Private ruling: Exempt vehicles
Published: October 2013
Ruling period: FBT year ended 31 March 2013. | FBT year ended 31 March 2014. | FBT year ended 31 March 2015.
Date scheme commenced: 1 April 2012

Ruling: Q1: Do the modifications made by the company to the vehicles originally designed as passenger cars and provided to its employees, result in the modified vehicles qualifying as exempt vehicles pursuant to subsection 8(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Yes

Relevant facts and circumstances: You currently own a number of vehicles. These vehicles are primarily used as delivery vehicles by sales representatives. The vehicles are 4 to 5 seater designed to primarily carry passengers and are sold as passenger cars. To improve the practicality of these vehicles that are used by the sales representatives, the rear seats are folded down and bolted down with a flat plywood floor bolted down over the top of the folded down seats. A safety cargo barrier is fitted behind the driver's seat. The only private use of the car will be: minor infrequent & irregular in relation to home to work travel.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 Section 8. Issue 1 | Question 1 | Do the modifications made by the company to the vehicles originally designed as passenger cars and provided to its employees, result in the modified vehicles qualifying as exempt vehicles pursuant to subsection 8(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? Detailed reasoning | Generally, a taxable car benefit arises for FBT purposes where an employer's car is used by an employee or an associate of the employee for private purposes or is available for their private use. | Subsection 8(2) of the FBTA 1986 acts to exempt certain cars from fringe benefits tax. It states: | "A car benefit provided in a year of tax in respect of the employment of a current employee is an exempt benefit in relation to the year of tax if: | (a) the car is: | (i) a taxi, panel van or utility truck! designed to carry a load of less then 1tonne; or | (ii) any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed for the principal purpose of carrying passengers); and | (b) there was no private use of the oar during the year of tax and at a time when the benefit was provided other than: | (i) work-related travel of the employee; and | (ii) other private use by the employee or an associate of the employee, being other use that was minor! infrequent and irregular." | Miscellaneous Taxation Ruling 2033 (MT 2033) Fringe Benefits Tax: application of subsection 8(2) exemption to modified cars considers whether modifications to vehicles originally designed as passenger cars will result in the modified vehicles being eligible for the exemption under subsection 8(2) of the FBTAA. | The ruling looks at the type of modification done to the car to determine whether the modification has changed its inherent design from that of a passenger carrying vehicle. | Paragraph 9 of MT 2033 requires that modifications actually effect a permanent change to the car, to the extent that they are not capable of being readily reversed so that the car could be used alternatively as a passenger or non-passenger car on a regular basis. | Paragraph 10 of the MT 2033 makes the point that, by itself, removing or bolting down the rear seat would not be sufficient to change the design. However, this in conjunction with certain other modifications would allow the car to meet the definition in paragraph 8(2)(a) of the FBTAA. | You have modified a number of your vehicles. The modifications include: | • the rear seats being folded down and bolted down, | • a flat plywood floor being permanently bolted over the folded seats, and | • a protective screen fitted behind the driver's seat. | The fact that the modification includes the rear seats being bolted down and a flat floor being permanently bolted indicates that the car is not capable of being readily reversed such that car could alternatively be used as a passenger or non passenger vehicle. This is in keeping with paragraph 9 of MT 2033. | The modifications to the vehicles satisfy paragraph 8(2)(a) of the FBTAA. | To qualify for exemption under section 8(2) of the FBTAA you are also required to satisfy the requirements of paragraph 8(2)(b). You have stated that there will be a strictly enforced policy in place to satisfy subsection 8(2)(b) of the FBTAA, in that the only private use of the car will be minor, infrequent and irregular in relation to any work-related travel. | Furthermore, paragraph 11 of MT 2033 states that the exemption under subsection 8(2) will not apply in the year in which the modifications are effected if, during that year, the unmodified car was used by the employee (or associate) for private purposes or was available for his or her private use. | Your vehicles will qualify for the exemption under subsection 8(2) of the FBTAA after the modifications. This exemption will apply in the EST year following the modification to vehicles that were available to employees (or associates) for private use. It should be noted that to qualify for the exemption the requirements of subsection 8(2) of the FBTAA must be met at all times during an FBT year when the car benefit is provided. | Further issues for you to consider | None.