Private ruling: Fringe benefit tax
Published: 30 March 2026
Date scheme commenced: 1 April 20XX

Ruling: Q1: In circumstances where a caravan owned by the Employer is made available for the Employees' private use, will this give rise to a 'fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Yes. | Q2: In circumstances where a caravan is owned by the Employer is stored at the Employees' residential premises during periods when the caravan is not being used for either business or private purposes, will this give rise to a 'fringe benefit' as defined in subsection 136(1) of the FBTAA? | A2: No. | Q3: If the answer to question 1 is 'Yes', would the fringe benefit constitute a 'residual fringe benefit' as defined in subsection 136(1) of the FBTAA? | A3: Yes. | Q4: If the answer to Question 2 is 'Yes', would the fringe benefit constitute a 'residual fringe benefit' as defined in subsection 136(1) of the FBTAA? | A4: Not applicable. | Q5: If the answer to Question 3 is 'Yes', would the market-rate rental fee paid by the Employer for the private use of the caravan constitute a 'recipient's contribution' for the purposes of calculating the taxable value of the external period residual fringe benefit under section 51 of the FBTAA? | A5: Yes. | Q6: Can the Employer claim deductions for the decline in value of the caravan under Division 40 of the Income Tax Assessment Act 1997( ITAA 1997) ? | A6: Yes. | Q7: What effective life will apply when calculating deductions for the decline in value of the caravan under Division 40 of the ITAA 1997? | A7: The Employer must self-assess the effective life of the caravan. | Q8: Will the mere storage of the caravan at the residential premises of the Employees, when not being used for business or private purposes, affect deductibility for the decline in value of the caravan under Division 40 of the ITAA 1997? | A8: No. | Q9: Will the Employer be entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 on the purchase of a caravan? | A9: Yes. This private ruling applies for the following period: For Fringe Benefit Tax (FBT) purposes FBT year ending 31 March 20XX FBT year ending 31 March 20XX FBT year ending 31 March 20XX FBT Year ending 31 March 20XX FBT Year ending 31 March 20XX For Income Tax and Goods and Services (GST) purposes Income Year 1 July 2025 to 30 June 20XX Income Year 1 July 2026 to 30 June 20XX Income Year 1 July 2027 to 30 June 20XX

Relevant facts and circumstances: 16. The Employer has two directors and shareholders (the Employees) 17. The Employer operates a finance brokerage and bookkeeping enterprise providing services to a wide range of clients including a number of clients located in regional and remote areas of Western Australia. 18. The Employer has been registered for Goods and Services Tax (GST) since 1 July 20XX. 19. The Employer operates in metropolitan and rural Western Australia. 20. The Employer is considering the purchase of a caravan for use in both a business and private context. 21. The caravan is expected to cost approximately $90,000 (inclusive of GST). 22. Due to the geographically dispersed nature of the client base, the caravan is intended to serve as a mobile office and accommodation facility to enable the Employees to travel and stay in rural areas to meet with clients, attend events, and conduct on-site consultations. 23. In addition to the business use, the caravan will be also used occasionally for private purposes for short-term accommodation by the Employees. In such instances, the Employees will pay the Employer a market rate rental fee inclusive of GST. 24. The rental fee will be calculated on a per-day basis, based on independent third-party pricing or an appropriate valuation method to reflect the arm's length nature of the transaction, and these payments will be recorded and invoiced accordingly to mitigate Fringe Benefit Tax (FBT) exposure 25. When not in use for either business or private purposes, the caravan will be stored at the residential property of the Employees. 26. During storage, access to the caravan will be restricted and it will not be available for private use unless formally booked and invoiced through the Employer. 27. It is expected that the caravan will be used for business purposes 8 weeks a year, private purposes 8 weeks a year and the remaining 36 weeks it will be stored at the Employee's residential address. 28. The Employer makes taxable finance brokerage services and taxable bookkeeping services. 29. The daily rental fee for short-term accommodation also is a taxable supply. 30. The Employer does not make any input taxed supplies.


