On 16 June 2021, the Commissioner issued Taxation Ruling TR 2021/2 ‘Fringe benefits tax: car parking benefits’ (‘the Ruling’), setting out the Commissioner’s views on when the provision of car parking is a ‘car parking benefit’.
The final ruling has been a long time coming and completes a process involving the issue of a draft ruling TR 2019/D5 in November 2019.
In this article we explore the major developments plus provide some commentary regarding the preconditions of what is a car parking benefit.
Date of effect
The Ruling will apply to car parking benefits provided in FBT years commencing both before and after its date of issue.
However, the Commissioner’s revised view on the meaning of the term ‘commercial parking station’ (see below) will only apply to car parking benefits provided from 1 April 2022. As this aspect of the Ruling is a major change and likely to bring more employers into the car parking benefit net this is welcome concession.
Background
The Ruling was previously issued in draft as TR 2019/D5 and differs from the draft in a number of respects.
The main difference relates to the meaning of ‘primary place of employment’ which was addressed in TR 2019/D5. The concept has been removed from the Ruling.
The ATO advises that the Ruling will be amended once it has finished considering its position in light of the recent Federal Court decision in Virgin Australia Airlines Pty Ltd v FCT [2021] FCA 523. We covered the this case in the May 2021 TaxEd Update (click here) and note the case is on appeal.
The Ruling is also intended to be read in conjunction with Chapter 16 of the Fringe benefits tax — a guide for employers. A new Chapter 16 is currently being finalized. The current Chapter 16 can be viewed here.
The Ruling – key points of note
Below we look at the key aspects of the ruling in the context of the pre-conditions of what is a car parking benefit.
When a car parking benefit is provided
A person does not have to be the employer to provide a car parking benefit, as long as it is provided under an arrangement with the employer.
Further, a person can provide a car parking benefit in relation to a car where the use of that car is an exempt benefit (for example, a ute where the only private travel is home/work and other minor, infrequent and irregular private travel).
A vehicle that is not a car does not give rise to a car parking fringe benefit (for example, +1 tonne load carrying vehicles).
A car that is parked at one or more work car parks on the same day, between 7.00 am–7.00 pm, may satisfy the minimum parking period.
Ordinarily, where there is no evidence that the employee and employer are dealing with each other in any other capacity, the parking is provided to the employee ‘in respect of their employment’.
Meaning of ‘in the vicinity of’
The work car park and the employee’s primary place of employment must be near, proximate or close to each other. When considering the distance between the places, it is the spatial and geographical separation that is significant.
‘Geographical’ includes features such as rivers, railway lines, freeways and other physical obstacles which might render a car park and an employee’s primary place of employment near or close as the crow flies but not so in terms of the distance of the shortest practicable route between them.
The Ruling provides the following useful example:
Example 1 – work car park is not ‘in the vicinity of’ the employee’s primary place of employment
12. An employer leases premises (a work car park) to provide car parking to its employees.
13. As the crow flies, the distance between the work car park and office building, which is the employee’s primary place of employment, is less than one kilometre.
14. However, the shortest walking route between the work car park and office building is approximately two kilometres, or 20 to 25 minutes, by foot. A shuttle bus also operates between the work car park and office building. The journey by shuttle bus takes approximately 15 to 20 minutes, one way.
15. The work car park is not ‘in the vicinity’ of the employee’s primary place of employment
Meaning of a ‘commercial parking station’
A ‘commercial parking station’, on a particular day, is a commercial car parking facility which:
- is permanent;
- is not on-street parking;
- has car spaces available in the ordinary course of business to the public for all-day parking for a fee.
For a ‘car parking benefit’ to arise, the commercial parking station must be located within a one kilometre radius of the work car park — this will be the case if:
- the closest car entrance to the commercial parking station is within one kilometre of the closest car entrance to the work car park;
- this is to be measured by the ‘shortest practicable route’, which can be travelled by foot, car, train and boat (but not including illegal or impractical shortcuts).
Commercial car parking facility
‘Commercial car parking facility’ takes its ordinary meaning. In considering its ordinary meaning and the statutory context, there must first be a parking facility. Without limiting what might be a parking facility, it could be:
- a purpose-built complex designed for car parking (including parking provided as part of an office or apartment building); or
- an area of land dedicated or adapted to providing car parking (including on-street parking).
