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Monday Ramblings – Fringe benefits tax and car parking fringe benefits

Since 1996, the place to go to work out if an employer has to pay FBT on car spaces it owns or leases has been Taxation Ruling TR 96/26, titled “Fringe benefits tax: car parking fringe benefits”.

Note: reimbursing someone who has used a third party car park is not a car parking fringe benefit but is an expense payment fringe benefit.

This ruling stated that a car parking station that discouraged all day car parking by excessive rates was not a commercial car parking station offering all day parking (as is required to be within 1km of the employer provided parking).

And using this same logic in TR 96/26, many advisors got private rulings saying as a car park was not available to all the public (say just those using an airport), it was not a commercial car parking station.

But we pushed a bit too hard and the Commissioner won a case (Commissioner of Taxation v Qantas Airways Ltd [2014] FCAFC 168) saying even if the pricing is designed to discourage all day parking, and even if only a part of the public can use a car park, it still can be a commercial car park… and that means any employer owned or leased parking in a 1km radius of it is now subject to FBT. Think every hospital, Westfield, airport…

And so in 2019 the Commissioner withdrew TR 96/26 and released a draft Ruling that massively increased those who need to consider if they are providing car parking fringe benefits.

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In TR 2019/D5 the Commissioner states:

All-day parking available to the public on payment of a fee

17. The term ‘public’ takes its ordinary meaning. A car park is offered to the public where car spaces are available to any member of the public. Contractual terms may restrict who may use the car park, for instance, an airport car park may be restricted to passengers and meeters and greeters of passengers. Such restrictions do not prevent the car park from being available to the public, provided any member of the public that accepts these restrictions can use the car park.

18. Similarly, if a car park allows all-day parking, but its fee structure discourages it with higher fees, the car park can still be considered a commercial parking station if it satisfies other requirements. This is because the parking facility makes car parking spaces available to the public for all-day parking, on payment of a fee.

19. A fee must be charged to access all-day parking. A car park operator may charge this fee daily, or over a longer period of time. Where a car park operator offers periodic payment, a daily fee can be worked out from the periodic fee charged.

20. Only one car space in a parking facility needs to be available in the ordinary course of business, to members of the public, for all-day parking, for the car park to meet the definition of a ‘commercial parking station’.

Your office is within 1km of a hospital, Westfield, airport… then you will be treated as being within a 1km radius of a commercial car parking station and FBT car parking fringe benefits are not an issue.

But it looks like we have one more FBT year before we need to worry about this, as the Commissioner has just announced that this new approach to what is a commercial car parking station will only start from 1 April 2022.  

Small Business Exemption…

And I should also mention that there is an exemption from car parking fringe benefits if in the last income year before the relevant FBT year they had an aggregate turnover under $50 million. However, this exemption does not apply if the car parking is provided in a commercial car park, and the exemption is not available if the employer is  government body, a listed public company, or a subsidiary of a listed public company. 

By Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.

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