Issue
Is there any discretion available to the Commissioner under section 7 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), to determine that a car is not available for the private use of an employee when the car is garaged or kept at or near the employee's place of residence?
Decision
No. There is no discretion within Section 7 of the FBTAA that allows the Commissioner to treat the car as not being available for private use.
Facts
The employer, who is not an ambulance service, a firefighting service or a police service, holds a range of sedans which are all 'cars' in terms of the FBTAA.
For a period of time, the employer is unable to use its office building and is therefore required to move its business temporarily to another building at another location.
This temporary building has no secure garaging or parking facilities, and there are no secure parking facilities available within the area. In that respect, the cars would have to be parked either in the street or open car parks.
In order to protect the cars from theft or vandalism various employees were allocated cars to travel to and from work, on the condition that they are kept securely garaged overnight and on weekends at the employees' residence/home.
The employer uses the statutory formula method for calculating the taxable value of car fringe benefits.
Reasons for Decision
Under subparagraph 7(1)(a)(ii) of the FBTAA, a car benefit will arise when a car that is held by an employer is taken to be available for the private use of an employee or an associate of the employee. The availability is taken to constitute a benefit provided to the employee or associate in respect of the employee's employment.
Subsection 7(2) of the FBTAA provides that a car shall be 'taken to be available' for the private use of an employee or an associate of the employee where it is 'garaged or kept at or near a place of residence of the employee or an associate of the employee'.
Subsection 7(3) of the FBTAA provides that a car shall be 'taken to be available' for private use of an employee or an associate where the car is held by the employer or an associate and the car is not at the business premises of the employer and any of the following conditions is satisfied; either: • the employee is entitled to apply the car for private use, or • the employee is not performing the duties of his or her employment and has custody or control of the car, or • an associate of the employee is entitled to use, or has custody or control of, the car.
The two situations, therefore, in which a car will be taken to be available for private use of an employee or an associate and a car benefit will arise are: • where the car is garaged at or near the employee's residence (subsection 7(2)): or • where 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)).
The effect of subsection 7(4), is for the purposes of subsection 7(3), a car that is garaged at an employees home is treated as being available for the private use of the employee regardless, of whether or not the employee has permission to use it.
Where the statutory formula method of calculating car fringe benefits is used, subsection 7(2) treats the place of garaging as a determining factor in calculating the taxable value of the car fringe benefit. Where the car is garaged at or near the place of residence of the employee, 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.
As the car is not used by an ambulance service, a firefighting service or a police service, the exemption under subsection 7(2A) does not come into effect. Note: Subsection 7(2) of the FBTAA only applies to the statutory formula method and not the operating cost method for calculating the taxable value of a car fringe benefit.