Income tax and fringe benefits tax: customers of Intellitrac Pty Ltd as trustee for The Calapai Family Trust trading as IntelliTrac who use the IntelliTrac FBT e-Logbook for their log book records

This Ruling sets out the Commissioner's opinion on the way in which the relevant provision(s) identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates.

The relevant provisions dealt with in this Ruling are: • subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) • section 28-120 of the Income Tax Assessment Act 1997 (ITAA 1997), and • section 28-125 of the ITAA 1997.

The class of entities to which this Ruling applies is the customers of Intellitrac Pty Ltd as trustee for The Calapai Family Trust trading as IntelliTrac (IntelliTrac) who use the IntelliTrac FBT e-Logbook for the purposes of section 10 of the FBTAA or Subdivision 28-F of the ITAA 1997.

The Commissioner makes this Ruling based on the precise scheme as identified in this Ruling.

The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 8 to 14 of this Ruling.

If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: • this Ruling has no binding effect on the Commissioner because the scheme entered into is not the scheme on which the Commissioner has ruled, and • this Ruling may be withdrawn or modified.

This Ruling applies from 1 April 2016. However, this Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10).

The following description of the scheme is based on information provided by the applicant.

The IntelliTrac FBT Electronic Logbook System (the IntelliTrac System) was developed as a means of recording car log book entries.

The IntelliTrac System consists of the following components: • A Global Positioning System (GPS) Telematics Device which has a unique electronic serial number linking it to a vehicle. When the ignition is turned on and off GPS satellite information, such as location, date, time and odometer, is captured and returned to the GPS Telematics. • The GPS Telematics Device uses GPS location data at one second sampling rates to increment distance travelled each second. These one second distance increments are cumulated and added to the GPS odometer reading each second. • A device called the Driver RFID Wave & Go Reader is used to identify the employee using the vehicle and is connected to the GPS Telematics Device. • All information on any journeys undertaken by a vehicle is transmitted to the IntelliTrac data centre using 3G or 4G telecommunications networks. If the vehicle is outside network coverage, the information is stored in the in-car GPS Telematics Device and transmitted when coverage is available. • Log book records are accessed from the IntelliTrac website, which is secured by a username and password.

At the time of installing the IntelliTrac System, an initial odometer reading from the car is recorded in the database.

The IntelliTrac System has the following four methods for recording whether a journey undertaken is business or private and the purpose of any business journeys: Method One • When the driver turns on the ignition a device called the 'In Vehicle Mobile Data Terminal' provides instructions to swipe the Driver RFID Wave & Go Reader and enter whether the journey is business or private. • If the journey is business, the driver must then select the purpose of the journey. Method Two • When the driver turns on the ignition a buzzer sounds to prompt the driver to swipe the Driver RFID Wave & Go Reader and select whether the journey is business or private using a switch mounted on the dashboard. The buzzer will continue until this is done. • The driver enters the purpose of a business journey at a later time using an online portal. A weekly email is generated to remind the driver. Method Three • When the driver turns on the ignition a buzzer sounds to prompt the driver to swipe the Driver RFID Wave & Go reader. • The driver selects the type of journey using a dashboard mounted keyboard with trip selection codes. Each of the codes specifies whether the journey is business or private and provides a description of the purpose the journey. • The buzzer will stop sounding when this is done. Method Four • When the driver turns on the ignition a buzzer sounds to prompt the driver to swipe the Driver RFID Wave & Go reader. If the driver does not swipe the reader the buzzer will continue. • Push notification is sent to the driver Smartphone App confirming that a journey has commenced in the nominated vehicle and requesting trip purpose information. • Where it is not practical for the driver to use the App at the start of the journey, it will store all 'undefined' journeys in a menu so that the driver will remember to enter the type and purpose of the journey at a later time. Each time the driver commences a new journey or ends a journey there is a reminder to complete outstanding trips. • The driver has the option of an online portal to enter the purpose of the journey if an App or Smartphone is not available.

An IntelliTrac customer will be able to use the IntelliTrac System to produce, in English, an FBT e-Logbook for any selected period for each car that has the system fitted.

The FBT e-Logbook will provide the following information for each journey undertaken during the e-Logbook period: • name of the vehicle • vehicle registration • driver name • date for the journey • start odometer reading for the journey • finish odometer reading for the journey • start time for the journey • finish time for the journey • start location for the journey • finish location for the journey • distance travelled • journey type (private or business), and • reason for the journey. The following information will also be provided: • the report period • initial odometer reading for the report period • last odometer reading for the report period • total kilometres travelled during the report period • total kilometres for all trips during the report period that were classified as private journeys • total kilometres for all trips during the report period that were classified as business journeys, and • percentage of trips during the report period that were classified as business journeys.

