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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1051363969114

Date of advice: 30 April 2018

Ruling

Subject: Car parking benefits

Question 1

Is there a commercial car parking station, as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), within 1km of the Rulee’s car park?

Answer

Yes

Question 2

Does a car parking fringe benefit arise, under section 39A of the FBTAA, when an employee has parked their own private car at the Rulee’s car park, for more than 4 hours between 7am and 7pm?

Answer

Yes

Question 3

Does a car parking fringe benefit arise, under section 39A of the FBTAA, when an employee who has used a pool car to travel between home and work parks the pool car at the Rulee’s car park, for more than 4 hours between 7am and 7pm?

Answer

No

This ruling applies for the following periods:

Fringe benefits tax year ended 31 March 2017

Fringe benefits tax year ended 31 March 2018

The scheme commences on:

1 April 2016

Relevant facts and circumstances

The Office is a division of the Rulee.

All employees working at the Office are employed and paid by the Rulee.

In June 200X, the Rulee purchased vacant land, adjacent to the Office. On-street parking in the surrounding area is free, but is time limited (2-4 hour parking zones).

Following the purchase, the vacant land was flattened and surfaced with gravel. An open-air car park was set up with capacity for approximately 60 vehicles (the Rulee’s car park).

Employees of the Rulee, working at the Office, park private cars in the Rulee’s car park. The employee’s private cars are vehicles that satisfy the definition of ‘car’ in subsection 136(1) of the FBTAA. Neither the driver of, nor any passenger in, the car to which this ruling applies is entitled under State or Territory law to use a disabled person's parking space or a valid disabled persons' car parking permit is not displayed on the car.

The spaces in the Rulee’s car park are not designated to specific employees, and are filled on a ‘first in’ basis.

There are two entrances to access the Rulee’s car park. The first entrance is through an asphalted parking area that is set out for visitor and disabled parking, in front of the Office building. There is a boom gate at the entrance to the asphalted parking area, which is open each day between 7 am and 6 pm. The second entrance accesses the Rulee’s car park directly, and a sign is erected which states that it is the Rulee’s car park and that it is a ‘Staff and Visitor Car Park’. There is no barrier or boom gate restricting access on this entrance.

The Office site also has a secured car park that is secured at 5pm each night. The secured car park is used for Rulee vehicles allocated to the Office car pool, and cannot be used for employee’s private cars.

For the purposes of this Ruling an ‘Office pool car’ is a car in the fleet of vehicles owned or held by the Rulee and allocated for use by the Office, and includes four sedans. Office pool cars are usually garaged overnight in the secure car park.

The Office fleet also includes vehicles which do not satisfy the FBTAA definition of ‘car’ in subsection 136(1).

Office pool cars are not permanently allocated to particular employees, and are predominantly provided to employees for operational purposes.

On occasion and in accordance with the Rulee’s policies, an Office pool car may be kept overnight at an employee’s place of residence and returned to the Office car pool, the following day. The car may be parked in the Office car park instead of the secure car park.

Within 1 kilometre of the Office car park there are two hospitals, which both have onsite car parking facilities. The hospital car parks are permanent car parks.

The Hospital A car park is managed by an unrelated management company, who manage car parks under term agreements.

The current parking fees for the Hospital A car park are:

Concession rates may apply for some categories of patients and visitors.

Hospital A also has a car park that is available to employees only.

The Hospital B is managed by an unrelated management company.

The current parking fees for the Hospital B car park are:

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986

Subsection 39A(1)

Paragraph 39A(1)(a)

Paragraph 39A(1)(b)

Paragraph 39A(1)(c)

Subparagraph 39A(1)(c)(i)

Paragraph 39A(1)(d)

Paragraph 39A(1)(e)

Paragraph 39A(1)(f)

Paragraph 39A(1)(g)

Paragraph 39A(1)(h)

Paragraph 39A(1)(i)

Subsection 136(1)

Section 148

Reasons for decision

Question 1

Summary

Both hospital parking facilities are considered to be ‘commercial car parking stations’ as they satisfy the definition in subsection 136(1) of the FBTAA.

