Private ruling: Excluded benefit
Published: May 2012
Ruling period: 1 April 2012 to 31 March 2015
Date scheme commenced: 1 April 2012.

Ruling: Q1: Does the use of the car by the second employee in scenario 1 described below, constitute a car benefit in accordance with subsection 7(1) of the Fringe Benefits Tax Assessment Act 1986 ? | A1: Yes. | Q2: If the answer to question 1 is yes, will the car fringe benefit provided to both employees in both scenarios, be an excluded benefit in accordance with paragraph 5E(3)(i) of the F ringe Benefits Tax Assessment Act 1986 ? | A2: As the answer to question 1 is no, no response required. | Q3: Does the use of the car by the second employee in scenario 2 described below, constitute a car benefit in accordance with subsection 7(1) of the Fringe Benefits Tax Assessment Act 1986 ? | A3: Yes. | Q4: If the answer to question 3 is yes, will the car fringe benefit provided to both employees in both scenarios, be an excluded benefit in accordance with paragraph 5E(3)(i) of the F ringe Benefits Tax Assessment Act 1986 ? | A4: Yes

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. General The employer is a local government in a certain state. The vehicles provided are 'cars' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986. The applicant has a fleet of cars which are provided to employees for private use. The applicant allows varying levels of private use of the car, depending on the employee's seniority in the entity's structure and the Motor Vehicle policy. Each car has a regular employee allocated to it, 7 days a week/365 days a year. The entity requires each car to be pooled for other employee's to use. Any staff member wishing to qualify for reporting exemption must have the pooled use approved by senior management in writing unless the change of driver is as a result of a staff member leaving leading to a reallocation, or due to an internal reallocation of cars at the instruction on management. Scenario 1. A car is allocated to employee 1 for the full year. Employee 1 is directed by the employer to allow employee 2 to use the car on one occasion, to attend an out of town conference requiring an overnight stay at a place other than their normal residence. Employee 2 collects that car from their place of employment during the work day and travels to the place of the conference. They remain at the place of the conference overnight and return to their place of employment the next day. The place of the conference and the overnight accommodation are the same. No other private use of the vehicle by employee 2 is noted. Scenario 2 . As per scenario 1, except the of the overnight accommodation is not the same as the place of conference, therefore employee 2 must travel from the place of the conference to the place of accommodation, the place of the accommodation is not the employee 2's normal place of residence. No other private use of the vehicle by employee 2 is noted.

