Private ruling: Fringe benefits tax exemption
Published: January 2015
Ruling period: 1 April 2015 to 31 March 2016 | 1 April 2016 to 31 March 2017 | 1 April 2017 to 31 March 2018 | 1 April 2018 to 31 March 2019
Date scheme commenced: The scheme has commenced.

Ruling: Q1: Do the outreach employees constitute itinerant employees and as such does the use of the cars to travel from the home of the outreach employee to a client and from the client to the home of the outreach employee constitute: (a) private use for the purposes of section 7 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? (b) business use for the purposes of section 10 of the FBTAA? | A1: (a) No. (b) Yes. | Q2: If the car of an outreach employee is garaged at the outreach employee's home after hours and there is a prohibition on the use of the car after hours, is the car applied to, or is it available for private use by the outreach employee after hours for the purposes of section 7 of the FBTAA? | A2: No.

Relevant facts and circumstances: The employer is a public benevolent institution. As part of its operations, the employer conducts an outreach service whereby employees of the employer (outreach employees) are employed to make regular home visits to clients. 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. The employer owns a fleet of motor cars which it makes available to outreach employees to enable them to fulfil their employment duties. Clients are grouped into regions. Outreach employees generally travel extensively around these areas in the cars provided to them by the employer. Most outreach employees will commence their working day driving to a client visit and not at the office. Depending on the time spent with each client, an outreach employee could visit a number of clients each day. The outreach employees do not have a designated desk space at the employer's office. While these employees are required to attend the employer's office for meetings and supervision, their main role is to make home visits to outreach clients. Travel is a fundamental part of each outreach employee's employment with the employer. Outreach employees do not get paid a travel allowance. At the end of each day, each outreach employee takes the car assigned to them to their garage for safe keeping. While the car is garaged at the home of the outreach employee after hours, the outreach employee does not have the right to any personal use of the car after hours. The information contained in the following documents: (a) The employer's Motor Vehicle Policy setting out the requirements in relation to cars provided to outreach employees. (b) A copy of a signed agreement reached between an outreach employee and the employer setting out the conditions for the garaging of cars provided by the employer to outreach employees. (c) A copy of a log book of an outreach employee documenting the use of the car provided by the employer to that outreach employee. In reply to our letter which requested further information in order to fully consider the application we received a letter which provided the following: Advice as to the nature of the checks carried out to ensure that outreach employees were complying with record keeping requirements regarding the logbook record of car use. That advice was: • Quarterly checks are undertaken on motor vehicles. This is completed by managers who also check the log books as part of the inspection. • Managers also check the odometer readings to ensure the vehicle is not being used for non-work related purposes. • Fleet department check the reports from fuel companies and perform a reasonable test to ensure there is no excessive use of petrol. • A reconciliation is performed to confirm that travel is work related. • When employees go on leave vehicles are left at work premises.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 Section 7 | Section 10 | Subsection 136(1) | Income Tax Assessment Act 1936 Section 318 | Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision: Summary: This question turns on whether the work performed by the outreach employees is "itinerant work". The judgement of Smith J in FC of T v Wiener 78 ATC 4006; (1978) 8 ATR 335 is considered together with documents containing a relevant ATO view namely Miscellaneous Taxation Ruling MT 2027 and Taxation Ruling TR 95/34. In TR 95/34 characteristics that have emerged from cases as being indicators of itinerancy are listed and these are applied to the facts of this case resulting in the conclusion that the duties of the outreach employees are of an itinerant nature. Section 7 of the FBTAA is applied so that there is private use of the car and an apparent car benefit in respect of the travel by outreach employees. The travel is from the outreach employee's home to the home of the first client and from the home of the last client to the outreach employee's home. However, the principle discussed in Wiener and MT 2027 that in relation to itinerant work the journey to and from work that would otherwise be of a private nature is a business journey is applied and negates the apparent car benefit. It is concluded that: (a) the use of the car to travel from the home of the outreach employee to a client and from the client to the home of the outreach employee does not constitute private use for the purposes of section 7 of the FBTAA; and (b) the use of the car to travel from the home of the outreach employee