We issued a TaxEd Special Edition on 1 April 2022 (see here) drawing attention to the fact the car parking FBT rules may be changing again. Yes, again.
On 29 March 2022 the Assistant Treasurer Hon. Michael Sukkar MP issued a press release entitled Consultation on car parking fringe benefits.
Its fair to say the press release caught us by surprise and whilst it flags a welcome change, (should it happen) it does leave things in a bit of a state of flux as we kick off the 2022/23 FBT year.
By way of background, let’s recap.
In November 2019 the ATO issued a draft ruling TR 2019/D5 outlining an updated view of the application of the Fringe Benefits Tax (‘FBT’) rules for car parking fringe benefits.
The draft ruling, once finalised, was intended to replace TR 96/26 (which was withdrawn at that time).
On 16 June 2021, the ATO issued Taxation Ruling TR 2021/2 ‘Fringe benefits tax: car parking benefits’ (‘the Ruling’). The Ruling stated:
- Paragraph 81 of TR 96/26 expressed the view that car parking facilities that have a primary purpose other than providing all-day parking (that is, one that usually charges penalty rates significantly higher than the rates chargeable for all-day parking at commercial all-day parking facilities) were not commercial parking stations. That view is not retained in this Ruling in recognition of the decisions of the Federal Court in Qantas] and the Administrative Appeals Tribunal in Qantas AAT]. In respect of this changed view, this Ruling applies in respect of car parking benefits provided on or after 1 April 2022.
A key excerpt from Assistant Treasurer Hon. Michael Sukkar’s MP press release states:
“The consultation will identify appropriate modifications to the definition of ‘commercial parking station’ with a view to restoring the previously‑understood interpretation, which better reflects the policy intention of the law. This will also reduce the potential FBT burden on some employers, helping them attract employees back into the workplace.
…
The new definition will apply to car parking fringe benefits provided from 1 April 2022″.
The proposed changes will seemingly be implemented with a view to returning to the previously understood interpretation of the FBT Law.
There is no guarantee that what is ultimately enacted (after consultation) will result in the FBT law reverting entirely to the previous interpretation. There is the further complication of a Federal election and possible change of Government. One could imagine the ATO would be quite happy to retain the position it has arrived at unless the Government of the day changes the law to achieve an outcome closer to the intended policy.
We also note that as the FBT law has not yet changed the ATO are still required to administer the law as it currently stands. In due course the ATO will presumably release a statement as to how it will apply the law pending the consultation/law change process and outcome.
What does it mean for employers?
It appears that the FBT law may be amended (with an intended start date of 1 April 2022) to clarify that car parks that have a primary purpose other than providing all day parking will not fall within the definition of a commercial parking station. This may hopefully allow shopping centre and certain other car parks not to be treated as commercial parking stations.
Whilst this would be good news for many employers and may remove any FBT impost on providing car parking to employees (for example, where the only commercial parking station within 1km is a shopping centre car park), we recommend employers take a conservative approach towards relying on the press release.
Exactly where employers stand in relation to 2022/2023 and later year FBT compliance won’t be known until the consultation and legislative amendment process is complete.
As the ATO may continue to administer the law as it currently stands (and as per TR 2021/2), we suggest it is prudent for employers to gather details of what parking rates apply on 1 April 2022 at ‘potential’ commercial parking stations within the 1km radius and keep records of what parking is provided to employees. We acknowledge this does make it difficult for employers to budget for any FBT exposure in 2022/23 pending greater certainty and also whether, for example, employers should consider securing a market value for car parking they provide in the event the changes do not materialise (see previous TaxEd article from March 2022 regarding the benefit of securing a valuation).
Hopefully once the precise lay of the land is known (including how the ATO will apply the current law for 2022/23) this development may be some welcome news for many employers.