Relevant legislative provisions: Fringe Benefits Tax Regulations 1992 3F | Fringe Benefits Tax Regulations 1992 3F(1) | Fringe Benefits Tax Regulations 1992 3F(2) | Fringe Benefits Tax Regulations 1992 3F(3). | Fringe Benefits Tax Assessment Act 1986 Section 5E. | Fringe Benefits Tax Assessment Act 1986 Subsection 5E(1). | Fringe Benefits Tax Assessment Act 1986 Subsection 5E(2). | Fringe Benefits Tax Assessment Act 1986 Subsection 5E(3). | Fringe Benefits Tax Assessment Act 1986 Paragraph 5E(3)(i). | Fringe Benefits Tax Assessment Act 1986 Subsection 7(1) | Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision: Summary: The provision of the car to the employee 2 is a car benefit that is not a fringe benefit as it is an exempt minor benefit under section 58P of the Fringe Benefits Assessment Act 1986 (FBTAA). | Detailed Reasoning - Detailed reasoning: A car benefit has been provided in accordance with subsection 7(1) of the FBTAA. However, a the car was only provided to the employee 2 on one occasion and the cost of the benefit was less than $300, the benefit is an exempt minor benefit under section 58P of the FBTAA. The General Rule Under paragraph 7(1)(a) of the FBTAA a car benefit will arise at any time of day in respect of the employment of the employee where a car that is held by an employer is either: (i) applied to a private use by an employee or an associate of an employee, or (ii) taken to be available for the private use of an employee or an associate of the employee. In accordance with paragraph 7(2)(b) of the FBTAA, a car shall be taken to be available for private use on a day where, in respect of the employment of an employee, the car is garaged or kept at or near a place of residence of the employee, or an associate of the employee, for the purposes of subparagraph 7(1)(a)(ii) of the FBTAA. Subsection 136(1) of the FBTAA defines a 'place of residence', in relation to a person as: · a place at which the person resides; or · a place at which the person has sleeping accommodation; · whether on a permanent or temporary basis and whether or not on a shared basis. Accommodation in the form of a motel room is 'sleeping accommodation' that is used on a temporary basis. Deemed availability for private use under subsection 7(2) of the FBTAA is not dependent on any actual use or actual availability for any use. Where the conditions of the subsection are met then the car concerned is taken to be available for private use. In applying these rules, a car that is parked overnight at or near such temporary accommodation is treated as being available for private use of the employee regardless of whether or not the employee has permission to use it privately. Therefore as the car is park where the conference is held or at overnight accommodation not at the place of the conference a car benefit will arise from the provision of the car to the employees, unless the benefit is an exempt benefit. Note: as the car is question is principally designed to carry passengers the exemption for car benefits under subsection 8(2 ) of the FBTAA does not apply. Therefore, the car benefit does not qualify as an exempt benefit under subsection 8(2) of the FBTAA. Although the car benefit is not exempt under subsection 8(2) of the FBTAA, paragraph 23 of Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits states: The minor benefits exemption in section 58P can apply to car benefits provided the requisite conditions are satisfied. For the purposes of determining whether the car benefit satisfies the minor benefits threshold test, the statutory formula method and the operating cost method under Division 2 of Part III (Division 2) do not apply. For the purposes of the threshold test, the value of the benefit must be calculated by assuming the car benefit is a residual benefit. As the car is only provided once for the use of employee 2 the benefit will be exempt under the section 58P of the FBTAA if the notional value of the benefit is less than $300. One of the methods provided in Taxation ruling MT 2034 of valuing the use of a car is what it would cost to rent a similar car on the open market. It is reasonable to assume the cost of renting a similar car for use by employee 2 for one day would be less than $300. Therefore the car benefit would be an exempt benefit and not a fringe benefit. | Summary: Employee 1 receives a car benefit that is a fringe benefit and employee 2 receives a car benefit that is an exempt benefit, the car benefits are excluded benefits for both employees. | Detailed Reasoning - Detailed reasoning: An employer who provides taxable fringe benefits to its employees has to prepare and lodge with the tax office, a fringe benefits tax (FBT) return for the preceding FBT year. In calculating its FBT liability for the previous year, the employer has to work out each employee's individual fringe benefits amount as outlined in section 5E of the Fringe Benefits Tax Assessment Act 1986. An employer is also required to report the grossed-up taxable value of the fringe benefits provided to an employee on the employee's payment summary when the employee's individual fringe benefits amount is more than $2,000. However, subsection 5E(2) of the FBTAA allows for certain fringe benefits to be excluded benefits, for the purposes of an employees reportable fringe benefits amount, but are still taxable benefits. 'Excluded benefit' is defined in subsection 136(1) of the FBTAA, as having the meaning given by subsection 5E(3) of the FBTAA. In this case, paragraph 5E(3)(i) of the FBTAA is the paragraph under which the benefit may be exclude. This paragraph states that a benefit prescribed by the Fringe Benefits Tax Regulations 1992 (FBTR) will be an excluded benefit and will not count towards the employee's reportable fringe benefits amount. Reportable fringe benefits amount is defined in section 135P of the FBTAA and is the grossed-up value of the employee's individual fringe benefits amount for a year of tax. The appropriate regulation, is regulation 3F of the FBTR, which is in respect of pooled or shared cars. Sub regulation 3F(1) of the Fringe Benefits Tax Regulations 1992 (FBTR) states, with reference to section 5E of the FBTAA: For paragraph 5E(3)(i) of the Act, a benefit is an excluded fringe benefit if, during the year of tax: (a) the benefit is a car benefit, as described in subsection 7(1) of the Act, that is: (i) a fringe benefit within the meaning of subsection 136(1) of the Act; or (ii) a benefit that: (A) is an exempt benefit; and (B) would have been a fringe benefit except that the benefit is an exempt benefit; and (b) the car benefit relates to a car the provision of which gives rise to the benefit described in paragraph (a) for more than 1 employee. | Detailed Reasoning - Example:: The employer of 3 employees makes 1 car available to the employees, for private use, at different times during the year of tax. In considering the example in sub regulation 3F(1) of the FBTR, sub regulation 3F(2) goes on to state: The fringe benefit is an excluded fringe benefit in relation to each of those employees. To therefore qualify as an excluded fringe benefit under regulation 3F of the FBTR, the following conditions must be met: a. The benefit must be a car benefit. b. During the year more than 1 employee must receive a car benefit from the provision of the car. As employee 1 receives a car benefit that is a fringe benefit and employee 2 receives a car benefit that is an exempt benefit, the car benefits are excluded benefits for both employees.

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