We have previously focused on the Tax Office’s ruling TR 2021/2 (July 2021 Update and December 2021 Update) and particularly changes to the ATOs view as to what is a ‘commercial car parking station’. In short the ATO now will treat as a commercial car parking station one that does not have a primary purpose of providing all day parking and that may charge penalty or excessive all day rates to discourage all day parking (e.g. shopping centre car parks, hotels etc).
As employers approach 1 April 2022 the following matters should be considered:
- the ATO’s new view on what is a ‘commercial car parking station’ has the potential to cause many employers to be subject to FBT on car parking fringe benefits for the 1st time. It is important employers consider the car parking they provide and the possible FBT consequences there-of. In particular:
- does the employer enjoy FBT exemption on employer provider car parking on the basis it is a section 57A type employer or under the ‘small business car parking’ exemption in section 58GA (requires employer to be a ‘small business entity’ which imposes a <$50 million turnover test or, if not, a <$10 million income test for other businesses- but click here for more detail. Note Government bodies are excluded from both measures.)
- does the employer enjoy an exemption on other grounds such as section 58G which provides exemption for:
- parking of motor vehicles that are not cars for FBT purposes , (e.g. more than 1 tonne load carrying capacity vehicles); and
- certain car parking provided by scientific institutions, registered charities, or public educational institutions.
Where no other exemptions are available employers need to be aware of whether their circumstances are such that an FBT liability may arise on employer provided car parking come 1 April 2o22.
We remind employers of 2 key issues that members are regularly raising when considering if they are impacted by the ATO’s change in approach.
What is the lowest daily rate charge by shopping centre car parks and other car parks (hotels etc) that provide all day parking even if at penalty rates?
Where a commercial car parking station is located within the requisite 1km of the employer provided car parking, it is necessary to determine whether the lowest fee charged by it in the ordinary course of business to members of the public for all-day car parking exceeds the car parking threshold. A car parking fringe benefit liability will potentially only exist where this situation arises.
To start with, the car parking threshold for 2021/22 is $9.25. The car parking threshold for 2022/23 is yet to be announced.
‘All-day parking’ means parking of a single car for a continuous period of 6 hours or more on a day during a daylight period.
When assessing the threshold, employers need to ascertain if the lowest fee (and not any fee) charged by a commercial car parking station exceeds the threshold. For example, a car parking station may charge $10 for all-day parking (in before 10am – leave after 4pm), however, it may have other periodical parking arrangements (monthly or annual parking fees) that, when converted to a daily basis, results in the daily fee being below the threshold. Alternatively there may be more advantageous all-day parking rates for members of the public that book in advance or open a parking account.
The all day rate at a shopping centre car park will routinely be set at a premium level ($30+) and be above the car parking threshold.
As catered for in section 39E of the FBTAA, the ATO confirm (in draft Chapter 16 of the ‘Fringe Benefits Tax – a guide for empl0yers’) that where periodical parking arrangements are available (i.e. monthly or yearly) it is possible to derive the daily rate by reference to the total fee charged for the period divided by the number of business days in the period. It should be noted that the number of business days in the period excludes Saturdays and Sundays and public holidays (in the relevant state/territory).
Employers should be certain that they have identified the lowest all day parking rate charged by a shopping centre/commercial car parking station when considering whether the threshold is exceeded.
Ordinary daily rates should not be solely relied upon to make decisions without checking whether any periodical or other rates (such as by pre-booking or opening an account) exist that may produce a lower all day parking rate (and hopefully one below the threshold). Remember though the rate must be available to members of the public so care should be taken to ensure for instance there are no conditions that attach to a lower rate parking fee that mean it is not available to members of the public. This is very relevant to parking rates only available to employees of tenants at there shopping centre.
Formal enquiries should be made as to the existence of periodical rates and any terms and conditions applicable. As noted above the periodical rate must be divided by the number of business days in the period.
Valuing car parking fringe benefits
Employers that face a potential car parking liability as a result of the change in ATO position should consider the ‘market value’ basis when determining which taxable value method to use for car parking benefits. More information on this method is available at draft chapter 16.2.5.2 of draft Chapter 16 of the ‘Fringe Benefits Tax – a guide for empl0yers’.)
This is particularly the case where, despite the existence of a shopping centre/ commercial car park within a 1km radius that charges more than the threshold, there is ample free street or other free parking near the employer provided parking.