Edited version of private advice

Authorisation Number: 5010067963420

Date of advice: 17 December 2020

Ruling

Subject: Fringe benefits tax car parking benefits - commercial car parking station

Question 1

Is the shopping centre car park currently a commercial car parking station as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No

Question 2

Is the shopping centre car park a commercial car parking station as defined in subsection 136(1) of the FBTAA from the FBT year beginning 1 April 2021?

Answer

Yes

Question 3

If the lowest fee charged is below the car parking threshold for an FBT year, has a car parking fringe benefit been provided?

Answer

No

Question 4

If the lowest fee charged by the shopping centre were to rise above the ATO threshold, would the market valuation provided be an acceptable valuation pursuant to section 39D of the FBTAA?

Answer

The Commissioner declines to rule on this question under section 359-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA) as to do so would prejudice or unduly restrict the administration of a taxation law, given the question raises a hypothetical scenario.

This ruling applies for the following periods:

FBT year ending 31 March 2021

FBT year ending 31 March 2022

FBT year ending 31 March 2023

FBT year ending 31 March 2024

FBT year ending 31 March 2025

The scheme commences on:

1 April 2020

Relevant facts and circumstances

The employer has negotiated a lease for its business premises at a location in Australia.

As part of the lease, the landlord has allocated xx car parking spaces to the employer on the premises. However, to cater for all staff, the employer has had to secure an additional xx car parks at the nearby shopping centre. The cost for these additional spaces is $7 per day (Monday to Friday).

The shopping centre is less than 1km away from the employer's business premises.

The advertised general public car parking rate at the shopping centre is based in the number of hours parked, starting at free for up to 3 hours and $36 where the car is parked for more than 7 hours.

The employer sought a valuation report confirming the lowest representative price of a car park within 1 km of both its business premises and the shopping centre, as well as a market valuation of the car parking spaces to be offered to employees. The valuation report confirmed that the shopping centre offer to the public a monthly car parking rate of $127.05 per month, which equates to approximately $6.10 per day. This rate is available for the 2020 calendar year. The valuation report also provided a current market valuation of $2.50 per car park.

Relevant legislative provisions

Section 136(1) FBTAA

Section 39A FBTAA

Section 39D FBTAA

Section 359-35 TAA

Reasons for decision

Question 1

Summary

The shopping centre car park will not be treated as a commercial car parking station as defined in subsection 136(1) of the FBTAA for the FBT year ended 31 March 2021.

Detailed reasoning

Pursuant to Section 39A of the FBTAA, a car parking fringe benefit will arise when all the following conditions apply:

•   A work car park is provided to your employee or their associate in respect of their employment, to use on a day between 7:00am-7:00pm.

•   Your employee or their associate uses the work car park to park a car in a car space for a minimum parking period.

•   The work car park is located at or near the employee's primary place of employment on that day.

•   The car (including a van, utility, sports utility vehicle, all-wheel drive vehicles or similar vehicles designed to carry a load of less than one tonne and fewer than nine passengers) must be:

-   Owned by the employee (or their associate, for example, a spouse)

-   Made available to the employee or their associate

-   A pool car, or

-   Provided to the employee under a salary packaging arrangement.

•   The employee must have used that car to commute between their place of residence and their primary place of employment on the day the car is parked.

•   Within a one-kilometre radius of the work car park is a commercial parking station and the lowest representative fee charged by the commercial parking station is above the car parking threshold.

•   The car space is not a disabled parking space that the employee is entitled to use on that day.

Under section 136(1) of the FBTAA, a 'commercial parking station", in relation to a particular day:

means a permanent commercial car parking facility where any or all of the car parking spaces are available in the ordinary course of business to members of the public for all-day parking on that day on payment of a fee, but does not include a parking facility on a public street, road, lane, thoroughfare or footpath paid for by inserting money in a meter or by obtaining a voucher.

