Private ruling: Fringe benefits tax
Published: March 2012
Ruling period: Year ended 31 March 2012 | Year ended 31 March 2013 | Year ended 31 March 2014 | Year ended 31 March 2015
Date scheme commenced: Year ended 31 March 2012

Ruling: Q1: Are vehicles, parked at a secure facility away from your business premises whilst your employees are working offshore, taken to be available at that time for private use for the purposes of section 7 of the Fringe Benefits Tax Assessment Act 1986 ? | A1: No | Q2: Are vehicles, parked securely your business premises whilst your employees are working offshore, taken to be available at that time for private use for the purposes of section 7 of the Fringe Benefits Tax Assessment Act 1986 ? | A2: No

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. A number of your employees are scheduled to commence working offshore for several months. The employees are to be accommodated for a certain number of days on an offshore vessel. The employees are transported to and from the vessel. A number of your employees have access to a company vehicle. During the time that the employee is working offshore, the vehicle is to be stored either at a secure facility away from your business premises, or at your business premises. The secure facility is classified as a security zone, as the facility is fenced on all sides and the gates are locked when staff is not in attendance. You deem it sufficiently secure for employees to leave their cars at this facility on a daily basis and for extended periods of time. Whilst the vehicles are stored at the secure facility, the keys for the vehicle are locked in a safe by an independent security contractor. The independent security contractor at the secure facility will not hand over custody of the car to an associate. The employees do not authorise anyone to pick up the keys or use the car in their absence. An associate of an employee cannot access the cars when they are parked at the secure facility. All of the cars provided by the employer to employees are leased. The lease car statements can verify that during an employee's absence, the car is not refuelled and no mileage is accumulated. Employees may alternatively store their vehicle at your business premises during their absence. They are considered to be secure premises and the employee is to hand over the keys to you to be locked in a safe. A policy will be in place to ensure that the car is not available for the use of either the employee or their associate during the storage period. There will be strict procedures to ensure that only the employee may drop off and collect the car from your business premises and that associates of the employee will not be able to collect or use the car in the employee's absence. These circumstances are likely to be encountered frequently in the future.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 7.