Detailed reasoning

For FBT purposes, the term ‘commercial parking station’ (in relation to a particular day), means:

Taxation Ruling TR 96/26 Fringe benefits tax: car parking fringe benefits (TR 96/26), at paragraph 81, provides examples of parking facilities that are not regarded as being ‘commercial parking stations’.

You have accepted that there are two parking facilities within 1km of the Office car park and that these are ‘permanent’ car parking facilities.

Are the hospital car parking facilities ‘commercial’?

The word ‘commercial’ is not defined in the FBTAA and so takes its ordinary meaning within the legislative context. The Macquarie Dictionary, [Online], viewed 19 April 2018, www.macquariedictionary.com.au (The Macquarie Dictionary) relevantly defines ‘commercial’ to mean:

The Explanatory Memorandum to the Tax Laws Amendment (Car Parking) Act 1992 (the EM) states, as an example, that:

‘A car park which was not run with a view to making a profit usually reflected in significantly lower car parking rates charged compared with the normal market value for that facility) would not be commercial.

Similarly, the following example from paragraph 81 of TR 96/26 refers to commerciality:

Both hospital parking facilities are operated by commercial parking operators, and charge fees that are comparative with similar hospital car parks and other parking facilities in the city. These fees are not considered nominal fees.

As such, both hospital parking facilities are permanent, commercial parking facilities.

The ordinary course of business

The phrase 'in the ordinary course of a business' is not defined in either the FBTAA or the ITAA 1997 and so takes its ordinary meaning within the legislative context.

The Macquarie Dictionary relevantly defines ‘ordinary’ to mean:

Subsection 136(1) of the FBTAA defines ‘business operations’, in relation to a government body or a non-profit company, to include any operations or activities carried out by that body or company.

As explained in paragraphs 41 and of Taxation Ruling TR 2000/4 Fringe benefits tax: meaning of 'business premises' (TR 2000/4), the term ‘business operations’ has a broad meaning and involves a wide range of activities undertaken by the entity carrying on the business, including both passive and active dealings, which may not be considered to be ‘in the ordinary course of’ the business’.

In Fairway Estates Pty Ltd v FC of T (1970) 123 CLR 153; (1970) 44 ALJR 306; (1970) 1 ATR 726; 70 ATC 4061; [1970] HCA 29, discussing the meaning of ‘in the ordinary course of business’, Barwick CJ said:

‘… the remarks of Rich J in Downs Distributing Cot Pty Ltd v Associated Blue Star Stores Pty Ltd (1948) 76 CLR 463 at p 477 are of use in that they emphasise the notion of a common course in the conduct of a business. The requirement that the transaction be in the ordinary course of the business excludes transactions which are made for purposes other than the carrying on of the business or to achieve ends disparate from those of the business activity.

You may derive ordinary income in the ordinary course of running your business, even if the income is not the main type of ordinary income you derive. The income does not need to account for a significant part of your business's overall receipts. It is sufficient that the ordinary income is of a kind derived regularly or customarily in the course of running your business'.

It is the Commissioner’s view that the car parking spaces at both hospital parking facilities are made available in the ordinary course of business, to ensure patients and visitors are able to park close to the hospitals, as part of the service provided to patients.

Available to members of the public

The word ‘public’ is not defined in the FBTAA so takes its ordinary meaning within the legislative context. The Macquarie Dictionary relevantly defines ‘public’ to mean:

8. Also, the general public. The people constituting a community, state or nation.

9. a particular section of the people.

