• 16.7 Taxable value - the statutory formula method

    Under the statutory formula method, 228 car parking fringe benefits are deemed to arise from each car parking space that is available to be used by an employee during the course of the FBT year. However, the result is reduced proportionately if the number of employees is less than the number of spaces.

    Note that this method differs from the typical FBT valuation method, where you are required to keep records of each fringe benefit as it is provided during the year and then value each benefit individually. The statutory formula method gives a total taxable value for all of the fringe benefits you have elected to value by this method.

    The statutory formula involves a four-step process. While this involves finding the taxable value of each daily benefit as if the commercial parking station method, market value method or average cost method applies (refer to sections 16.3 to 16.5), you treat employee contributions quite differently.

    The four steps of the statutory formula method are as follows:

     

    Step

    Action

    1

    Apply the following formula to each car parking space used by an employee who is covered by your election to use this method:

    $A    x     B      x   228
                 366

    Where:

    A = the amount that would be the taxable value of one car parking fringe benefit if you used the commercial parking station method, market value method or average cost method and there was no employee contribution (a car parking fringe benefit arises from the use of one space during one day by one employee)

    B = the number of days in the period of use of the car parking space. This period begins on the first day in the FBT year in which the car parking space is available for use by any employee who is covered by the election, and ends on the last day in the FBT year in which the car parking space is available for use by any employee who is covered by the election.

    2

    Obtain the total of all the amounts calculated under step 1.

    If the average number of employees covered by the election is less than the average number of spaces made available to those employees, divide the total of all amounts calculated under step 1 by the average number of spaces made available, and multiply by the average number of employees covered by the election.

    3

    Obtain the total of all employee contributions for all employees covered by your election to use this method.

    4

    Reduce the step 2 amount by the step 3 amount. The amount remaining is the taxable value of the entire car parking fringe benefits that you elected to value under this method.

     

    Attention

    Regardless of whether or not the year is a leap year, always divide B (in step 1) by 366.

    End of attention

    Election

    If you elect to use the statutory formula method, you must specify in a written election whether the election covers all employees, a particular class of employees, or specific employees.

    Average number of employees covered by the election

    To obtain the average number of employees, add the number of employees covered by the election at the beginning of the parking period to the number of employees covered by the election at the end of the parking period, and then divide the sum by two.

    The number of employees you use for this method must be representative. On any particular day, the number of employees is representative if it is substantially the same as the average number of employees covered by the election during a four-week period beginning or ending on that particular day.

    Average number of spaces made available

    You obtain the average number of spaces by:

    1. counting the number of spaces made available to employees covered by the election at the beginning of the parking period
    2. counting the number of spaces made available to employees covered by the election at the end of the parking period
    3. adding (1) and (2) together and dividing the total by two.

    The number of spaces you use for this method must be representative. On any particular day, the number of spaces is representative if it is substantially the same as the average number of spaces available to employees covered by the election during a four-week period beginning or ending on that particular day.

    Example
    An employer starts providing car parking fringe benefits on 1 October 2008 and continues to do so for the 182 days to 31 March. The employer elects to use the statutory formula method. The employer has four car parking spaces available for use by three employees. Using the average cost method, the employer establishes that the taxable value of each car parking fringe benefit is $10.

    The employees are required to make employee contributions of $30 each a week for 26 weeks.

    Now apply the four steps of the statutory formula method:

     

    Step

    Action

    1

    Apply the following formula to each car parking space used by an employee who is covered by the employer's election to use this method:

    $A    x     B      x    228
                 366

     

    Where:

    A = the amount that would be the taxable value of one car parking fringe benefit if the commercial parking station method, the market value method or the average cost method was used and there was no employee contribution (a car parking fringe benefit arises from the use of one space during one day by one employee), that is, $10.

    B = the number of days in the period of use of the car parking space. This period begins on the first day in the FBT year on which a car parking fringe benefit is provided to an employee who is covered by the election and ends on the last day in the FBT year on which a car parking fringe benefit is provided to that same employee, that is, 182 days.

    $10   x   182   x   228
                   366

    = $1,133.77

    2

    Obtain the total of all the amounts calculated under step 1.

    $1,133.77   x   4

    = $4,535.08

    If the average number of employees covered by the election is less than the average number of spaces made available to those employees, divide the total of all the amounts calculated under step 1 by the average number of spaces available and multiply by the average number of employees covered by the election.

    ($1,133.77 x 4) / 4 x 3

    $4,535.08 / 4 x 3

    = $3,401.31

    3

    Obtain the total of all employee contributions for all employees covered by the employer's election to use this method.

    $30   x   26 weeks   x   3 employees

    = $2,340

    4

    Reduce the step 2 amount by the step 3 amount. The amount remaining is the taxable value of the entire car parking fringe benefits the employer elected to value under this method.

    $3,401.31  -  $2,340  =  $1,061.31

    $1,061.31 is the taxable value of the car parking fringe benefits the employer has elected to value under the statutory formula method.

     

    Attention

    Regardless of whether or not the year is a leap year, always divide B (in step 1) by 366.

    End of attention
      Last modified: 05 Jul 2012QC 17813