to a client and from the client to the home of the outreach employee does constitute business use for the purposes of section 10 of the FBTAA. | Detailed Reasoning - Itinerant work: This question turns on whether the nature of the work performed by the outreach employee is 'itinerant work' as that term has been interpreted by the Courts and also by the Commissioner in Australian Taxation Office publications. Accordingly, it is necessary to begin with an examination of the nature of itinerant work. Guidance on this issue can be found in the judgement of Smith J in FC of T v Wiener 78 ATC 4006; (1978) 8 ATR 335 ( Wiener) as well as in Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel (MT 2027) and Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expense (TR 95/34). In Wiener the headnote to the report at (1978) 8 ATR 335 summarises the decision as follows: The taxpayer was a teacher in the Education Department of the State of WA and had been so employed since 1958. For the four year prior to the year of income in question she was employed in a pilot scheme involving the teaching of a foreign language in primary schools. In the early years the programme involved instruction to selected children from 27 different schools and such instruction was given on Saturday mornings. In the latter years the scheme was extended to classes in four different schools with lessons being conducted at the respective schools. Instruction was given at a fifth school before ordinary school hours. In addition the taxpayer taught at a high school each morning. The taxpayer used her own motor vehicle to travel from her home to school and between the various schools which she was required to attend, and subsequently from the last school at which she gave instruction on a particular day to her home. There was no issue between the taxpayer and the Commissioner as to the mileage covered in respect of either the distance which the Commissioner conceded was covered in the course of earning her assessable income and therefore the expenses relating to which were allowable deductions, or the travel between her home and the first school or the last school and her home. Nor was there any dispute as to the amount of the expenditure which was in issue. The sole question before the court was whether the expenses related to the travel from home to the first school and from the last school to her home were an allowable deduction. A Board of Review in 19 CTBR (NS) Case 39 had, by majority allowed the taxpayer's objection claiming that the expenses related to the travel between home and school were allowable deductions. The Commissioner appealed to the Supreme Court of WA. Held , dismissing the appeal, the expenses were properly related to the earning of assessable income as the expenditure was incurred in the performance of the taxpayer's duties which commenced from the moment of leaving home, and ceased only when she arrived home. A relevant extract from the detailed judgement is given below. After a discussion of various cases including Lunney v FC of T 100 CLR 478; (1958) - 0311H - HCA; Ricketts v Colquhoun (1926) A.C. 1 and Taylor v Provan (1975) A.C. 194, Smith J turned to an examination of the facts in Wiener and said: "… Viewed objectively, it does not seem to be open to question that the taxpayer would not have been able to perform her duties without the use of her motor vehicle. On four of the five working days the taxpayer's contract of employment required her to teach at not less than four different schools and to comply with an exacting timetable which kept her on the move throughout each of those days. The nature of the job itself made travel in the performance of its duties essential, and it was a necessary element of the employment that on those working days transport be available at whichever school the taxpayer commenced her teaching duties and that transport remained at her disposal throughout each of those days. It was not said by the taxpayer in evidence that that it was an express term of her employment that she provide her own means of transport, but it appears to have been tacitly understood that she would do so, as she was paid an allowance by her employer for the use of her motor vehicle in travelling between schools. The evidence as to the necessary use of a motor vehicle is not as strong in relation to the single working day on which the taxpayer was not required to attend at more than one school, but it would seem that performance of administrative tasks on that day was facilitated by the use of the motor vehicle. In any event no separate issue was raised as to the expense of travelling between home and school on that day. In all the circumstances, it seems to me, that the travelling expenses claimed by the taxpayer fall into the first of two categories described by Lord Simon of Galaisdale in Taylor v Provan i.e . where the place of employment is of itself inherently an itinerant one, and that the taxpayer may be said to be travelling in the performance of her duties from the moment of leaving home to the moment of return there." In MT 2027 at paragraphs 25 to 27 there is a discussion under the heading "Employment Duties of an itinerant Nature (Commercial Travellers, etc.)" In TR 95/34 there are guidelines for establishing whether an employee is carrying out itinerant work. The ruling given there was concerned with a deduction in terms of the Income