The IntelliTrac FBT e-Logbook described in paragraph 14 of this Ruling will satisfy the definition of log book records in subsection 136(1) of the FBTAA provided: • the report is for an applicable log book period, and • the purpose of any journey classified as being a business journey, is entered within a week of the journey occurring and is sufficiently descriptive to enable the journey to be classified as a business journey.

The IntelliTrac FBT e-Logbook as described in paragraph 14 of this Ruling will satisfy the requirements of section 28-125 of the ITAA 1997 provided: • the report is for the period specified in section 28-120 of the ITAA 1997, and • the purpose of any journey classified as being a business journey is entered within a week of the journey occurring and is sufficiently descriptive to enable the journey to be classified as a business journey.

Section 10 of the FBTAA allows an employer to elect to calculate the taxable value of a car fringe benefit using the cost basis method (operating cost method).

Where this election is made, subsection 10(2) of the FBTAA provides that the taxable value of the car fringe benefit will be the amount calculated in accordance with the formula: (Cx(100% - BP)) - R Where: C is the operating cost of the car during the holding period; BP is: (a) if, under sections 10A or 10B, the employer is not entitled to a reduction in the operating cost of the car on account of business journeys undertaken in the car during the holding period - nil; or (b) not applicable (Omitted by No 145 of 1995) (c) In any other case - the business use percentage applicable to the car for the holding period; and R is the amount (if any) of the recipient's payment.

Therefore, an employer intending to claim a reduction in the operating costs of a car, on account of business journeys undertaken during the holding period, must meet the requirements of section 10A of the FBTAA (if the year is a log book year of tax), or section 10B of the FBTAA (if the year is not a log book year of tax).

Subsection 162G(1) of the FBTAA sets out the circumstances in which a year will be a log book year of tax. The circumstances include a year in which an election is made to treat the year as a log book year of tax.

An IntelliTrac customer who uses the Intellitrac System to record details of the journeys undertaken in a car during a particular year will be regarded as making an election for the year to be a log book year of tax.

Section 10A of the FBTAA requires that in a log book year: • log book records are maintained for an applicable log book period • odometer records are maintained for an applicable log book period • odometer records are maintained for the period of the year in which the car was held (the holding period) • the employer estimates the number of business kilometres travelled during the holding period, and • the employer specifies the business use percentage for the holding period.

For the purposes of this Ruling it is only necessary to consider the first of these requirements.

Subsection 136(1) of the FBTAA defines log book records as follows: log book records, in relation to a car held by a person (in this definition called the holder), in relation to a period, means a daily log book or similar document in which, in respect of each business journey: (a) that is undertaken in the car during the period; and (b) that the holder, or a person acting on behalf of the holder, chooses to record in the document for the purpose of demonstrating the pattern of use of the car during the period; an entry setting out particulars of: (c) the date on which the journey began and the date on which it ended; and (d) the respective odometer readings of the car at the beginning and end of the journey; and (e) the number of kilometres travelled by the car in the course of the journey; and (f) the purpose or purposes of the journey. ... is made in the English language at, or as soon as reasonably practicable after, the end of the journey.

In considering these conditions, the Intellitrac Telematics Device records the data for each trip undertaken in the car. Therefore, it will record information in respect of each business journey. The other requirements of the definition of log book records are considered below.

Paragraph (c) of the definition of log book records requires each entry to detail the dates on which the business journey began and ended. This requirement is met as the Intellitrac FBT e-Logbook provides details of the time and date on which each journey began and ended.

Paragraph (d) of the definition of log book records requires that the respective odometer readings of the car at the beginning and end of each journey be entered into the relevant records.

The term odometer is not defined in either the FBTAA of the ITAA 1997 but The Macquarie Dictionary, online edition, defines that term as being 'an instrument for measuring distance passed over, as by a motor vehicle'.

However, the definition of odometer records in subsection 136(1) of the FBTAA makes reference to the 'odometer reading of the car'. In this regard, it is concluded that, whilst odometer readings must pertain to the car, it does not necessarily mean that they must also be attributable either wholly or in part to the rotation of the car's wheels.

Provided the device used to determine the car's odometer readings is of sufficient integrity it can be accepted that a system other than the car's own odometer may meet the FBTAA legislative requirements.

The initial odometer reading of the car is recorded in the database at the time that the IntelliTrac System is installed.

Each time the car is driven, the GPS Telematics Device records the distance travelled during that journey. In this way the respective start and end odometer reading of the car for each journey is recorded for the Intellitrac FBT e-Logbook. It is accepted that the opening and closing odometer readings calculated are of sufficient integrity.

Therefore, the Intellitrac FBT e-Logbook will satisfy the requirements of paragraph (d) of the definition of log book records.

Paragraph (e) of the definition of log book records requires the number of kilometres travelled by the car in the course of each business journey to be shown. This requirement is met as the Intellitrac FBT e-Logbook shows the total distance travelled for each journey.

