Unless an employee is solely a ‘work from home’ employee, then travel to and from work is a necessity of working life. Many employees catch public transport to and from work to avoid the expense and traffic involved with driving.
If an employer has employees who regularly commute to and from work by bus, is it possible for this travel to be provided on a FBT free basis?
In Melbourne the metropolitan public transport utilises the MYKI system. A MKYI card can be purchased and loaded with MYKI money for use on trains, trams and buses within the metropolitan public transport network.
It is our understanding that it is possible for an employer to acquire and register a number of MYKI cards pre-loaded with MYKI money on them. The cards are then provided to staff by way of salary sacrifice for their use but remain the employer’s property. As the MYKI money is used, the cards can be topped-up by way of further salary sacrifice by the relevant staff member.
If the employer provides these MYKI cards only to employees that commute to work on a bus, and then enters into a strict usage policy that the cards are only to be used for working days travel and obtains a declaration to that effect, can it be argued an exempt residual benefit has been provided?
Subsection 47(6) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) provides exemption for residual benefits consisting of the provision or use of a motor vehicle under certain limited circumstances.
Subsection 47(6) of the FBTAA states:
’47(6) [Motor vehicle not for private use] 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:
(iii) work-related travel of the employee; and
(iv) 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.’
A motor vehicle is essentially defined as any motor powered road vehicle (including a 4WD) and so a bus would fall within this term.
As the bus is neither a taxi nor a car and will only be used to take employees between home and work, the determinative question to be considered is whether the benefit consists of the ‘provision or use of a motor vehicle’ in respect of employment.
The relevant individuals only obtain access to the bus transportation under salary sacrifice arrangements between themselves and their employer. Therefore, the relevant bus transportation is being used in respect of the employment of a current employee.
The word ‘use’ has a broad meaning. It is not restricted to situations where the employee has control of a vehicle. While the facts are that the bus will carry the employee on a pre-organised route and at pre-organised times enable the benefit to be described as the provision of transport, it does not alter the fact that the benefit will consist of ‘the use of a motor vehicle’.
In National Australia Bank v FCT [1993] FCA 531, Ryan J noted that the specific inclusion of ‘a taxi let on hire to the provider’ in paragraph 47(6)(aa) of the FBTAA indicates that the legislature considered ‘use of a motor vehicle’ could include a passenger’s travel in a taxi. As a passenger’s travel in a bus is comparable to a passenger’s travel in a taxi, these comments support the conclusion that bus transportation can also involve the ‘use of a motor vehicle’.
In conclusion, where employer owned MYKI cards are provided to staff for their commuter use between home and work, it would appear reasonable to argue that the benefit being provided is an exempt residual benefit.
This conclusion would also appear to be the case in regards to the Go Card (Qld), Smart Rider (WA), Opal (NSW) and MetroCard (SA) systems to the extent the employer can be registered as the holder of the cards under those systems.
Note: It should be noted that, where employees commute by way of train or tram, the exemption will not be available, as trains and trams are not considered motor vehicles because they are not road vehicles.