Tax Assessment Act 1936 however the determinants of itinerant work apply equally to this ruling which relates to provisions of the FBTAA. In TR 95/34 there is a discussion under the heading "When is an employee's work itinerant?" With respect to the duties of the outreach employees, four of the seven characteristics of itinerancy as listed in TR 95/34 are present in this case as follows: a) Travel is a fundamental part of the outreach employees' work. This is because outreach employees are required to visit clients at their homes regularly and, amongst other things, take them out shopping and transport them to medical and various other appointments. b) There is a 'web' of workplaces being the homes of clients that are located in the region serviced by each outreach employee. However, given that a number of clients may be visited each day there is no regularity in the place at which the employees perform their duties and hence no fixed place of work. Outreach employees do not have a designated desk space at the employer's office, and are only required to attend the employer's office for meetings. Attendance at other times will be to update client records. c) The outreach employee continually travels from one work site to another on each day on which more than 1 client is visited. The number of clients visited each day may vary so that the outreach employee will be required to travel between sites and perform duties at each site before returning home. d) (i) There is a degree of uncertainty as to the location at which the outreach employee is employed each day. This is because the clients visited by the outreach employee and the needs of those clients will vary from day to day so that there is no regular pattern to the location at which the work is performed. Therefore the duties of the outreach employees constitute itinerant work. Consequently the outreach employees are "itinerant employees" as that term is used in the question posed. (a) Section 7 Car benefits and private use of car Section 7 of the FBTAA relates to car benefits and sets out the circumstances in which the application or availability of a car shall be taken to constitute a benefit provided by the employer to the employee in respect of the employment of the employee. The provision of such a benefit is measured on a daily basis. In this case each working day when the outreach employee drives the car, which is provided by the employer, from home to the first location (a client's home) at which work is performed and home from the last location (also a client's home) at the end of the day those journeys prima facie would be travel to and from work and thus a private use of the car. Therefore in terms of subsection 7(1) "Where at any time on a day, …the car ... is applied to a private use by the employee … and the provider is the employer of the employee … that application … shall be taken to constitute a benefit provided on that day by the provider to the employee … in respect of the employment of the employee." The car benefit is a "car fringe benefit" within the meaning of that term in subsection 136(1) of the FBTAA. However, because it has been found above that the outreach employee performs work that is of an itinerant nature the daily journey to work and from work is a business journey 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. Therefore the travel by the outreach employee from the home of the outreach employee to the home of a client at the start of the day and return from the home of a client at the end of the day does not constitute private use of the car for the purposes of section 7 of the FBTAA. (b) Section 10 Calculation of taxable value Section 10 of the FBTAA relates to the calculation of the taxable value of car fringe benefits using the cost basis. The duties of the outreach employees have been found to be of an itinerant nature. This was in accordance with the principle discussed in Wiener and MT 2027. As a result the answer above to question 1(a) regarding section 7 of the FBTAA was that the apparent private use of the car when the outreach employee travelled from the outreach employee's home to the home of a client at the start of the day and returned from the home of a client at the end of the day was not a private use of the car but instead such travel is a business journey for the purposes of section 7 of the FBTAA. Likewise, for the purposes of section 10 of the FBTAA, the interpretation is that travel to and from the home of a client by an outreach employee is a business journey. As a result all of the travel undertaken by the outreach employee in the car is classified as being a business journey. Note that in terms of the formula in section 10 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%. Therefore, the use of the car by the outreach employee to travel from the home of the outreach employee to the client and from the client to the home of the outreach employee constitutes business use for the purposes of section 10 of the FBTAA. | Summary: The car provided by the employer to the outreach employee is garaged at the outreach employee's home overnight each weeknight and throughout the weekend. Consideration as to whether a car benefit arises in terms of section 7 of the FBTAA. Subsections 7(1), 7(2), 7(3) and 7(4) discussed. The relevant conditions in subsection 7(2) and 7(3) are met so that "the car shall be taken, for the purposes of this