Reasons for decision: Summary: A 'fringe benefit' as defined in subsection 136(1) of the FBTAA will arise in circumstances where a caravan owned by the Employer is made available for the Employees' private use. | Detailed Reasoning - Detailed Reasoning: A 'fringe benefit' is defined in subsection 136(1) of the FBTAA. Broadly a 'fringe benefit' arises when the following condition are satisfied: 6. A benefit is provided at any time during the year of tax. 7. The benefit is provided to an employee or an associate of the employee. 8. 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: (C) participates in or facilitates the provision or receipt of the benefit; or (D) 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; 9. The benefit is provided in respect of the employment of the employee. 10. 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). | 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: (b) an arrangement for or in relation to: (ii) the performance of work (including work of a professional nature), whether with or without the provision of property... In this case, a caravan owned by the Employer is made available for the Employees' private use. This constitutes a 'benefit' as defined in subsection 136(1) of the FBTAA as a right to use the caravan (a benefit) has been arranged to be allowed, given or granted to the Employees. Therefore, this condition in the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA is satisfied. | Detailed Reasoning - Is the 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 . The Employer pays its Employees amounts which constitute 'salary or wages' as defined in the FBTAA. The Employees are therefore the Employer's current employees. Therefore, subsection 136(1) of the FBTA is satisfied. Is the benefit provided by the employer, an associate of the Employer or a third party in a situation that comes within either paragraph (e) or (ea) of the 'fringe benefit' definition? Paragraph (e) and (ea) of the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA provide: (e) a person (in this paragraph referred to as the arranger) other than the employer or an associate of the employer under an arrangement covered by paragraph (a) of the definition of arrangement between: (i) the employer or an associate of the employer; and (ii) the arranger or another person; or (ea) a person other than the employer or an associate of the employer, if the employer or an associate of the employer: (i). participates in or facilitates the provision or receipt of the benefit; or (ii) participates in, facilitates or promotes a scheme or plan involving the provision of the benefit; Furthermore, 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 Employer provided the benefit (being the right to private use of the Employer's caravan) to the Employees. Therefore, this condition in the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA is satisfied. | Detailed Reasoning - Is the benefit provided in respect of the Employees' employment?: In considering whether a benefit is provided to an employee 'in respect' of their employment, subsection 136(1) of the FBTAA defines 'in respect of', in relation to the employment of an employee, to include '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'. The connection between the benefit and the Employees' employment is considered to be material and sufficient, and not merely casual. If it were not the employment relationship between the Employer and the Employees, the Employees would not have received the benefit. Given this connection between the benefit provided and the Employees' employment duties, it is considered that the benefit would be provided 'in respect of the Employees' employment.' Therefore, this condition in the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA is satisfied. | Detailed Reasoning - Is the benefit excluded from the definition of a fringe benefit?: A benefit which comes within paragraphs (f) and (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 would be 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 conditions of the definition of a 'fringe benefit' as defined in subsection 136(1) of the FBTAA are satisfied in the current circumstances, such the Employees' right to private use of the Employers' caravan constitutes a 'fringe benefit.' | Detailed Reasoning - Question 2: In circumstances where a caravan is owned by the Employer is stored at the Employees' residential premises during periods when the caravan is not being used for either business or private purposes, will this give rise to a 'fringe benefit' as defined in subsection 136(1) of the FBTAA? | Summary: A fringe benefit as defined in subsection 136(1) will not arise in circumstances where a caravan owned by the Employer is stored at the Employees' residential premises during periods when the caravan is not being used for either business or private purposes. | Detailed Reasoning - Detailed reasoning: The definition of a 'fringe benefit' was discussed in the response to Question 1. The first condition of the definition of a 'fringe benefit' that is to be satisfied that a benefit is provided. The terms 'benefit' and 'provided' are defined in the response to Question 1. It is considered that, in circumstances where a caravan owned by the Employer is stored at the Employees' residential premises during periods when the caravan is not being used for either business or private purposes, a benefit would not be provided to the Employees. This is because the caravan is merely being stored at the Employees' home and the Employees do not have any private use or enjoyment of the caravan during that period due to access to the caravan being restricted. As per the facts, the caravan will not be available for the Employees' private (or business) use during the period it is