The meaning of the word ‘public’ was discussed in FC of T v Qantas Airways Ltd [2014] FCAFC 168; 2014 ATC 20-477; (2014) 227 FCR 554 (Qantas), in relation to commercial parking stations, for car parking fringe benefits purposes. In Qantas, Qantas argued that the airport car parking was intended for use by airline travellers and not the commuting public. The Court held that there is no rationale for imputing into the definition a requirement that a commercial parking station be one that employees of the employer commuting to work by car would or could in fact use.

Paragraph 81 of TR 96/26 provides the following examples of parking arrangements that are not considered to be made available to members of the public:

In your circumstances, the hospital car parking facilities both make parking spaces available to members of the public being patients and visitors and other members of the general public.

All-day parking

For FBT purposes:

The EM provides the following example:

‘Some car parking facilities have a primary purpose to provide short-term shopper parking. To discourage all-day parking, the operators of these facilities charge penalty rates for all-day parking. These rates are significantly greater than the rates that would be charged by a similar facility which encouraged all-day parking. For the purposes of these provisions, short-term shopper parking facilities using penalty rates for all-day parking will not be treated as a "commercial parking station".’

Similarly, TR 96/26 paragraph 81 provides the following example:

The hospital car parking facilities both provide all-day parking for a fee. The fee structure used by both facilities involves gradually increased prices for additional parking hours. The fee structure does not involve steep increases in prices for longer-term parking that would indicate an intention to discourage all-day parking.

Public street, road, lane, or thoroughfare or footpath

The Commissioner is satisfied that neither hospital car parking facility is a parking facility on a public street, road, lane, or thoroughfare or footpath.

In light of the above, both hospital car parking facilities are considered to be ‘commercial parking stations’ as they satisfy the definition of the term provided in subsection 136(1) of the FBTAA.

Question 2

Summary

Yes. Under the circumstances, a car parking benefit does arise as all of the conditions in subsection 39A(1) of the FBTAA are satisfied.

Detailed reasoning

A car parking benefit under section 39A is a fringe benefit where it falls within the definition of ‘fringe benefit’ provided in subsection 136(1) of the FBTAA. This definition requires the following:

Car parking benefits arise under subsection 39A(1) of the FBTAA, which states that where the conditions in paragraphs 39A(1)(a) to (i) are satisfied in relation to a daylight period, or a combination of daylight periods on a particular day:

In your circumstances, your question establishes that:

As such, in this situation, paragraphs 39A(1)(b) and (c) of the FBTAA are satisfied, and the four hours of parking is in relation to a ‘daylight period’, as defined in subsection 136(1), or a combination of daylight periods, on any particular day on which the employee’s car is parked.

Applying the circumstances provided in the facts, the contentions in your private ruling application, and the decision in question 1, the Commissioner is satisfied that paragraphs 39A(1)(a) and (e) to (i) are satisfied.

The remaining condition, in paragraph 39A(1)(d) of the FBTAA, is whether providing the parking facilities for your employee’s car during the period or periods is ‘in respect of the employment of the employee’.

Under subsection 136(1) of the FBTAA, for FBT purposes, the term ‘provide’, in relation to a benefit, includes the term ‘allow’. Section 148 of the FBTAA further extends the meaning of provision of a benefit to a person in respect of the employment of an employee, which is to be regarded as such:

In your application you discuss Indooroopilly Children Services (Qld) Pty Ltd v FC of T [2007] FCAFC 16; 2007 ATC 4236; [2007] ALMD 3803; (2007) 158 FCR 325; (2007) 65 ATR 369; (2007) 239 ALR 85 (Indooroopilly) in which case the court said that ‘a “benefit” may only be a “fringe benefit” if it is provided … to one of two possible “recipients” – the employee or an “associate” of the employee.’

This clarifies that it is necessary that a particular employee is identified to whom the benefit relates, and that the benefit is provided to the employee in respect of the employment of that employee.

As detailed in the facts, the Rulee allows its employees to park their private cars in the Office car park. For FBT purposes, the Office car park facility is “provided” to the employees and when each car is parked, the specific employee to whom the benefit is provided can be identified.