Paragraph (f) of the definition of log book records requires that the purpose or purposes of each business journey be recorded. To enable this requirement to be met the user is able to input the purpose of a journey at the beginning or end of that journey as follows: • Method 1 - by using the 'In Vehicle Mobile Data Terminal' • Method 2 - by using the switch mounted on the dashboard and then entering the purpose of the business journey at a later time using an online portal • Method 3 - by using a dashboard mounted keyboard with trip selection codes • Method 4 - by using a Smartphone App Therefore, this requirement will be met if the reason for the journey is sufficiently descriptive to enable the journey to be classified as a business journey.

In addition, the definition of log book records requires each of the entries to be made in the English language at, or as soon as reasonably practical after, the end of the journey.

The first of these requirements is met as the entries are recorded in English.

Generally, the second of these requirements will be met as, depending on the method used, at the beginning or the end of the journey the user will record the purpose of the journey. However, there may be occasions on which it is not practical to enter this information at the end of the journey. Provided that the purpose of each journey is recorded on at least a weekly basis, it will be accepted that the entries were made as soon as practical after the end of the journey.

The IntelliTrac FBT e-Logbook will satisfy the requirements of the definition of log book records in subsection 136(1) of the FBTAA provided the purpose of any journey classified as being a business journey is entered within the week of the journey occurring and is sufficiently descriptive to enable the journey to be classified as a business journey.

As set out in paragraph 22 of this Ruling, the log book records must be maintained for an applicable log book period. Subsection 162H(1) of the FBTAA provides that the applicable log book period will be a continuous 12 week period, unless the car is held for less than 12 weeks. If the car is held for less than 12 weeks, the applicable log book period is the period for which the car was held.

Division 28 of the ITAA 1997 provides four methods that can be used by an individual or alternatively by a partnership (that includes at least one individual) to calculate the amount of the income tax deduction that can be claimed for car expenses.

One of the methods is the 'log book' method which is contained in Subdivision 28-F of the ITAA 1997. To be able to use this method, the substantiation requirements set out in section 28-100 of the ITAA 1997 must be met.

Section 28-100 of the ITAA 1997 requires: • the car expenses to be substantiated in accordance with Subdivision 900-C of the ITAA 1997 • a log book to be kept in accordance with Subdivision 28-G of the ITAA 1997 • odometer records to be kept in accordance with the requirements in Subdivision 28-H of the ITAA 1997 for the period of the year for which the car was held • an estimate to be made of the number of business kilometres and the business use percentage, and • the log book and odometer records to be retained.

For the purpose of this Ruling it is only necessary to consider the second of these requirements.

Section 28-115 of the ITAA 1997 sets out the circumstances in which a log book will need to be kept. The circumstances include the making of a decision to keep a log book in a year in which it is not otherwise required to be kept.

In using the IntelliTrac System to record the details of journeys undertaken in a particular year an IntelliTrac customer will be taken to have chosen to keep a log book for the year.

Section 28-120 of the ITAA requires that log book to cover a continuous period of 12 weeks, unless the car is held for less than 12 weeks. If the car is held for less than 12 weeks, the log book must be kept for the period for which the car was held.

Section 28-125 of the ITAA 1997 sets out the way in which a log book is to be kept. Section 28-125 states: 28-125 How to keep a log book (1) It is in your interests to record in the log book any journey made in the *car during the log book period in the course of producing your assessable income. If a journey is not recorded, the log book will indicate a lower *business use percentage than is actually the case. (2) A journey is recorded by making in the log book an entry specifying: (a) the day the journey began and the day it ended; (b) the *car's odometer readings at the start and end of the journey; (c) how many kilometres the car travelled on the journey; (d) why the journey was made. The record must be made at the end of the journey or as soon as possible afterwards. (3) If 2 or more journeys in a row are made in the *car on the same day in the course of producing your assessable income, they can be recorded as a single journey. (4) The following must be entered in the log book: (a) When the log book period begins and ends; (b) The car's odometer readings at the start and the end of the period; (c) The total number of kilometres that the car travelled during the period; (d) The number of kilometres that the car travelled during the period, in the course of producing your assessable income, on journeys recorded in the log book; (e) The number of kilometres referred to in paragraph (d), expressed as a percentage of the total number referred to in paragraph (c). Each of the entries must be made at or as soon as possible after the start or end of the period, as appropriate. (5) Each entry in the log book must be in English.

In considering these conditions, the Intellitrac Telematics Device records data for each trip undertaken in the car. Therefore, it complies with subsection 28-125(1) of the ITAA 1997. The requirements of subsection 28-125(2) of the ITAA 1997 are considered below.

Paragraph 28-125(2)(a) of the ITAA 1997 requires the day the journey began and the day it ended to be entered for each journey. This requirement is met as the IntelliTrac FBT e-Logbook provides details of the time and date on which each business journey began and ended.