Act, to be available at that time for the private use of the employee or associate, as the case may be.". However, the employer has a written "Motor Vehicle Policy" which sets out the requirements for the provision and use of the employer's vehicles. That policy refers specifically to an agreement with outreach employees authorised to garage vehicles at their home. That agreement with outreach employees prohibits the employee from using the car for any private purpose "other than stop-off shopping etc on route to or from a client visit". A copy of an executed agreement has been provided. In addition the employer has explained in detail the nature of the checks carried out to ensure compliance with the agreement. In view of this consistent enforcement of the prohibition on private use subsection 7(4) does not apply. In view of the prohibition on private use of the car by the outreach employee when the car is garaged at the outreach employee's home and the enforcement of that prohibition it is concluded that the car is not applied to or available for private use for the purposes of section 7 of the FBTAA. | Detailed Reasoning - Detailed reasoning: Car garaged at outreach employee's home In this case the car provided by the employer to the outreach employee is garaged at the outreach employee's home overnight each week night and throughout the weekend. Thus it is necessary to consider whether a car benefit arises in terms of section 7 of the FBTAA. It is useful to begin with subsection 7(2). This subsection deals precisely with the situation where the car is garaged at the employee's residence. Each condition specified at subparagraph 7(2)(a)(i) namely that the car is held by the employer and at paragraph 7(2)(b) where "the car is garaged … at a place of residence of the employee …" is met so that "the car shall be taken, for the purposes of this Act, to be available at that time for the private use of the employee or associate, as the case may be.". Subsection 7(3) is also relevant as it deals with the situation where at a particular time the car is not at the employer's business premises. Given the facts of this case, when the car is garaged at the home of an outreach employee then clearly it is not at the employer's business premises. Each condition specified at subparagraph 7(3)(a)(i) namely that the car is held by the employer; at subparagraph 7(3)(b)(i) that the car is not at business premises of the employer; and at subparagraph 7(3)(c)(ii) that the employer is not performing the duties of his or her employment and has custody or control of the car, is met so that "the car shall be taken for the purposes of this Act, to be available at that time for the private use of the employee or associate as the case may be.". Therefore, the condition at subparagraph 7(1)(a)(ii) being that "a car is taken to be available for the private use of the employee or an associate of the employee" is met and the condition at subparagraph 7(1)(b)(i) is met because the provider of the car is the employer of the employee. Further, "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.". Prima facie, a car benefit is thereby provided to the outreach employee or associate on each day the car is garaged at the outreach employee's home. However, it is stated in the "Relevant facts and circumstances": While the car is garaged at the home of the outreach employee after hours, the outreach employee does not have the right to any personal use of the car after hours. A copy of the employer's Motor Vehicle Policy has been provided and states: • The employer's vehicles are not to be used for private purposes. • Outreach employees may be authorised to garage vehicles at their homes overnight due to the itinerant nature of their work. • Employees must sign an agreement covering conditions of use of vehicles. A copy of an executed agreement setting out the conditions for the garaging of vehicles provided by the employer to outreach employees has been provided and states: • That the employee is required to maintain a log book provided by the employer and complete it for each individual trip showing the start point and destination suburb/town. • The vehicle cannot be used for private travel or use other than stop off shopping etc on route to or from a client visit. • The vehicle must be returned to the employer's office during periods of leave. Subsection 7(4) of the FBTAA, which deals with the situation where a prohibition on the private use of a car is not consistently enforced, provides that "the person shall be deemed to be entitled to use the car, or apply the car to a private use, notwithstanding the prohibition." . However, in this case it was advised that record keeping compliance takes the form described above in the "Relevant facts and circumstances". Accordingly, it is accepted that the prohibition on the private use of the car by outreach employees is consistently enforced. Therefore subsection 7(4) does not apply. Consequently, the prima facie view that a car benefit arises as a result of the garaging of the car at the home of the employer's outreach employee cannot be maintained. Thus it is concluded that the employer's car garaged at the outreach employee's home after hours is not applied to or available for private use for the purposes of section 7 of the FBTAA. This is in view of the prohibition on the private use of the car and the enforcement of that prohibition.