Edited version of private ruling

Authorisation Number: 1011686078185

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fac sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Fringe benefits tax - car parking fringe benefits

Question 1

For the year ended 31 March 2011, will there be a car parking fringe benefit on a day when an employee parks in a parking space labelled 'Entity A Use Only'?

Answer

No

Question 2

For the year ended 31 March 2012, will there be a car parking fringe benefit on a day when an employee parks in a parking space labelled 'Entity A Use Only'?

Answer

Yes

Question 3

If the answer to question 2 is yes, will there still be a car parking fringe benefit if the 'Entity A Use Only' label is removed?

Answer

Yes

This ruling applies for the following periods:

Year ended 31 March 2011

Year ended 31 March 2012

The scheme commences on:

1 July 2010

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

For a number of years no paid parking has existed within a one kilometre radius of car parking spaces near your premises. A car park now exists with pay parking stations installed, parking fees imposed and fees charged from the particular month in the recent year.

The car park meets the definition of a commercial parking station as it:

· charges a fee for all day parking

· is permanent as the site has been resurfaced, signage and pay stations have been erected

· is commercial with a view to making a profit, and

· the all-day parking definition is met for a continuous period of at least six hours between 7am and 7pm.

The employer, entity A, provides car parking within the building and other nearby surrounding tenancies to employees with access provided via a security pass and boom gate. The employer acknowledges these car parks constitute employer provided car parking as they are leased by or otherwise under the control of the employer and are provided in respect of the employees' employment.

However, the employer's building premise is surrounded by public car parks.

Within the car park there is permit parking which allows permit holders for to park. The employer sends requests for such permits to the body managing the car parks only for a particular class of employees.

Reciprocal agreements between various entities mean that any employee of these entities with a permit may park in any space indicated as requiring the permit to park.

The permit parking is legally enforceable at law with parking fines issued for vehicles parked in the spaces not displaying the appropriate label.

In addition permit spaces are labelled for 'Entity A Use Only' and are used by the employees of a particular class and appropriate employees from other entities agencies who visit the employer that have a permit. The 'Entity A Use Only' labels do not legally restrict the permit spaces to only the particular class of employees as the signage is not enforceable at law with no fines able to be issued.

The employer does not own or lease or otherwise control permit parking spaces and cannot determine the number of those spaces within the public car park.

The permits are issued to the entity applying for the parking permit not to the individual employees.

The signage of 'Entity A Use Only' acts as a deterrent to individuals who fail to observe the parking signage.

Furthermore neither the permit parking nor signage 'Entity A Use Only' in any way reserves or guarantees car parking spaces for the employer's employees.

The permits are provided to a class of employees as part of their position.

The employees who use the permit parking spaces use cars which are either their own or provided as car fringe benefits.

Assumptions

Cars will be parked for longer than four hours on each business day between the hours of 7:00am and 7:00pm.

The employee travels between his or her place of residence and primary place of employment.

The lowest fee for all day parking charged to members of the public by the commercial parking station on the first business day of the FBT year will be more than the car parking threshold. (The current lowest fee for all day parking charged by the commercial parking station is greater than the parking threshold for the year ended 31 March 2011.)

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 39A

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision

All references made in these reasons for decision are to the Fringe Benefits Tax Assessment Act 1986 unless otherwise stated.

Question 1

Summary

For the year ended 31 March 2011 there will not be a car parking fringe benefit on a day when an employee parks in a permit parking space labelled 'entity A use only' as subparagraph 39A(1)(a)(iii) is not satisfied.

Detailed reasoning

A car parking fringe benefit will arise on a day if all of the conditions as outlined in section 39A(1) of the FBTAA are satisfied during the hours from 7:00am to 7:00pm on that day:

(a) during the period or periods, a car is parked on one or more premises of a person (the ``provider''), where:

(i) the premises, or each of the premises, on which the car is parked are business premises, or associated premises, of the provider; and

 (ii) a commercial parking station is located within a 1 km radius of the premises, or each of the premises, on which the car is parked; and

 (iii) the lowest fee charged by the operator of any such commercial parking station in the ordinary course of business to members of the public for all-day parking on the first business day of the FBT year is more than the car parking threshold;

 (b) the total duration of the period or periods exceeds 4 hours;

 (c) any of the following applies:

(i) a car benefit relating to the car is provided on that day to an employee or an associate of an employee in respect of the employment of the employee;

(ii) the car is owned by, or leased to, an employee or an associate of an employee at any time during the period or periods;

 (iii) the car is made available to an employee or an associate of an employee at any time during the period or periods by another person, where:

(A) the other person is neither the employer of the employee nor an associate of the employer of the employee; and

(B) the other person did not make the car available under an arrangement to which the employer of the employee, or an associate of the employer of the employee, is a party;

 (d) the provision of parking facilities for the car during the period or periods is in respect of the employment of the employee;

(e) on that day, the employee has a primary place of employment;  

(f) during the period or periods, the car is parked at, or in the vicinity of, that primary place of employment;

 (g) on that day, the car is used in connection with travel by the employee between:

 (i) the place of residence of the employee; and

 (ii) that primary place of employment;

(h) the provision of the parking facilities for the car during the period or periods is not taken, under the regulations, to be excluded from this section;

(i) the day is on or after 1 July 1993;

the provision of parking facilities for the car during the period or periods is taken to constitute a benefit provided by the provider to the employee or the associate of the employee in respect of the employment of the employee.

The premises on which the car is parked are business premises, or associated premises, of the provider

A 'provider' is defined in section 136(1) as meaning the person who provides the benefit.

A 'benefit' includes any right, privilege, service or facility.

