Private ruling: Car fringe benefit
Date of advice: 19 July 2016
Published: August 2016
Ruling period: FBT year of 1 April 20XX to 31 March 20XX
Date scheme commenced: 1 April 20XX

Ruling: Q1: Is the provision of the company car to the managing director of the company in the 2015-2016 FBT year an exempt car fringe benefit under section 8 of the Fringe Benefits Tax Assessment Act 1986 ? | A1: No.

Relevant facts and circumstances: The managing director of the company has the company car garaged at their home for the relevant FBT year. In your email of dd/mm/yyyy, you advised that the car is a luxury sedan. You also advised us that during the period from dd/mm/yyyy until on or about dd/mm/yyyy, the managing director had full private use of the car, except when they were overseas on business for 14 days and interstate for 3 days. On or about dd/mm/yyyy, the managing director suffered a medical condition and became incapacitated and unable to work or drive the company car, as confirmed by a neurologist's letter. No one else had access to the vehicle. In your email of dd/mm/yyyy, you advised that the managing director returned to work on dd/mm/yyyy for 1 day per week for 3 hours. Their full time carer drove them to and from work in the company car. The company uses the statutory formula method for the purposes of determining the taxable value of the car for FBT purposes.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 7 | Fringe Benefits Tax Assessment Act 1986 section 8

Reasons for decision: Detailed Reasoning - Car benefit: Where an employer, associate of an employer or third party under an arrangement with the employer provides a motor vehicle to an employee, a car benefit may arise. Where a car benefit does arise the employer will be liable to FBT on the taxable value of that benefit unless an exemption applies. The managing director of the employer company can be an employee for FBT purposes (see Miscellaneous Taxation Ruling MT 2019). Under section 7 of the Fringe Benefits Tax Assessment Act 1986 (FBT Act), a car benefit arises where the following requirements are satisfied: 1. the motor vehicle is a "car"; 2. the car is provided to the employee or an associate of the employee; 3. the car must be "held" by the provider; and 4. the car must be either: a) applied to a private use; or b) made available for private use. Where the above requirements are met at any time on a day, and are in respect of the employment of the employee, the application or availability of the car constitutes a benefit provided on that day (subsection 7(1)). Accordingly, it is necessary to examine the car on a daily basis. In the present case, the company has provided a luxury sedan to the managing director for the entire relevant FBT year, which is garaged at the managing director's home. | Detailed Reasoning - 1. The motor vehicle is a "car": A car is defined in subsection 136(1) of the FBT Act (using the meaning in section 995-1 of the Income Tax Assessment Act 1997 ) as any motor-powered road vehicle (including a four-wheel drive but excluding a motor cycle or similar vehicle) being: 1. a station wagon, panel van, utility truck or similar vehicle designed to carry a load of less than one tonne; or 2. any other road vehicle designed to carry a load of less than one tonne and fewer than nine passengers. This requirement is met as the luxury sedan is a car under the second limb of the definition. | Detailed Reasoning - 2. The car is provided to the employee or an associate of the employee: This requirement is satisfied as the company has provided a luxury sedan to the managing director, who is treated as an employee for FBT purposes. | Detailed Reasoning - 3. The car must be "held" by the employer: A car is "held" by a person if it is owned by the person, leased by the person or otherwise made available to the person by another person (subsection 162(1) FBT Act). This requirement is satisfied as the employer company owns the car. | Detailed Reasoning - 4. (a) The car must be applied to a private use: A car is applied to a private use if it is used in accordance with the employee's directions, instructions or wishes (subsection 7(5) FBT Act). A "private use" is any use of the car by the employee which is not exclusively in the course of producing assessable income of the employee (subsection 136(1) FBT Act). Therefore any employment-related use of the car by the employee would not be private use. In your email of dd/mm/yyyy, you advised that during the period from dd/mm/yyyy until on or about dd/mm/yyyy, the managing director had full private use of the car, except when they were overseas on business for 14 days and interstate for 3 days. For this period of time, then, the car was applied to a private use by the managing director. | Detailed Reasoning - 4. (b) The car must be available for private use: A car will be taken to be available for private use where: 1. The car is garaged at the employee's residence (subsection 7(2) FBT Act); or 2. The car is not at the employer's business premises and the employee has the use, custody or control of the car (subsection 7(3) FBT Act). In both situations, the rules are absolute - there is no discretion for the Commissioner to discount or ignore a set of facts. Once the facts occur, a car benefit automatically arises (ATOID 2003/613). | Detailed Reasoning - 1. Car garaged at the employee's residence: For the entire relevant FBT year, the car was garaged at the managing director's residence. On or about dd/mm/yyyy, the managing director suffered a medical condition and became incapacitated and unable to work or drive the car, as confirmed by a neurologist's letter. No one else had access to the vehicle. The car was not used by the managing director or anyone else during this period. The car is taken to be available for the private use of the managing director for the entire FBT year as the car was garaged at the managing director's residence. Actual use of the car by the employee or an associate is not relevant as the place of garaging is the determining factor. Where the car is garaged at the employee's place of residence, as it is here, there is no discretion available to the Commissioner to treat the car as not available for private use, even where it is due to extenuating circumstances, such as those applying here to the managing director. | Detailed Reasoning - 2. Car not at employer's business premises and employee has use, custody or control of car: Alternatively, where a car held by an employer is, on any day, not garaged at the business premises of that employer, it is taken to be available for private use if any of the following conditions are satisfied under subsection 7(3) FBT Act): 1. Employee is entitled to apply the car to a private use; 2. Employee is not performing employment duties and has custody and control of the car; 3. An associate of the employee is entitled to use, or has custody or control of, the car. The first and second conditions apply here. On this alternative ground, for the entire relevant FBT year, the car is taken to be available for the private use of the managing director as the car is not at the employer's business premises and the managing director as employee has the use, custody or control of the car. In these circumstances, a car benefit arises in respect of the provision of the company car to the managing director in the entirety of the relevant FBT year. The employer will be liable to FBT on the taxable value of that benefit, using the statutory formula method, unless an exemption applies. | Detailed Reasoning - Exempt car benefit: Under section 8 of the FBT Act, a car benefit will be an exempt benefit if: 1. The car is a taxi, panel van or utility vehicle designed to carry a load of less than one tonne, or other road vehicle not designed for the principal purpose of carrying passengers; and 2. There was no private use of the car during the year when the benefit was provided, except: a) work related travel of the employee; and b) minor, infrequent and irregular private use by the employee or an associate of the employee. In the present circumstances, the luxury sedan is a car that is designed for the principal purpose of carrying passengers. The first requirement of the exemption is therefore not satisfied. There is no need to consider the second requirement. The exemption in section 8 does not apply here. | Detailed Reasoning - Conclusion: The provision of the car to the managing director for the entirety of the relevant FBT year is a taxable car benefit. The employer will be liable to FBT on the taxable value of that benefit, using the statutory formula method.