A recent ATO Interpretative Decision ID 2012/96, considered the issue where an employee's duties of employment are inherently itinerant in nature, is their journey between home and a work location in their employer's car a 'business journey' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) if they transport a family member during part of the journey?  

My initial thought is that the answer would be no as a trip to take your daughter to school or your husband to work is clearly for personal use.  And that is pretty much what the ATO thinks as well.  Where the transportation of the family member during the journey is an application of the car to a private use and that application results in the provision of a fringe benefit in relation to the employer, the entire journey does not meet the definition of 'business journey' in subsection 136(1) of the FBTAA.

Here are the facts & reasons given by the ATO.

Facts

All statutory references are to the FBTAA.

The employer provides a sedan to the employee which is garaged by the employee at their home. Therefore, a car benefit arises under section 7. The car benefit is a 'car fringe benefit' within the meaning of that term in subsection
136(1).

The employee carries out their duties of employment at varying locations and varying times. Their duties of employment are inherently itinerant in nature. The employee's unaccompanied travel in the sedan from home to work would be considered business travel in accordance with an application of Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax : private use of cars : home to work travel (MT2027).

On a frequent and regular basis in the year of tax the employee used the sedan to transport their spouse to the spouse's workplace during the employee's journey from home to their work locations.

Each application of the car to transporting the employee's spouse is an application of the car to a 'private use' as defined in subsection 136(1) and results in the provision of a 'fringe benefit' within the meaning of that term in subsection 136(1).

The employer has elected to use the operating cost method in section 10 to calculate the aggregate taxable values of car fringe benefits in relation to the car.

Reasons for Decision

Calculating the aggregate taxable values of car fringe benefits under the operating cost method in section 10 requires, amongst other things, a determination of the 'business use percentage' applicable to the car. Under the definition of 'business use percentage' in subsection 136(1), the percentage is dependant, in part, on the number of business kilometres travelled by the car. The definition of 'business kilometre' is 'a kilometre travelled by the car in the course of a 'business journey'.

Subsection 136(1) relevantly defines 'business journey' to mean:

(a)

for the purposes of the application of Division 2 of Part III in relation to a car fringe benefit in relation to an employer in relation to a car - a journey undertaken in a car otherwise than in the application of the car to a private use, being an application that results in the provision of a fringe benefit in relation to the employer;..

As stated in the facts, unaccompanied travel of the employee from home to work in the sedan would be considered business travel in accordance with an application of MT 2027.

However, as also stated in the facts, the employee's transportation of their spouse to the spouse's workplace during the employee's journey from home to work is an application of the car to a private use which results in the provision of
a fringe benefit in relation to the employer.

Therefore, that portion of the journey where the employee transports their spouse to the spouse's workplace does not meet the definition of 'business journey'.

It falls for consideration whether the entire journey from the employee's home to their work location does not meet the definition of 'business journey' or whether only that portion of the journey where the car was applied to a private use with the spouse as passenger is excluded from being a 'business journey'.

The FBTAA does not specify what is to be regarded as a 'journey'. The Macquarie Dictionary 2009, rev. 5th edn, The Macquarie Library Pty Ltd, NSW provides the following definition for the term 'journey':

     journey

    noun

    1 . a course of travel from one place to another, especially by land.

It is considered that a course of travel in a vehicle from one place to another may include stops,diversions, or changes in the number of occupants in the vehicle and it will still satisfy the definition of journey.

In this case the course of travel in the employer's car from the employee's home to their work location is the relevant journey that needs to meet the definition of 'business journey'. The transporting of the employee's spouse during the course of that journey is part of the relevant journey and not a separate journey.

There is no mechanism in the FBTAA to allow the apportionment of the total distance travelled in a journey where the journey would otherwise be considered a 'business journey' but it includes an application of the car to a private use.

Accordingly, where a journey that would be considered a 'business journey' other than the fact that it includes an application of the car to a private use which results in the provision of a fringe benefit in relation to the employer, the entire journey does not meet the definition of 'business journey'.

In this case, where the employee's journey from their home to their work locations includes the transporting of their spouse to the spouse's workplace, the entire journey does not meet the definition of 'business journey' in subsection 136(1).

Date of decision: 14 November 2012