'Business premises' are defined in subsection 136(1):

…in relation to a person, means premises, or part of premises, of the person used in whole or in part, for the purposes of business operations of the person…

'Associated premises' are also defined in subsection 136(1):

… in relation to a person, means premises or part of premises:

· owned by the person; or

· leased by the person; or

· otherwise under the control of the person;

but does not include

· business premises of the person; or

· premises, or part of premises, used as a place of residence of an employee of the person or an employee of an associate of the person.

Employees of the employer are able to park in car parking spaces near their place of employment, this facility is a benefit. The benefit is being provided by the owner of the parking spaces therefore this condition is satisfied.

A commercial parking station is located within a 1 km radius of the premises on which the car is parked; and the lowest fee charged by the operator of any such commercial parking station in the ordinary course of business to members of the public for all-day parking on the first business day of the FBT year is more than the car parking threshold

A commercial parking station is defined in subsection 136(1):

…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.

'Business day' is defined in subsection 136(1) to mean a day other than a Saturday, a Sunday or a public holiday in the place concerned.

The car park within a one kilometre radius of the employer's business satisfies the definition of a commercial parking station.

This car park only commenced to operate in a particular month in 2010. As such, it did not charge a fee to members of the public for all day parking on the first business day of the FBT year as that day would have been in April 2010.

Therefore this condition is not satisfied and there is no possibility of car parking fringe benefits arising for the year ended 31 March 2011.

Question 2

Summary

For the year ended 31 March 2012, there will be a car parking fringe benefit on a day when an employee parks in a permit parking space labelled 'Entity A Use Only' as all of the conditions in subsection 39A(1) will be satisfied.

Detailed reasoning

There will be a car parking fringe benefit on a day when all of the conditions outlined in section 39A (1) are satisfied during the hours from 7:00am to 7:00pm. Those conditions are as follows:

The premises on which the car is parked are business premises, or associated premises, of the provider

We established in the reasons for decision for question one that this condition is satisfied. This will remain the same for the 2012 FBT year. 

A commercial parking station is located within a 1 km radius of the premises on which the car is parked; and the lowest fee charged by the operator of any such commercial parking station in the ordinary course of business to members of the public for all-day parking on the first business day of the FBT year is more than the car parking threshold

There is a commercial parking station within a one kilometre radius of the permit parking spaces.

For the year ended 31 March 2012 the first business day will be 1 April 2011.

Based on the fact that the current rate for all day parking is greater than the current car parking threshold, we have made the assumption that the lowest fee charged by the parking station for all day parking to members of the public on 1 April 2011 will be greater than the car parking threshold. Therefore this condition will be satisfied.

 The total duration of the period or periods exceeds 4 hours

We have made the assumption that cars will be parked for longer than four hours on each business day between the hours of 7:00am and 7:00pm. Therefore this condition will be satisfied.

The car is owned by, or leased to, an employee or an associate of an employee at any time during the period or periods

The employees who will be using the parking spaces either own their cars or the cars are provided as a fringe benefit, therefore this condition will be satisfied.

The provision of parking facilities for the car during the period or periods is in respect of the employment of the employee

The meaning of 'in respect of employment' was considered by the Full Federal Court in J & G Knowles v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 45 ATR 1101. The Full Federal Court held that it is not sufficient for the purposes of the FBTAA to conclude that there was a causal connection between the benefit and the employment. It must be established that there was a sufficient and material connection or relationship between the benefit and the employment.

The permits are issued only to certain entities. The employer must apply for the permits and they are issued to it rather than to specific employees.

The employer then provides the permits to a specific class of employees as part of their position. This allows them to park in spaces that people without such permits cannot park. Whilst they may not be guaranteed a permit parking space, if one is available they are entitled to park in that space. If those employees were not provided the permit as part of their position, they would not be able to park in those spaces.

By contrast, when employees use the car parking spaces that do not have restrictions, the provision of those car parking spaces has no connection to their employment. Employees and the general public may park in those spaces. Also the employer would have no knowledge of, or involvement in, whether employees use those spaces or not.

Consequently the connection between the provision of the benefit and the employees' employment is both sufficient and material.

This condition is therefore satisfied.

On that day, the employee has a primary place of employment

The employees perform their duties of employment work at a particular building. This location is their primary place of employment. This condition will be satisfied.

During the period or periods, the car is parked at, or in the vicinity of, that primary place of employment

 The parking is provided near the building where the employee performs their specified work duties thus satisfying the relevant condition.

 On that day, the car is used in connection with travel by the employee between the place of residence of the employee and that primary place of employment

We have made the assumption that each day that the parking is provided the car is utilised by the employee to travel between their place of residence and their primary place of employment.

Therefore this condition will be satisfied.

Additionally, the car parking facilities are not excluded by the regulations from this section 39A.

Consequently on a particular day if an employee parks in a permit parking space outside their place of employment this will result in a car parking fringe benefit under Section 39A.

Question 3

Summary

There will still be a car parking fringe benefit on a day when an employee parks in a permit parking space even if the 'Entity A Use Only' label is removed.

Detailed reasoning

The 'Entity A Use Only' labels do not legally restrict the permit spaces only to those employees of entity A as the signage is not enforceable at law with no fines able to be issued. The labels are only a deterrent therefore it has always been possible for anyone with a permit to park in those spaces.

Regardless of whether the label is removed or not from the permit spaces, the benefit provided to the employees will still be in respect of their employment.

On the assumption that all of the other conditions in subsection 39A(1) will be satisfied on a day, there will still be a car parking fringe benefit when an employee parks in a B class permit parking space.