In your application you contend that the spaces in the Office car park are not provided to employees as part of their remuneration, as was the case in Qantas. However, FBT applies to benefits that satisfy the definition of ‘fringe benefit’ provided in the FBTAA. As such, FBT will apply to any benefit provided by an employer to an employee in respect of their employment, not only those benefits specifically included in the employee’s remuneration.

Subsection 136(1) of the FBTAA defines the term ‘in respect of’, in relation to the employment of an employee, to include ‘by reason of, by virtue of, for or in relation directly or indirectly to that employment.’

The meaning of the phrase ‘in respect of’ the employment of an employee was considered by the Full Federal Court (FFC) in Knowles, at 4156. The FFC said:

22. The words “in respect of” have no fixed meaning. They are capable of having a very wide meaning denoting a relationship or connection between two things or subject matters. However the words must, as with any other statutory expression, be given a meaning that depends on the context in which the words are found…

23. The AAT was correct in stating that the phrase requires a “nexus, some discernible and rational link, between the benefit and employment”... what is required is a sufficient link for the purpose of the particular legislation… It cannot be said that any causal relationship between the benefit and the employment is a sufficient link so as to result in a taxable transaction…

…

29. To put the matter another way, although the process of characterising the benefit provided in a particular case can involve questions of fact and degree, it is not sufficient for the purposes of the Act merely to enquire whether there is some causal connection between the benefit and the employment… Although Brennan, Deane and Gaudron JJ observed in Technical Products (at Aust Torts Reports 68, 622; CLR 47), that the requisite connection will not exist unless there is “some discernible and rational link” between the two subject matters which the statute requires to be linked, as was pointed out by Dawson J (at Aust Torts Reports 68, 624; CLR 51), the connection must be “material”

Although the Office car park does not have restricted entry, and can be accessed by the general public, it is the Commissioner’s view that the Office car park is not a car park provided for public use, but a private car park, designated for Office visitors and staff.

It is the Commissioner’s view that the Rulee set up the Office car park to provide ‘all-day’ free parking close to the Office for employees and visitors, as the street parking surrounding the Office workplace is restricted to 2 or 4 hour periods, after which fines may be incurred.

The Rulee allows the parking facilities to be used by employees to facilitate their attendance at work, to carry out their duties. As such, the provision of the Office car park to employees is ‘in respect of the employment of the employee’, and paragraph 39A(1)(d) is satisfied.

Under the circumstances, all of the conditions in subsection 39A(1) of the FBTAA are met, and the provision of the car parking facility to the employee is taken to constitute a benefit, to which FBT applies.

Question 3

Summary

No. A car parking benefit does not arise as the parking facilities are not provided to an employee in respect of their employment.

Detailed reasoning

As discussed above in question 2, a car parking benefit under section 39A of the FBTAA is a ‘fringe benefit’ where it falls within the definition of that term in subsection 136(1). This requires, among other things, that the benefit is provided to an employee (or their associate), and is provided in respect of the employment of the employee. A car parking benefit arises when the conditions in subsection 39A(1) are satisfied.

Under the circumstances, where an Office pool car is used to travel from home to work by an employee and is parked in the Office car park, although the car is not returned to the secure car park, the car is returned to the Office car pool. The car is no longer made available exclusively to the employee who parked the car, but is available for use for Office purposes by any authorised employee.

Applying the meaning of “in relation to the employment of the employee” as discussed in Knowles, as the employee does not have exclusive use of the car once it is parked, providing the parking facility for the car is not materially connected to the employment of the employee. The necessary connection will not exist if the employee does not have an ongoing entitlement to the private use of the car.

As such, the parking is not provided ‘in relation to the employment of the employee’, and neither paragraph 39A(1)(d), nor the definition of ‘fringe benefit’, are satisfied in relation to the provision of the car parking facility for parking the Office pool car.

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