ATO Interpretative Decision

ATO ID 2009/140

Fringe Benefits Tax

Issue

When an employee only travels between home and work on a bus owned by the employer, under an employment arrangement, will the employee's travel constitute a residual benefit which is an exempt benefit under subsection 47(6) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Decision

Yes. The travel between home and work under the employment arrangement is work-related travel. The travel constitutes a residual benefit which is an exempt benefit under subsection 47(6) of the FBTAA.

Facts

The employer is the owner of a fleet of buses and is in the business of providing transport to members of the public.

The employer also engages in business activities other than providing transport to members of the public. The employee is engaged in these other activities. As the employee is not employed in the business of providing transport to members of the public the exemption under subsection 47(1) of the FBTAA does not apply.

Payment of the fare is facilitated by a pre-paid ticketing system. A third party entity operates the ticketing system. Tickets and credits which are placed on the tickets are purchased from the third party entity.

The employee is provided with free transport on the buses under the employment arrangement. The employment arrangement is facilitated through the employer providing the employee with the use of a pre-paid ticket. The tickets and credits on each ticket are purchased by the employer from the third party entity, remain the property of the employer, and are held in the employer's name.

Under the employment arrangement the employee is only permitted to use this ticket for travel between the employee's place of residence and the employee's place of employment (between home and work). Any other form of use, including any use by an associate of the employee, is expressly prohibited.

The employer implements a policy to ensure that each ticket is only used by the employee for travel between home and work.

The employer has no involvement in travel by the employee or associate on the buses when they travel in a private capacity, apart from the employer being a public transport provider. That is, the employee or associate is able to travel as a member of the public for private travel by purchasing their own ticket. In these circumstances, the employee or associate is not travelling in respect of the employment of the employee.

Reasons for Decision

Subsection 47(6) of the FBTAA provides:

Where:

(a)

a residual benefit consisting of the provision or use of a motor vehicle is provided in a year of tax in respect of the employment of a current employee

(aa)

the motor vehicle is not:

(i)

a taxi let on hire to the provider; or

(ii)

a car, not being:

(A)

a panel van or utility truck; or

(B)

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 motor vehicle 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 of the motor vehicle by the employee or an associate of the employee, being other use that was minor, infrequent and irregular

the benefit is an exempt benefit in relation to the year of tax.

Paragraph 47(6)(a)

A bus is a motor vehicle (refer subsection 136(1) of the FBTAA). The employee's travel on a bus is the use of a bus. This travel is undertaken by using the employer's ticket under the employment arrangement. The employee's travel is a residual benefit. Therefore, paragraph 47(6)(a) of the FBTAA is satisfied.

Paragraph 47(6)(aa)

Paragraph 47(6)(aa) of the FBTAA is satisfied as the bus is neither a taxi nor a car.

Paragraph 47(6)(b)

Paragraph 47(6)(b) uses the defined terms: 'private use' and 'work-related travel'.

Private use is defined in subsection 136(1) of the FBTAA:

"private use", in relation to a motor vehicle, in relation to an employee or an associate of an employee, means any use of the motor vehicle by the employee or associate, as the case may be, that is not exclusively in the course of producing assessable income of the employee.

Work-related travel is defined in subsection 136(1) of the FBTAA:

"work-related travel", in relation to an employee, means:

(a)

travel by the employee between:

(i)

the place of residence of the employee; and

(ii)

the place of employment of the employee or any other place from which or at which the employee performs duties of his or her employment; or

(b)

travel by the employee that is incidental to travel in the course of performing the duties of his or her employment.

Paragraph 47(6)(b) of the FBTAA requires that there was no private use of the bus during the year of tax and at a time when the benefit was provided other than private use by the employee being work-related travel or other than private use by the employee or associate being use that was minor, infrequent and irregular.

Private use, as defined, in relation to a bus, in relation to an employee or an associate of an employee, means any use of the bus by the employee or associate, as the case may be, that is not exclusively in the course of producing assessable income of the employee. Private use also includes a contextual reference to 'in relation to an employee or an associate of an employee'. The introductory words to subsection 47(6) of the FBTAA include a contextual reference to the residual benefit being provided 'in respect of the employment of a current employee'.

Private use should be confined to when an employee or associate is provided with or uses the bus and when the travel has a sufficient connection with the employment of the employee. Refer also J & G Knowles & Associates Pty Ltd v. Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22. Therefore, use of the bus by a member of the public, by the employee or associate in a private capacity for private travel, or by a different employee for any purpose is not private use of the bus in relation to the residual benefit provided to the employee under paragraph 47(6)(b) of the FBTAA.

Accordingly, in the present matter, private use only occurs when the employee is travelling between home and work using the employer's ticket. Any associate of the employee does not have access to the employer's ticket. This private use by the employee occurs during the year of tax and at a time when the (residual) benefit was provided.

The employer has implemented a policy to ensure that the employee limits travel to between home and work when under this employment arrangement.

During the FBT year and at the time the employee is provided with the residual benefit there is no private use of the bus other than for work-related travel.

Accordingly, the residual benefit consisting of the use of the bus when the employee only travels between home and work under the employment arrangement is an exempt benefit under subsection 47(6) of the FBTAA.

Year of income:  Year ended 31 March 2010

Legislative References:
Fringe Benefit Tax Assessment Act 1986
   subsection 47(1)
   subsection 47(6)
   paragraph 47(6)(a)
   paragraph 47(6)(aa)
   paragraph 47(6)(b)
   subsection 136(1)

Case References:
J & G Knowles & Associates Pty Ltd v. Commissioner of Taxation
   (2000) 96 FCR 402
   2000 ATC 4151
   (2000) 44 ATR 22

Related ATO Interpretative Decisions
ATO ID 2001/313

Keywords
Exempt benefits
FBT exempt private use
FBT residual fringe benefit
Residual fringe benefits

Siebel/TDMS Reference Number:  6091890; 1-A48PYZO

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  20 November 2009
Date reviewed:  2 November 2016

ISSN: 1445-2782