A ‘commercial’ car parking facility is a parking facility that displays certain characteristics that are hallmarks of such a facility, for example:
- it is operated by a car parking operator, this includes a parking facility that exists within another complex (such as an office, shopping centre or hospital) where the owner or lessor of that complex outsources the management of the parking facility to a car parking operator;
- if not operated by a car parking operator:
- has clear signage visible from the street advertising that paid parking is available;
- has mechanisms to control who can enter and/or exit the parking facility, or park at the facility, this may include boom gates, or ‘pay and display’ ticketing machines;
- charges more than a nominal fee (usually a significantly lower rate than the local market rate) for paid parking, this includes charging a user for parking which is not all day parking (such as parking at an hourly rate).
The Ruling states that where a parking facility displays two or more of the above characteristics, it will be considered a commercial car parking facility.
‘Permanent’
Based on its ordinary meaning and statutory context, a ‘permanent’ commercial car parking facility is enduring or lasting and not temporary or transient. For example, a parking facility set up for a special event (like a sporting event) would not be permanent. A vacant lot, operated as a commercial car parking facility, could be considered to be a permanent commercial car parking facility even where it is intended that a building will be erected on the site in due course. Many of the hallmarks of a ‘commercial car parking facility’ would also support a conclusion that the parking facility is permanent, such as it has:
- signage, advertising and/or online booking facilities;
- infrastructure which controls the entry and exit of cars or payments for parking.
All-day parking available in the ordinary course of business to the ‘public’ on payment of a fee
Based on its ordinary meaning, a car space is available to the ‘public’ when any member of the public may park their car in that space.
Contractual terms and conditions may restrict who or how someone may use the parking facility — e.g. an airport car park may be restricted to passengers and those meeting and greeting passengers. Such restrictions do not prevent the car park from being available to the public, provided any member of the public who agrees to the terms and conditions can use the parking facility.
However, if there are substantial limits on the availability of all of the car spaces at a parking facility, the facility’s car spaces are not available to the public.
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.
Only one car space within a commercial car parking facility needs to be available in the ordinary course of business, to members of the public, for all-day parking, for the facility to meet the definition of a ‘commercial parking station’.
‘Ordinary course of business’
What constitutes the ‘ordinary course’ depends on the business being carried on by the operator of the parking facility. That is, whether the offer of all-day parking is a usual or regular part of business activities, even if it is not the sole business activity. A parking facility may still qualify as a commercial parking station even if some of its car spaces are available for other purposes, for example:
- short-term parking, such as hourly parking at a hospital, shopping centre, hotel, university or an airport; or
- long-term parking, that is, parking over a period exceeding one day.
Note – All-day parking may still be provided in the ordinary course of business, even if a parking facility’s fee structure appears to encourage short-term parking and discourage all-day parking. The fact that all-day parking charges are expensive will not, on its own, mean all-day parking is outside the ordinary course of business.
The key change introduced by the Ruling is to the long held ATO view expressed in TR 96/26 (now withdrawn). Paragraph 81 there-of stated that car parking facilities with 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.
The new ATO view as expressed in the Ruling is shown below:
Example 2 – parking facility is a commercial car parking facility
23. An inner-suburban shopping centre provides dedicated car spaces in a multi-level concrete structure attached to the shopping complex. The car park is operated by the landlord of the shopping centre.
24. There is licence plate recognition functionality at each entrance and boom gates at each exit to the parking facility. A car can be parked for free for the first two hours, after which parking costs $5 per hour. There is signage visible from the street and at each entrance advertising that car parking is available.
25. This parking facility is a commercial car parking facility. While the parking facility is not managed by a car parking operator, it satisfies all three hallmark characteristics in paragraph 21 of this Ruling. The parking facility is a commercial parking station if it meets the other requirements in paragraph 16 of this Ruling.
All-day parking may still be provided in the ordinary course of business, even if a parking facility’s fee structure appears to encourage short-term parking and discourage all-day parking. The fact that all-day parking charges are expensive will not, on its own, mean all-day parking is outside the ordinary course of business.
‘Lowest representative fee’ charged
A fee that is not representative is disregarded when considering if the car parking threshold requirement is met.
To work out if an all-day parking fee is the lowest representative fee, it is necessary to identify the fee charged on the first business day of the FBT year — i.e. 1 April — and compare that fee against the average fee charged for the same all-day parking by the same operator during:
the four-week period beginning on that first day of the FBT year; or
the four-week period ending on that first day of the FBT year.
To be considered ‘representative’, the fee being tested should not be substantially greater or less than the average fee on each day during the relevant four-week period.