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FBT – ATO puts the spotlight on valuations used for car parking fringe benefits

We set out some thoughts in relation to the ATO recent expression of interest in market valuations used for car parking.

Car parking fringe benefits have become a focus of the ATO in recent times.

The ATO’s historical explanation of this area, TR 96/26 ‘Fringe benefits tax – car parking fringe benefits’ was withdrawn in November 2019 and a proposed replacement, draft ruling TR 2019/D5 issued for comment. This coincided with the issue of a new draft chapter 16 of the ‘Fringe Benefits Tax – a guide for employers’ (chapter 16 deals with car parking fringe benefits).

With the November developments still progressing from ‘draft’ to ‘final’ through the usual channels, we highlight a further ATO statement on 21 January 2020 outlining ATO concerns and proposed action where the taxable value of car parking fringe benefits is determined using the ‘market value’ method.

The market value method is one of 3 methods available to value car parking fringe benefits. Perhaps considered the least used of the valuation methods, the ATO has seen fit (refer QC 61147) to advise tax agents:

‘From February, we may contact your clients who have engaged an arm’s length valuer as required under the market value method. In some instances valuers have prepared reports using a daily rate that doesn’t reflect the market value. As such, the taxable value of the benefits is significantly discounted or even reduced to nil.’

It would appear something has attracted the ATO’s attention.

The market value method is certainly prescriptive as to the matters required to be considered (refer QC 61147). However, as a valid basis of valuation, prima facie there should be no particular issues provided the valuation is properly undertaken by a suitably qualified person and considers all the requisite criteria.

We could speculate as to what is motivating the ATO, but rather than do that we make the following observations:

  • It is unclear how the ATO proposes to target employers that use the market value method as the current FBT return does not disclose this information. Perhaps a change to the 2019/20 FBT return is contemplated to gather this information. Alternatively, will the ATO gather data directly from (certain) valuers?
  • The car parking fringe benefit rules, and specifically the valuation rules, are not particularly employer-compliance friendly. It was mooted a Board of Taxation review (commenced in 2018) aimed at improving cumbersome FBT compliance obligations (such as requirements to identify and measure distances to ‘commercial car parks’, determine whether and when commercial car parks are open and prices charged) may have resulted in some changes which could have overcome the type of valuations that are raising concerns for the ATO. We are not sure what has happened to the review but, given the ATO’s recent statement, it may be that identifying/making any compliance focused changes wasn’t as simple as hoped.

For employers that use the market value method, it may be timely to review any valuation received and ensure it satisfies the requirements set out in QC 61147.

 

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