Paragraph 28-125(2)(b) of the ITAA 1997 requires the car's odometer readings at the start and end of each journey to be recorded. As discussed at paragraphs 27 to 33 of this Ruling in relation to paragraph (d) of the definition of log book records in subsection 136(1) of the FBTAA, the odometer readings detailed in the IntelliTrac FBT e-Logbook will be accepted as being the odometer readings for the start and end of each journey.

Paragraph 28-125(2)(c) of the ITAA 1997 requires the number of kilometres travelled by the car in the course of each business journey to be shown. This requirement is met as the IntelliTrac FBT e-Logbook shows the total number of kilometres travelled during each trip.

Paragraph 28-125(2)(d) of the ITAA 1997 requires the reason for the journey to be shown. As discussed at paragraph 35 of this Ruling the user is able to input the purpose of the journey, depending on the method used, at the beginning or end of the journey. Therefore, this requirement will be met if the reason that is input for the journey is sufficiently descriptive to enable the journey to be classified as a business journey.

In addition, subsection 28-125(2) of the ITAA 1997 requires the entries to be made at, or as soon as possible after the end of the journey. As discussed at paragraph 38 of this Ruling, provided the driver enters the purpose of each journey at the end of each journey, or at least on a weekly basis, it is accepted that the entries were made as soon as practicable after the end of the journey.

Subsection 28-125(4) of the ITAA 1997 requires the following details to be entered into the log book: • the date on which the log book period begins and ends • the car's odometer readings at the start and end of the period • the total number of kilometres that the car travelled in the period • the number of kilometres that the car travelled in the course of producing assessable income on journeys recorded in the log book, and • the number of kilometres that the car travelled in the course of producing assessable income as a percentage of the total number of kilometres travelled during the period.

The IntelliTrac FBT e-Logbook will satisfy each of these requirements as it provides: • the start and end dates of the log book period • the car's odometer readings at the start and finish of the period • the total number of kilometres travelled by the car during the period • the total number of kilometres that the car travelled in the course of producing assessable income during the period, and • the number of kilometres travelled in the course of producing assessable income as a percentage of the total number of kilometres travelled during the period.

In addition, subsection 28-125(4) of the ITAA 1997 requires each of the entries to be made at, or as soon as possible after the start or end of the period as appropriate and subsection 28-125(5) of the ITAA 1997 requires each entry to be in English.

Generally, the first of these requirements will be met as at the end of each journey the driver will record the purpose of the journey. This will be done as follows: • Method 1 - by using the 'Navigator Mobile Data Terminal' • Method 2 - by using the switch mounted on the dashboard and then entering the purpose of the business journey at a later time using an online portal • Method 3 - by using a dashboard mounted keyboard with trip selection codes • Method 4 - by using a Smartphone App However, there may be occasions on which it is not practical to enter this information at the end of the journey. Provided the purpose of each journey is recorded on at least a weekly basis, it will be accepted that the entries were made as soon as practical after the end of the journey.

The requirement at subsection 28-125(5) of the ITAA 1997 is met as the entries are recorded in English.

The Intellitrac FBT e-Logbook will satisfy the requirements of section 28-125 of the ITAA 1997 provided: • The report is for the period specified in section 28-120 of the ITAA 1997, and • The purpose of any journey classified as being a business journey is entered within a week of the journey occurring and is sufficiently descriptive to enable the journey to be classified as a business journey.

The following is a detailed contents list for this Ruling: Paragraph What this Ruling is about 1 Relevant provision(s) 2 Class of entities 3 Qualifications 4 Date of effect 7 Scheme 8 Ruling 15 Appendix 1 - Explanation 17 Does the IntelliTrac FBT e-Logbook satisfy the definition of log book records in subsection 136(1) of the FBTAA? 17 Log book records 24 The date on which the journey began and the date on which it ended 26 The respective odometer readings of the car at the beginning and end of the journey 27 The number of kilometres travelled by the car in the course of the journey 34 The purpose or purposes of the journey 35 Made in the English language at, or as soon as reasonably practicable after, the end of the journey 36 Conclusion 39 Applicable log book period 40 Does the IntelliTrac FBT e-Logbook satisfy the requirements of section 28-125 of the ITAA 1997? 41 Log book requirements in Subdivision 28-G of the ITAA 45 The day the journey began and the day it ended 50 The car's odometer readings at the start and the end of the journey 51 How many kilometres the car travelled on the journey 52 Why the journey was made 53 The record must be made at the end of the journey or as soon as possible afterwards 54 Details to be entered into the log book 55 Entries to be made at or as soon as possible after the start or end of the period, as appropriate, and in the English language 57 Conclusion 60 Appendix 2 - Detailed contents list 61