Heads up – the ATO has issued some revised material on car parking fringe benefits.
Two recent ATO documents cause us to take another look at the issue of car parking fringe benefits.
In fairness, most of the ATO efforts have gone into updating its public commentary about when a car parking fringe benefit arises and how it is valued. At present, both ATO documents are draft and subject to public comment, so for now we will just focus on the more noteworthy developments.
The ATO have tackled the topic from two angles.
Firstly, after a long standing commitment to review and update TR 96/26 Fringe Benefits tax: car parking fringe benefits, the ATO have released a draft replacement ruling TR 2019/D5 Fringe Benefits Tax: car parking benefits. TR 96/26 has been withdrawn pending the finalisation of TR 2019/D5.
Secondly, a draft replacement Chapter 16 (Car parking fringe benefits) of the ATO’s FBT guide for employers has also been issued for comment. Comments are due 17 January 2020.
In broad terms the draft ruling and replacement Chapter 16 provide more expansive coverage for employers to identify when a car parking fringe benefit arises and how to value it. The more expansive coverage is welcome.
For the purpose of this article, we focus on two issues, one which is a current issue and sometimes overlooked (workhorse cars) and the other, a tightening up of the ATO view as to what is a commercial car parking station.
We explore both issues below.
Car parking fringe benefits and workhorse cars
As the name suggests, car parking fringe benefits arise in relation to the parking of cars. A car is defined for FBT purposes as a motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers.
A common misconception is that a car parking fringe benefit does not arise where the ‘car’ is not subject to FBT given the operation of section 8(2) of the Fringe Benefits Tax Assessment Act 1986.
Section 8(2) provides an exemption for certain cars (utes, vans and dual cabs designed to carry a load of less than 1 tonne and fewer than 9 passengers) where the only private use of the vehicle is home to work travel and other private travel that is minor, infrequent and irregular.
TR 2019/D5 provides a timely reminder (at paragraph 6) that, despite a car not being subject to FBT (due to section 8(2)), it may give rise to a car parking fringe benefit if the other conditions of a car parking fringe benefit are present (including that the employee drives to/from home and the car is parked on an employer-provided parking space for more than 4 hours).
What is a commercial car parking station?
When TR96/26 was released, the ATO provided a few concessions for car parking facilities, including facilities:
- that had a primary purpose other than all-day parking, that charged rates for all-day parking significantly higher than rates charged at other all-day parking facilities; and
- for car parks not run with a view to making a profit.
These concessions have seen may employers/car parks secure favourable rulings that a car park does not constitute a commercial car parking facility and therefore is not relevant when an employer determines whether the parking it provided was within 1km of a commercial parking station that charged an all-day parking fee greater than the threshold.
The concessions have also resulted in employers assuming certain car parking facilities that provide all day parking at rates higher than the threshold do not create an FBT exposure because the primary purpose of the car park was other than all-day parking.
For example, regional airport car parks which are predominantly used for short term drop off/pick up and shopping centres that provide all-day parking at penalty rates were routinely ignored when an employer tested the 1km boundary.
The ATO has clearly reset and tightened the concessions.
Paragraph 20 of TR 2019/D5 states:
‘Only one 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.’
Further at paragraph 18 the Ruling notes that:
‘ … 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.’
For employers that may have enjoyed the ‘old ATO view’, the ATO have indicated the changed interpretation will apply from 1 April 2020.
Accordingly, for all employers that provide employee parking and do not currently pay FBT on car parking fringe benefits, it is high time to get out the 1km tape measure and see what FBT year 2021 holds in store.
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