stored on the Employees' residential premises unless formally booked and invoiced through the Employer. Therefore, as a benefit would not be provided in these circumstances, a 'fringe benefit' as defined in subsection 136(1) of the FBTAA will not arise. | Detailed Reasoning - Question 3: If the answer to question 1 is 'Yes', would the fringe benefit constitute a 'residual fringe benefit' as defined in subsection 136(1) of the FBTAA? | Summary: In circumstances where a caravan owned by the Employer is made available for the Employees' private use, such a benefit would be a 'residual fringe benefit' as defined in subsection 136(1) of the FBTAA. In particular, it would constitute an external period residual fringe benefit. | Detailed Reasoning - Residual Fringe Benefit: Subsection 136(1) of the FBTAA defines a 'residual fringe benefit' as a fringe benefit that is a residual benefit. The term 'fringe benefit' was defined in the response to Question 1, which concluded that a fringe benefit as defined in subsection 136(1) of the FBTAA will arise in circumstances where a caravan owned by the Employer is made available for the Employees' private use. The meaning of the term 'residual benefit' is considered below. | Detailed Reasoning - Residual Benefit: A benefit is a residual benefit under section 45 of the FBTAA if the benefit does not fit into any of the specific categories of benefits under a provision of Subdivision A of Division 2 to 11 of the FBTAA. In considering whether the benefit (the right to private use of the Employer's caravan) falls within any of the benefits under a provision of Subdivision A of Divisions 2 to 11 of the FBTA, the only category of benefits that may be relevant are 'housing benefits' and 'property benefits.' Would the right to private use of the Employer's caravan constitute a 'housing benefit'? Under section 25 of the FBTAA, a 'housing benefit' will arise where a person grants a 'housing right' to another person as follows: The subsistence during the whole or part of a year of tax of a housing right granted by a person (in this section referred to as the provider) to another person (referred to in this section as the recipient) shall be taken to constitute a benefit provided by the provider to the recipient in respect of that year of tax. A 'housing right' is defined in subsection 136(1) of the FBTAA as meaning a lease or license being granted to a person to occupy or use a unit of accommodation as that person's current usual place of residence: housing right, in relation to a person, means a lease or license granted to the person to occupy or use a unit of accommodation, in so far as that lease or license subsists at a time when the unit of accommodation is the person's usual place of residence. A 'unit of accommodation' is defined in subsection 136(1) of the FBTAA as including a caravan. The FBTAA does not provide a separate definition of the term 'usual place of residence.' However, subsection 136(1) f the FBTAA defines a 'place of residence' to mean: (a) a place at which the person resides; or (b) a place at which the person has sleeping accommodation; whether on a permanent or temporary basis and whether or not a shared basis. In the absence of a legislative reference, it is relevant to refer to the ordinary meaning of the word 'usual.' The Macquarie Dictionary defines 'usual' to mean 'habitual or customary....'. It is accepted that the Employees' usual place of residence is their residential premises. In the current circumstances, the caravan will not be occupied or used by the Employees' as their usual place of residence. This is because the Employees' usual place of residence will be their residential premises. As such, a 'housing right' as defined in subsection 136(1) of the FBTAA is not provided by the Employer to the Employees. In turn, the definition of a 'housing benefit' is also not satisfied as per the definition of that term in section 25 of the FBTAA. Would the right to private use of the Employer's caravan constitute a 'property benefit'? Section 40 of the FBTAA states: Where, at a particular time, a person (in this section referred to as the 'provider') provides property to another person (in this section referred to as the 'recipient'), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time. 'Property' is defined in subsection 136(1) of the FBTAA to include intangible property. The word 'provide', in relation to property, is defined in subsection 136(1) of the FBTAA to mean dispose of (whether by sale, gift, declaration of trust or otherwise), or to have beneficial or legal ownership of the property. In this case, no property is 'provided' by the Employer to the Employees. This is because the Employer retains legal ownership of the caravan and does not transfer any beneficial or legal ownership over to the Employees. In other words, the Employees have not been given the caravan, they have just been allowed to have private use of the caravan for a specified amount of time. On this basis, section 40 of the FBTAA is not satisfied such that the provision by the Employer of a caravan for the Employees' private use would not constitute a 'property benefit.' Therefore, as the benefit provided by the Employer does not fit into any other category of benefits under a provision of Subdivision A of Divisions 2 to 11 of the FBTAA, the benefit will be a residual benefit under section 45 of the FBTAA. Given, as per the response to Question 1, the residual benefit provided is also a fringe benefit, a 'residual fringe benefit' as defined ins subsection 136(1) of the FBTAA will arise in these circumstances. Residual fringe benefits can be separated under four different categories under subsection 136(1) of the FBTAA as: 1. In-house non-period residual fringe benefits 2. In-house period residual