Employers that have provided FBT car parking benefits for the 2022–2023 FBT year should be aware that the ATO has finalised the changes to its ruling on car fringe benefits – specifically on the concept of “primary place of employment”. A broad test of primary place of employment now applies. Considerations of whether a place is an employee’s primary place of employment may include where their duties are performed, the place at which is primary to the employee’s conditions of employment.
The FBT ruling on car fringe benefits has finally been updated to include changes to address the concept of primary place of employment as a result of the Full Federal Court’s decision in Federal Commissioner of Taxation v Virgin Australia Regional Airlines Pty Ltd [2021] FCAFC 209. A draft addendum was previously issued by the ATO in late 2022 on the topic and this has now been finalised, largely unchanged from the draft.
Determining the primary place of employment for FBT car parking purposes is important because, among other things, benefits are only fringe benefits taxable where a car is used by an employee to travel between home and their primary place of employment and is then parked at or in the vicinity of that primary place of employment.
In the Virgin case, the Full Federal Court determined that the “home base” airport of various flight and cabin crew was their primary place of employment, and this was the case even on days when the employee did not attend the home base airport at all (eg because their work meant they had flown to and were required to stay at other locations overnight). As a result, the Court found that car parking benefits were provided, because the employees’ cars were parked at, or in the vicinity of, the primary place of employment. Hence, FBT would be payable by the company for providing the car parking.
Before that decision, the Federal Court had determined that where employees operated on only one aircraft during the day, that aircraft was their primary place of employment; and where employees operated on more than one aircraft during the day, then they had no primary place of employment. Thus, with no primary place of employment or a primary place of employment on an aircraft, any car used by the employee would not be parked in the vicinity and no FBT was payable by the company. This previous decision no longer stands.
The updated ruling now states that an employee’s primary place of employment on a particular day will be either:
A broad test of primary place of employment has been used in this context, and “primary” has been given its ordinary meaning of “first or highest in rank or importance, chief, principal”. Considerations of whether a place is an employee’s primary place of employment may include the place at which duties are performed, and the place which is primary to the employee’s conditions of employment as contained in employment contracts and/or industrial instruments (ie rostering, allowances and car parking entitlements).
Specifically, the updated ruling confirms that where an employee’s conditions of employment indicate that a particular business premises are primary to their employment, those premises may satisfy the definition of primary place of employment even if the employee performs duties principally at another place on a particular day.
In addition, where an employee performs duties from, or at, more than one business premises on a day, the employee’s primary place of employment may be identified through a quantitative and qualitative analysis of the duties performed from, or at, the different business premises. This updated ATO view applies both before and after its date of issue, so employers will need to take care, in particular when preparing for the end of the 2022–2023 FBT year.
An update to Chapter 16 of FBT – a guide for employers is also planned to be completed in April 2023. This update will incorporate practical guidance on the application of the car parking FBT law, including the meanings of “commercial parking station” and “primary place of employment”, and should be read in conjunction with the aforementioned updated ruling.
A new area that the ATO is working on is the issuance of a draft practical compliance guideline for calculating electricity costs when charging an electronic vehicle (EV) at an individual’s home for FBT purposes. According to the ATO, this draft guideline will provide a methodology to enable users of EVs to determine the approximate cost for the electricity when charging an EV at home. It is expected to be released soon (sometime in March 2023).
While this new draft practical compliance guideline will not currently apply to those electric vehicles both held and used on or after 1 July 2022 and meets the other conditions for exemption from FBT (ie under the LCT threshold, and a zero or low emissions vehicle), it will be helpful for those vehicles that do not meet the conditions for FBT exemption and for reportable fringe benefits amount purposes.
For an eligible EV that is exempt from FBT, car expenses such as registration, insurance, repairs/maintenance and fuel (including electricity to charge and run electric cars) are also exempt. However, it should be noted that the provision of a home charging station is not a car expense associated with providing a car fringe benefit, and may be a property or an expense payment fringe benefit.
Although the private use of an eligible vehicle and associated expenses are exempt, businesses are still required to include the value of the benefit when working out whether an employee has a reportable fringe benefits amount. This entails working out the notional taxable value of the benefits, which under both the statutory and operating cost method is reduced for any employee contributions made.
For employees that charge EVs at their homes, the new draft guideline will hopefully provide an easier method for working out their contribution and reducing the taxable value of benefits for reportable fringe benefits amount purposes. It may also be useful in the future for all zero or low-emission vehicles, as the government has committed to a complete review into the FBT exemption by mid-2027 to consider electric car take-up, which may result in the FBT exemption being removed.
Source: www.ato.gov.au/General/ATO-advice-and-guidance/Advice-under-development-program/Advice-under-development---FBT-issues/
www.ato.gov.au/law/view/document?LocID=%22SAV/FBTGEMPD16%22&PiT=20220923000001&docid=SAV/FBTGEMPD16/00001