The Australian Taxation Office (ATO) recently issued draft ruling, Taxation Ruling TR 2019/D5, which expresses the ATO's updated views on the FBT treatment of car parking benefits provided to employees. This ruling replaces TR 96/26, which contained the ATO's previous views on the taxation of car parking benefits.

Paragraph 81 of TR 96/26 expressed the view that car parking facilities that have a primary purpose other than providing all day parking, that is, one that usually charges penalty rates significantly higher than the rates chargeable for all-day parking facilities, were not commercial car parking stations.

Pursuant to Paragraph 12 of TR 2019/D5, a car park is a commercial car parking station when it meets the following criteria for a particular day:

•is permanent

•is a commercial car parking facility

•makes all-day parking available to the public on payment of a fee

•is not on-street parking, and

•does this in the ordinary course of business.

Paragraph 18 of TR 2019/D5 also states:

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.

Following the decisions in Commissioner of Taxation v Qantas Airways Limited [2014] FCAFC 168 and Qantas Airways Limited and Commissioner of Taxation [2014] AATA 316, the ATO view, reflected in paragraph 18 of TR 2019/D5 is that car parks such as the shopping centre car park are a commercial car parking station.

However, the withdrawal notice of TR 96/26 makes it clear we will not be applying this view on or before 31/3/2020, which was further extended to 31/3/2021:

However, the view expressed in paragraph 81 of TR 96/26 will continue to apply in relation to a car parking fringe benefit provided on or before 31 March 2020 [further extended to 31 March 2021].

As such, the shopping centre car park will not be treated as a commercial car parking station as defined in subsection 136(1) of the FBTAA for the FBT year ended 31 March 2021.

Question 2

Summary

The shopping centre car park is a commercial car parking station as defined in subsection 136(1) of the FBTAA from the FBT year beginning 1 April 2021.

Detailed reasoning

Section 136(1) of the FBTAA states that a 'car parking benefit' is a benefit under section 39A.

Pursuant to 39A(1)(a)(iii) of the FBTAA, a car parking fringe benefit will only arise where: "The lowest fee charged by a commercial car parking operator in the ordinary course of business to members of the public for all day parking is more than the car parking threshold."

It is necessary to consider each of these terms separately. However, for the purposes of this question we will not be considering the 'lowest fee charged' as this will be dealt with in question 3 below.

(a) Commercial Car Parking Operator

Draft Taxation Ruling TR 2019/D5 has concluded that a car park is commercial (at paragraph 16):

If it is run to make a profit which may include a facility operated by a not-for-profit organisation. In determining whether a car parking facility is commercial, you will need to consider all of the surrounding circumstances and the general nature of the operation of the car parking facility. No one factor will be determinative.

As noted above, shopping centre car parks are generally provided to allow visitors to the shopping centre a convenient place to park. Accordingly, most shopping centre car parks offer a period of free parking, after which the parking fees increase exponentially. Accordingly, it arguable that the shopping centre car park is run to make a profit and that the shopping centre is a commercial car parking operator.

(b) Ordinary Course of Business

Paragraph 21 of TR 2019/D5 states that: "What constitutes the 'ordinary course' depends on the business being carried on and whether the offer of all-day parking is a usual or regular part of business activities even if it is not the sole business activity."

TR 2019/D5 also states in paragraph 21 that a car parking facility may still qualify as a commercial car parking station even if it has another purpose, such as providing short term parking at a shopping centre.

Paragraph 12 of TR 2019/D5 distinguishes from the previous ruling, TR 96/26, where it stated a car park that charged penalty rates significantly higher than rates chargeable for all-day parking, like shopping centres, was not commercial car parking facilities. TR 2019/D5 confirms that even in situations where a car park discourages all day parking with higher fees, that car park will still be a commercial car parking station provided all the other relevant conditions are satisfied.

Based on this, we consider the shopping centre car park will satisfy this element of the definition.