fringe benefits 3. External non-period residual fringe benefits; and 4. External period residual fringe benefits. Broadly, an 'in-house residual fringe benefit' is a residual benefit provided by an employer or associate of the employer as part of their business activities. An 'external residual fringe benefit' is a benefit that is not an in-house residual fringe benefit. The distinction between a 'period' and a 'non-period' residual fringe benefit depends on the definition of a 'period residual fringe benefit' in subsection 136(1) and section 149 of the FBTAA. A 'period residual fringe benefit' is defined as a residual fringe benefit that is provided during a period. Under subsection 149(1), a benefit is taken to be provided during a period if, and only if, it is provided and subsists during a period of more than one day and is not deemed to be provided at a particular time or on a particular day. The effect of this is that, generally, where a residual fringe benefit is provide and subsists for more than one day, it is a period residual benefit. Therefore, as the benefit (the right to private use of the Employer's caravan) is not provided by the Employer as part of its everyday business activities, and is provided for more than one day, an external period residual fringe benefit would be provided. | Detailed Reasoning - Question 4: If the answer to Question 2 is 'Yes', would the fringe benefit constitute a 'residual fringe benefit' as defined in subsection 136(1) of the FBTAA? | Summary: As the response to Question 2 is 'No,' a response to Question 4 is not applicable. | Detailed Reasoning - Question 5: If the answer to Question 3 is 'Yes', would the market-rate rental fee paid by the Employer for the private use of the caravan constitute a 'recipient's contribution' for the purposes of calculating the taxable value of the external period residual fringe benefit under section 51 of the FBTAA? | Summary: In circumstances where a caravan is owned by the Employer is made available for the Employees' private use, the market-rate rental fee paid by the Employees for the private use of the caravan constitutes a 'recipient's contribution' for the purposes of calculating the taxable value of the external period residual fringe benefit under section 51 of the FBTAA. | Detailed Reasoning - Detailed Reasoning: As concluded in the response to Question 3, the benefit provided by the Employees constitutes an external period residual fringe benefit. The taxable value of an external period residual fringe benefit is determined in accordance with section 51 of the FBTAA which states: Subject to this Part, the taxable value of an external period residual benefit in relation to an employer in relation to a year of tax is: e) where the provider was the employer or an associate of the employer and the recipients overall benefit was purchased by the provider under an arms length transaction - the amount paid or payable by the provider in respect of the recipients current benefit; f) where the provider was not the employer or an associate of the employer and the employer, or an associate of the employer, incurred expenditure to the provider under an arm ' s length transaction in respect of the provision of the recipients current benefit - the amount of that expenditure; or g) in any other case - the notional value of the recipients current benefit; h) reduced by the amount of the recipients contribution insofar as it relates to the recipients current benefit. The 'recipients overall benefit' is defined in subsection 136(1) of the FBTAA to mean the benefit to which the fringe benefit relates, including that benefit as it was or will be provided, at any time outside the year concerned. An 'arms length transaction' is defined is subsection 136(1) of the FBTAA to mean a transaction in which the parties are dealing with each other at arm's length in relation to the transaction. The 'recipients current benefit' is defined in subsection 136(1) of the FBTAA as the period residual fringe benefit insofar as it was provided during the current FBT year. Broadly, the 'notional value' of the recipients current benefit is defined in subsection 136(1) of the FBTAA to mean the amount that an employee could reasonably be expected to pay under an arm's length transaction at, or about, the time the residual benefit was provided. In the current circumstances, it is accepted that the notional value of the Employee's current benefit would be the market rental value for the period of private use of the caravan. The 'recipient's contribution' which is deducted from the valuation of the external period residual fringe benefit is defined in subsection 136(1) of the FBTAA as: • the amount of any consideration paid to the provider or to the employer by either the recipient or the employee in respect of the recipients benefit • less any reimbursement paid to the recipient in respect of that payment. The payment by the Employees of a market-rate rental fee for the private use of the caravan (during the period when the Employees are provided with the right to private use of the caravan) satisfies the definition of a 'recipient's contribution' in subsection 136(1) of the FBTAA. The recipient's contribution being the market-rate rental fee paid by the Employees for the private use of the caravan is in respect of the Employee's benefit (the right to private use of the Employer's caravan). Therefore, for the purposes of calculating the taxable value of the external period residual fringe benefit in relation to a year of tax under section 51 of the FBTAA, in circumstances where the Employer's caravan is made available for the Employee's private use, the amount of market-rate rental fees paid by the Employees (being a 'recipient's contribution') can be applied to reduce the notional