Reasons for decision: Summary: The cars, parked at the secure facility whilst your employees are working offshore, are not taken to be available at that time for private use for the purposes of section 7 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). | Detailed Reasoning - Detailed reasoning: As is applicable, in accordance with subsection 7(1) of the FBTAA: 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) … (ii) is taken to be available for the private use of the employee or an associate of the employee; and (a) either of the following conditions is satisfied: (i) the provider is the employer, or an associate of the employer, of the employee; (ii) … 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. Subsections 7(2) and 7(3) deal with circumstances under which a car shall be taken to be available for the private use of an employee or associate. Under subsection 7(2) of the FBTAA Where, at a particular time, the following conditions are satisfied in relation to an employee of an employer: (a) a car is held by a person, being: (i) the employer; (ii) … (a) the car is garaged or kept at or near a place of residence of the employee or of an associate of the employee; 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. Under subsection 7(3) of the FBTAA Where, at a particular time, the following conditions are satisfied in relation to an employee of an employer: (a) a car is held by a person, being: (i) the employer; … (a) the car is not at business premises of: (i) the employer; (ii) an associate of the employer; or (iii) a person (other than the employer or an associate of the employer) with whom, or in respect of whom, the employer or an associate of the employer has an arrangement relating to the use or availability of the car; (a) 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, 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(2) does not apply to your particular situation for the period that they are parked at the secure facility because during that time the cars are not garaged at or near the employees' place of residence. As subsection 7(2) does not apply subsection 7(3) must be considered. Paragraph (a) will be satisfied as you, the employer, lease the cars provided to your employees. A car that is leased by a person is held by that person in accordance with subsection 162(1). The secure facility is not your business premises, or that of your associates or a person who has an arrangement with you relating to the use or availability of the car. Therefore paragraph (b) is satisfied. If any of the conditions in paragraph (c) must are satisfied then the cars will be considered to be available for private use. If none are satisfied, then the cars will not be considered to be available for private use. The first condition to be considered is whether the employee entitled to apply the car to a private use on those days when it is stored at the secure facility. Subsection 7(4) of the FBTAA states that: For the purposes of subsection (3), where a prohibition on the application of a car, or on the application of a car for a private use, by a person is not consistently enforced, the person shall be deemed to be entitled to use the car, or to apply the car to a private use, notwithstanding the prohibition. In Taxation Determination TD 94/16 it is noted that an employee or associate of an employee will not be entitled to use a car when this is consistently enforced. The issue of what constitutes a prohibition against the private use of a car and what is required for it to be consistently enforced is addressed in Miscellaneous Taxation Ruling MT 2021: There would need to be a situation where an express prohibition had been made by the employer in clear and unequivocal terms. Employees would also need to be made aware that the prohibition was genuine and would be reinforced, if necessary, by disciplinary measures for its breach. Consistent enforcement could comprise regular checks of odometer readings against business kilometres claimed to have been travelled by employees. In short, it would not be sufficient for an employer to issue the instruction either on the general understanding that it would be honoured in the breach, or without establishing a system of review to detect and deter breaches. You have indicted that you intend to implement a policy to prohibit private use. You have also stated that 'lease car statements can verify that during an employee's absence the car is not refuelled and no mileage is accumulated'. Therefore the first condition will not be satisfied because the employees will not be entitled to apply the cars to a private use whilst they are parked at the secure facility. The second condition is not satisfied as the employees are working offshore whilst the car is parked at the secure facility and the keys of the car will be held in safe storage by an independent security contractor. The third condition will be satisfied if an associate of the employee is entitled to use or has custody or control of the car. In example one in TD 94/16, the custody of the car is taken from an employee by the employer taking the car keys. However, in your situation if an associate of an employee also has keys and can access the car whilst it is parked at the secure facility, that associate will potentially have control of the car. The following facts, however, support the conclusion that associates of your employees are not entitled to use the car and do not have control of the car while it is parked at the secure facility: · The independent security contractor at the secure facility will not hand over custody of the car to an associate. · The employees do not authorise anyone to pick up the keys or use the car in their absence. · An associate of an employee cannot access the cars when they are parked at the secure facility. The third condition is therefore not satisfied. Since none of the conditions of paragraph 7(3)(c) of the FBTAA are satisfied when the cars are parked at the secure facility, the cars are not considered available for private use for the purposes of section 7 of the FBTAA. | Summary: The cars parked securely at your business premises whilst your employees are working offshore, are not taken to be available at that time for private use for the purposes of section 7 of the FBTAA. | Detailed Reasoning - Detailed reasoning: Under paragraph 7(1)(a) of the FBTAA the provision of a car to one of your employees will be a car benefit if it is either: o applied to a private use by an employee or an associate of the employee or o taken to be available for private use of the employee or an associate of the employee. A car is treated as being available for private use by an employee or an associate of the employee on any day that: o the car is not at your premises, and the employee or associate of the employee is allowed to use it for private purposes, or o the car is garaged at the employee's home. As employees will be storing their cars at your business premises subsection 7(2) and subsection 7(3) of the FBTAA will not apply. It is therefore necessary to consider whether employees, or associates of the employees, are allowed to or could possibly use the car for private purposes during the time that the cars are at your business premises. You have indicated that there will be a policy in place to ensure that the car is not available for the use of either the employee or their associate during the storage period. Also, you have stated that there will be strict procedures to ensure that only the employee may drop off and collect the car from your business premises and that associates of the employee will not be able to collect or use the car in the employee's absence. As these procedures will be in place, cars parked at your business premises whilst the employee is working offshore are not considered to be available for private use for the purposes of section 7 of the FBTAA.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Reasons for decision: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.