(c) All day parking to members of the public

TR 2019/D5 paragraph 17 confirms that:

The term 'public' takes its ordinary meaning. A car park is offered to the public where car spaces are available to any member of the public. Contractual terms may restrict who may use the car park, for instance, an airport car park may be restricted to passengers and meeters and greeters of passengers. Such restrictions do not prevent the car park from being available to the public, provided any member of the public that accepts these restrictions can use the car park.

TR 2019/D5 paragraph 18 also confirms that if a car park allows all day parking, but its fee structure discourages it with higher fees, it still satisfies this definition.

Based on this, we consider the shopping centre car park will satisfy this element of the definition.

Conclusion

Based on the above, we consider that the shopping centre car park will be considered a commercial car parking station from 1 April 2021.

Question 3

Summary

Where the lowest fee charged is below the car parking threshold for an FBT year, a car parking fringe benefit has not been provided.

Detailed reasoning

Pursuant to 39A(1)(a)(iii) of the FBTAA, a car parking fringe benefit will only arise where: "The lowest fee charged by a commercial car parking operator in the ordinary course of business to members of the public for all day parking is more than the car parking threshold."

As mentioned in question one above, it is necessary to consider each of these terms separately. For the purposes of this question we have only considered 'the lowest fee charged' term.

(d) The lowest fee charged

Section 39AA of the FBTAA requires that: "For the purposes of subparagraph 39A(1)(a)(iii), any fee charged on the first business day of an FBT year that is not representative is to be disregarded."

Therefore, when considering the lowest fee on a particular day, that fee is representative of the fee usually charged by the operator.

Furthermore, section 39AB states:

A fee charged by an operator of a commercial parking station on a particular day is not representative if the fee is substantially greater or less than the average of the lowest fee charged by the operator in the ordinary course of business to members of the public for all-day parking on each of the days in whichever of the following periods is chosen by the employer:

a) the 4 week period beginning on the day; or

b) the 4 week period ending on the day.

Section 39AB requires the employer to consider the fees in either the 4-week period leading up to or ending or on the particular day when assessing whether a fee is representative. The valuation report confirmed that the shopping centre charges a monthly fee of $127.05 and that this rate is available for the entire 2020 calendar year. As noted above, this equates to a daily rate of $6.10 and is currently the lowest fee charged by this operator.

If the lowest fee charged per day by the shopping centre is lower than the car parking threshold for a particular FBT year, then all elements of section 39A of the FBTAA are not satisfied, specifically subsection(1)(a)(iii) of the FBTAA where the commercial parking station fee for all-day parking is not more than the car parking threshold for the FBT year.

Therefore, no car parking fringe benefits will arise on the provision of car parks to employees at either the employer's business premises or the shopping centre based on the current daily rate of $6.10 charged by the shopping centre.

Question 4

Summary

The Commissioner declines to rule on this question concerning whether the market valuation is acceptable under section 359-35 of Schedule 1 to the TAA if the lowest fee charged by the shopping centre were to rise above the ATO threshold.

Detailed reasoning

The Commissioner has the power to decline to rule under section 359-35 of Schedule 1 to the TAA in certain situations. Situations where the Commissioner may decline to rule include where the Commissioner considers that making the ruling would prejudice or unduly restrict the administration of a taxation law.

Paragraph 39 of Taxation Ruling TR 2006/11 gives examples of this situation, which include where the application is frivolous, vexatious or not seriously contemplated (such as a request where the scheme is merely hypothetical) [emphasis added]".

The Commissioner declines to rule on this question concerning whether the market valuation is acceptable under section 359-35 of Schedule 1 to the Taxation Administration Act 1953 if the lowest fee charged by the shopping centre were to rise above the ATO threshold. A possible increase in car parking fees charged is speculation about a future event, and as such is hypothetical.

Binding guidance may be sought from the Commissioner of Taxation if, at a future time, the lowest fee charged by the shopping centre does exceed the car parking threshold.

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