value of the benefit, potentially to nil. | Detailed Reasoning - Question 5: Can the Employer claim deductions for the decline in value of the caravan under Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997)? | Summary: The Employer can claim deductions for the decline in value of the caravan under Division 40 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Subsection 40-25(1) of the ITAA 1997 says you can deduct an amount equal to the decline in value for an income year of a depreciating asset that you held for any time during the year. Subsection 40-25(2) of the ITAA 1997 says you must reduce your deduction by the part of the asset's decline in value that's attributable to your use of the asset, or your having it installed ready for use, for a purpose other than a taxable purpose. Subsection 40-25(7) of the ITAA 1997 relevantly says 'taxable purpose' is the purpose of producing assessable income. Subsection 40-30(1) of the ITAA 1997 says a depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it's used, except land, trading stock, and certain intangible assets. However, section 40-45 of the ITAA 1997 says Division 40 of that Act doesn't apply to: • assets that are eligible work related items for the purposes of section 58X of the FBTAA • capital works for which you can deduct amounts under Division 43 of the ITAA 1997. • Deductions will be available under Division 40 of the ITAA 1997 for the caravan's decline in value. • The caravan is a depreciating asset because a caravan declines in value over the time it is used. • The caravan will be used exclusively for taxable purposes. The caravan will be used for business purposes (in allowing the Employees to travel and stay in rural areas to meet with clients etc.). While the caravan will also be used for private use, the Employees will pay the Employer a market-rate rental fee for private use. The caravan will be in storage the rest of the time. • Therefore, all uses (business and private) will be for the purpose of producing assessable income for the Employer. • Since the caravan is used exclusively for taxable purposes, all the decline in value will be attributable to taxable purposes, so there's no reduction for non-taxable use under subsection 4025(2) of the ITAA 1997. • The exclusions in section 40-45 of the ITAA 1997 aren't relevant. A caravan isn't an eligible work related item for FBT purposes. This caravan will be used as a mobile accommodation unit and won't be a building or capital improvement for which deductions could be available under Division 43 of the ITAA 1997. | Detailed Reasoning - Question 5: What effective life will apply when calculating deductions for the decline in value of the caravan under Division 40 of the ITAA 1997? | Summary: The Employer must self-assess the effective life of the caravan. | Detailed Reasoning - Detailed reasoning: Section 40-65 of the ITAA 1997 gives you a choice of methods to work out the decline in value: the diminishing value method and the prime cost method. The deduction rate, in both cases, depends on the asset's effective life. (See section 40-72 of the ITAA 1997 for the diminishing value method for post- 9 May 2006 assets, and section 40-75 of the ITAA 1997 for the prime cost method.) Section 40-95 of the ITAA 1997 says you must choose either to use an effective life determined by the Commissioner for a depreciating asset under section 40-100, or to work out the effective life of the asset yourself under section 40-105. In Income Tax Assessment (Effective Life of Depreciating Assets) Determination 2025 the Commissioner has determined the effective life of certain assets. Table A lists assets that are specific to a particular industry (you can only use Table A entries if you are a participant of the relevant industry). Table B applies to assets generally (you can use Table B entries if the particular asset isn't listed under the relevant industry heading in Table A). Campervans, motorhomes, caravans, and camper trailers are listed in Table A as categories of 'recreational vehicles' under 'rental and hiring services (except real estate)' on page 219, but caravans aren't listed for any other industry (including the financial services industry). Table B lists 'accommodation units in caravan/tourist parks being articles, not fixtures, and used for a specified purpose' on page 267 but doesn't otherwise list caravans. The Employer can't rely on the Commissioner's determination of effective life. The Employer isn't in the rental or hiring services industry, so it can't use the effective life determination for caravans in Table A. Caravans aren't listed in Table B. Therefore, there's no Commissioner's determination that could cover the caravan to be used by the Employer in these circumstances. This means that the Employer must self-assess the effective life for the caravan under section 40-105. | Detailed Reasoning - Question 6: Will the mere storage of the caravan at the residential premises of an Employee, when not being used for business or private purposes, affect deductibility for the decline in value of the caravan under Division 40 of the ITAA 1997? | Summary: No, the mere storage of the caravan at the residential premises of an Employee when not being used for business or private purposes will not affect the deductibility for the decline in value of the caravan under Division 40 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Subsection 40-25(2) of the ITAA 1997 says you must reduce a deduction for the decline in value that's attributable to your use of the asset, or your having it installed ready for use, for a purpose other than a taxable purpose. Subsection 40-25(2) of the ITAA 1997 won't apply to reduce the deduction. The Employer will use the caravan exclusively for business purposes or for hiring out