Departure from private ruling results in FBT assessments
The AAT has found that a scheme was implemented by a taxpayer differently from the scheme described in a private ruling and that the Commissioner was therefore no longer bound by the ruling, and was authorised to issue the taxpayer with fringe benefits tax (FBT) assessments for the relevant years.
The taxpayer, a company, owned 50% of a property containing a home. The taxpayer's directors (a husband and wife couple at the relevant times) owned the other 50% as tenants-in-common. In 2009, the taxpayer obtained a private ruling that described a scheme in which the property was used 50% by the business, and stated that there was, therefore, no housing fringe benefit. After an audit in 2012, the Commissioner issued FBT assessments for the 2007, 2008 and 2009 tax periods. The Commissioner decided the "business use" of the home was 34% (later decreased to 20% with amended FBT assessments issued).
The AAT found that, based on the totality of the facts and evidence before it, the taxpayer implemented the scheme differently to the scheme set out in the private ruling (and in the private ruling application). As a result, the Commissioner was not bound by the ruling and was authorised to issue the FBT assessments. The AAT also considered that less than 50% of the home had a "business use", not all of the identified "business use areas" were used exclusively or almost exclusively by the taxpayer to carry on its business and produce assessable income, and not all of the identified "business use areas" exhibited the defining characteristics of a place of business.
The AAT said the rooms that were identified in the private ruling (and private ruling application) as having "business use" were "not clearly identifiable as being solely or exclusively places of business and they could very easily be converted back into their original state as simply rooms in a private residence". It added that most of the rooms identified in the private ruling (and private ruling application) as having an exclusive or almost exclusive "business use" in fact had only a minor "business use". The AAT said "the only area that appears to have any genuine connection with the production of assessable income by the taxpayer was Studio B, which was used by the taxpayer for live music rehearsals".
In conclusion, the AAT held that the taxpayer had not proved, on the balance of probabilities, that the FBT assessments were excessive. Accordingly, the AAT affirmed the Commissioner's decision.
AAT Case [2013] AATA 566, AAT, www.austlii.edu.au/au/cases/cth/AATA/2013/566.html.
