which the following guidelines for the application of the principle have been adopted (see Taxation Ruling IT 2122). These are that travel will be indicated as business travel where the nature of the office or employment is such that: (a) it is inherently itinerant; (b) travel is a fundamental part of the employee's work; (c) it is impractical for the employee to perform the duties without the use of a car; (d) the terms of employment require the employee to perform duties at more than one place of employment; (e) the nature of the job itself makes travel in the performance of duties essential; and (f) it can be said of the employee that he or she is travelling in the performance of the employment duties from the time of leaving home. Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses (TR 95/34), provides further guidance as to when an employee's work is itinerant. Paragraph 7 of TR 95/34 states: There have been a number of cases considered by the Courts, Boards of Review and Administrative Appeals Tribunal where deductions for transport expenses were allowed on the basis of the taxpayers' 'shifting places of work'. 'Shifting places of work' is another term for itinerancy. In these cases the obligation to incur the transport expenses arose from the nature of the taxpayers' work, such that they were considered to be travelling in the performance of their duties from the moment of leaving home. The following characteristics have emerged from these cases as being indicators of itinerancy: (a) travel is a fundamental part of the employee's work… (b) the existence of a 'web' of work places in the employee's regular employment, that is, the employee has no fixed place of work… (c) the employee continually travels from one work site to another. An employee must regularly work at more than one work site before returning to his or her usual place of residence… (d) other factors that may indicate itinerancy (to a lesser degree) include: (i) the employee has a degree of uncertainty of location in his or her employment (that is, no long term plan and no regular pattern exists)… (ii) the employee's home constitutes a base of operations… (iii) the employee has to carry bulky equipment from home to different work sites… (iv) the employer provides an allowance in recognition of the employee's need to travel continually between different work sites… Importantly, TR 95/34 considers that the above characteristics are: • not exhaustive • no single factor on its own is decisive • the individual's occupation or industry does not determine if they are engaged in itinerant work, it is the nature of the individual's duties that determines it, and • itinerant work may be permanent or temporary in an employee's duties. The characteristics mentioned in MT 2027 and TR 95/34 are considered in your case as follows: | Detailed Reasoning - Travel a fundamental part of employee's work: The ATO publication Fringe benefits tax: a guide for employers in Chapter 7.5 considers employment duties of an itinerant nature and states: Travel from an employee's home may be considered business travel where the nature of the office or employment is itinerant. Examples include commercial travellers and government inspectors whose homes are a base of operations, from which they travel to one of a number of locations throughout the day, over a continuing period. Commonly, in these cases the employee works at the employer's office periodically (for example, once a week) to complete or file reports, pick up supplies or organise future trips. Travel between home and the office made in these limited circumstances is accepted as an ordinary incident of the business travel and, as such, is also treated as business travel. On the basis that outreach employees do not travel to the same locations each day and are required to visit several locations during a day demonstrates the nature of the job requires travel. It is impractical for them to perform all of their duties without the use of a vehicle. Therefore this requirement is satisfied. | Detailed Reasoning - Web of work places or employee has no fixed place of work: A web of work places exists where the employee performs duties at several work sites in a day. Paragraph 28 of TR 95/34 refers to Weiner's case for an example of a 'web' of work places where a teacher was required to instruct pupils at four to five different schools each day. In your case, there is no degree of certainty about where outreach employees may be physically located on any given day. The nature of work requires outreach employees to travel to several workplaces which would be considered to be a 'web' of workplaces (refer to paragraph 30 of TR 95/34). Therefore this requirement is satisfied. | Detailed Reasoning - Continual travel from one worksite to another: Paragraph 34 of TR 95/34 states: In certain work situations continual unsettled travel from one work place to another is a common factor. In some instances, an employee's ongoing engagement may require him or her to attend various sites in different localities nominated by the employer. In most such cases the need to travel from place to place would be a necessary condition of employment. As outreach employees attend to several different clients in a typical day, it is considered their travel is continually unsettled. Therefore this requirement is satisfied. | Detailed Reasoning - Other factors: (i) Uncertainty of location TR 95/34 refers to Case T106 86 ATC 1192; AAT Case 17 (1987) 18 ATR 3093 (case T106) where an 'off-sider' in the building industry was required to be continually dispatched to sites at various locations as an example of a taxpayer's employment being of an itinerant nature. On the basis that outreach employees attend to several clients in a typical day, it is considered they would not have the continual certainty of the places to which they are directed to travel. Therefore this requirement is satisfied. (ii) Home as a base of operations TR 95/34 at paragraph 56 states: An employee's home may constitute a base of operations if the work is commenced at or before the time of leaving home to travel to work and the responsibility for completing it is not discharged until the taxpayer attends at the work site. Whether an employee's home constitutes a base of operations depends on the nature and the extent of the activities undertaken by the employee at home. As outreach employees most likely conduct various administrative duties at home in a typical day such as making appointments and reviewing case studies, it is considered that their home would be a base of operations. Therefore this requirement is satisfied. (iii) Requirement to carry bulky equipment Paragraph 63 of TR 95/34 explains that if the transport of bulky equipment is the necessary reason for incurring transport costs, rather than any private reasons, then those costs may be allowable as deductions. It is not known in your case whether outreach employees carry bulky equipment although it would be assumed that it is not likely. Therefore, this characteristic is not satisfied. (iv) The employer provides an allowance You do not provide any travel or motor vehicle allowances as you provide outreach employees with the exclusive use of your motor vehicles. Therefore, this characteristic is not satisfied. Paragraph 72 of TR 95/34 confirms that the payment of an allowance would not by itself indicate that travelling is a necessary element of employment. The payment or absence of an allowance is just one of the many factors to be considered when determining whether the employment is itinerant in nature. Therefore, the absence of an allowance neither supports nor denies a conclusion that the duties are itinerant in nature. It is considered that the use of the vehicles by outreach employees satisfies the majority of the characteristics mentioned in MT 2027 and TR 95/34 as outlined above. Therefore, the duties of the outreach employees have been found to be of an itinerant nature. As outreach employees are considered itinerant employees, the private travel, that is, the journeys to and from home to work will be considered business journeys in accordance with the principle discussed in Wiener and MT 2027. Each journey is a 'business journey' as defined in subsection 136(1) of the FBTAA. The term business journey is defined in subsection 136(1) as: business journey means: (a) for the purposes of the application of Division 2 of Part III in relation to a car fringe benefit in relation to an employer in relation to a car - a journey undertaken in a car otherwise than in the application of the car to a private use, being an application that results in the provision of a fringe benefit in relation to the employer, … Accordingly, for the purposes of calculating the taxable value of car fringe benefits under the operating cost method pursuant to section 10 of the FBTAA, you can classify those journeys as business. For the purposes of section 10 of the FBTAA, travel to and from the home of a client by an outreach employee is a business journey. As a result, all travel undertaken by the outreach employee in the car is classified as being a business journey. The FBTAA provides two alternative methods of valuing the benefit. It is common to both methods that private use of the car by employees (or their associates) be identified. Under the operating cost method of valuation established by section 10 of the FBTAA, the value of the benefit is determined by apportioning the total operating cost (as specified in that section) according to the proportion that the private kilometres travelled by employees in the car bears to the total kilometres travelled in the car. For these purposes the number of private kilometres is determined by subtracting from the total kilometres travelled in the car the number of kilometres travelled on business journeys as evidenced by log book entries. In terms of the formula in section 10 of the FBTAA, the number of business kilometres travelled by the car during the holding period and the total number of kilometres travelled by the car during the holding period would be the same so that the business use percentage would be 100%.