to the Employees at market rates. Both these purposes qualify as taxable purposes. The caravan won't be otherwise available to the Employees. Therefore, while it's being stored at a private residence, it will still be held ready for use for a taxable purpose. There will be no disqualifying non-taxable purpose. | Detailed Reasoning - Question 7: Will the Employer be entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 on the purchase of a caravan? | Summary: The Employer will be entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 for the purchase of a caravan. Section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that 'you are entitled to the input tax credit for any creditable acquisition that you make'. Creditable acquisition is defined in section 11-5 of the GST Act. You make a creditable acquisition if: e) you acquire anything solely or partly for a creditable purpose; and f) the supply of the thing to you is a taxable supply; and g) you provide, or are liable to provide, consideration for the supply; and h) you are registered or required to be registered. If all four criteria are satisfied, the acquisition is considered creditable, and the Employer is entitled to claim an input tax credit for the GST included in the purchase price of the caravan to the extent of its creditable use. Furthermore, paragraph 48 of the Goods and Services Tax Ruling Goods and Services Tax: GST and how it applies to supplies of fringe benefits (GSTR 2001/3) states: You are entitled to an input tax credit for any creditable acquisition or creditable importation that you make. This includes creditable acquisitions and creditable importations made to supply fringe benefits. Each of the paragraphs in section 11-5 of the GST Act are considered below. Paragraph 11-5(b): The supply of the thing to you is a taxable supply For a supply to be taxable under paragraph 11-5(b) of the GST Act, all the requirements of section 9-5 of the GST Act must be satisfied. Section 9-5 of the GST Act states: You make a taxable supply if: e) you make the supply for consideration; and f) the supply is made in the course or furtherance of an enterprise that you carry on; and g) the supply is connected with the indirect tax zone; and h) you are registered or required to be registered. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Consideration is defined in subsection 9-15(1) of the GST Act as including: c) any payment, or any act or forbearance, in connection with a supply of anything; and d) any payment, or any act or forbearance, in response to or for the inducement of a supply of anything. From the facts given, the Employer has not acquired the caravan yet and when it does acquire the caravan it must make sure the acquisition satisfies section 9-5 of the GST Act. Paragraph 11-5(a): You acquire anything solely or partly for a creditable purpose In order for the Employer to be entitled to the full input tax credit on the acquisition of the caravan, the Employer must have acquired the caravan for a creditable purpose. Section 11-15 of the GST Act, which explains the meaning of 'creditable purpose', states: 3) You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. 4) However, you do not acquire the thing for a creditable purpose to the extent that: a. the acquisition relates to making supplies that would be input taxed; or b. the acquisition is of a private or domestic nature. Therefore, where the Employer acquires the caravan predominately for carrying on its enterprise, it is made for a creditable purpose as the caravan is primarily intended to be to serve as a mobile office and accommodation facility, to enable the employees to travel and stay in rural areas to meet with clients, attend events, and conduct on-site consultations. The Employer makes taxable finance brokerage and bookkeeping services and does not make input taxed supplies. Additionally, its daily rental fee for accommodation for the caravan is a taxable supply. Further, paragraph 52 of GSTR 2001/3 confirms that acquisitions made to provide fringe benefits in respect of employment are considered to be made in carrying on the enterprise and are not of a private or domestic nature. An acquisition or importation you make to provide a fringe benefit in respect of employment in your enterprise is made in carrying on the enterprise and is not of a private or domestic nature for the purposes of section 11-15 and section 15-10. Therefore, as the acquisition does not relate to making supplies that are input taxed nor is the acquisition made for a private or domestic nature, section 11-15(2) does not apply, and the caravan is acquired for a creditable purpose. Paragraph 11-5(c): You provide, or are liable to provide, consideration for the supply Once the Employer acquires the caravan and pays the consideration, estimated by the Employer to cost approximately $90,000(plus GST), paragraph 11-5(c) of the GST Act is satisfied. Paragraph 11-5(d): You are *registered, or *required to be registered The Employer is registered for GST. As such, paragraph 11-5(d) of the GST Act is satisfied. Therefore, as the Employer intends to acquire the caravan for a creditable purpose and will provide consideration for the acquisition, the Employer will make a creditable acquisition and be entitled to an input tax credit, provided the supply of the caravan meets the requirements to be a taxable supply under section 9-5 of the GST Act.

Reasons for decision: These reasons for decision accompany the Notice of private ruling for the Employer. This is to explain how we reached our decision. This is not part of the private ruling. | In circumstances where a caravan is owned by the Employer is made available for the Employees' private use, will this give rise to a 'fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?