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Subject: FBT-Car Parking-Meaning of Commercial Parking Station

Question 1

Is the XYZ shopping centre car park that is located within a 1km radius of one of the taxpayer's (TP's) work premises a commercial parking station within the meaning of sections 39(C) & 136(1) of the Fringe Benefits Tax Assessment Act 1986?

Answer

No

This ruling applies for the following periods:

01 April 2011 -31 March 2016

Relevant facts and circumstances

The XYZ shopping centre allows free car parking for the first 2 hours with a gradual increase in fees commencing at $X and increasing in $X increments for each up hour to 5 hours. All day car parking is provided at $XX per day after Y hrs. The shopping centre car park's schedule of charges is attached.

TP has several work premises. Within a 1km radius of one of the work premises there are two car parking facilities that that allow and charge fees for all-day parking. One is the XYZ shopping centre car park and the other is the QPR car parking facility that charges $Z for all day parking.

The QPR car parking facility is the only commercial parking facility within a radius of 2Km of the XYZ shopping centre car parking facility.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Division 9A

Fringe Benefits Tax Assessment Act 1986 Sub-section 136(1)

Fringe Benefits Tax Assessment Act 1986 Section 39A

Reasons for decision

Question 1

Summary

The XYZ shopping centre car park does not constitute a car parking facility within the meaning of sections 39(C) & 136(1) of the Fringe Benefits Tax Assessment Act 1986 because in accordance with Paragraph 81 of TR 96/26 it is a car parking facility with a primary purpose other than providing all-day parking and that usually charges penalty rates significantly higher than the rates charged for all-day parking at commercial all-day parking facilities (such as parking provided for short term shoppers or hotel guests).

Question 1

Detailed reasoning

The criteria for what constitutes a car parking benefit are detailed in section 39A of the Fringe Benefits Tax Assessment 1986 Act (FBTAA).

Subsection 39A(1) states:

If the following conditions are satisfied in relation to a daylight period, or a combination of periods on a particular 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) ------------------

(c) -------

(d) -----

(e) ----------

(f) ------

(g) ------

(h) ------------

(i) -------

the provisions 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.

Commercial parking station is defined in subsection 136(1) of the Fringe Benefits Tax Assessment 1986 (FBTAA)

…in relation to a particular day, means a permanent commercial car parking facility where any or all of the 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 or thoroughfare, or footpath paid for by inserting money in a meter or by obtaining a voucher.

For the purposes of section 39A of the FBTAA, a parking facility will be a commercial parking station where it meets this definition.

However, in the Explanatory Memorandum to the Taxation Laws Amendment (FBT Cost of Compliance) Bill 1995 (EM) that introduced the car parking threshold the Treasurer indicated that:

· 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.

· 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'.

After noting that 'some car parking facilities have a primary purpose of providing short term shopper parking', the EM went on to discuss that such facilities use penalty rates to discourage all-day parking. Penalty rates were said to be rates 'significantly greater than the rates that would be charged by a similar facility that encouraged all-day parking'.

Further, the Commissioner considers the meaning of 'commercial parking station' in Taxation Ruling TR 96/26 Fringe benefits tax: car parking fringe benefits (TR 96/26).

Paragraph 81 in TR 96/26 states:

We do not regard the following parking arrangements as constituting commercial parking stations:

· car parking facilities, with a primary purpose other than providing all-day parking, that usually charge penalty rates significantly higher than the rates charged for all-day parking at commercial all-day parking facilities (such as parking provided for short term shoppers or hotel guests); …

In accordance with paragraph 81 of TR 96/26, car parking facilities, with a primary purpose other than providing all-day parking, that usually charge penalty rates significantly higher than the rates charged for all-day parking at commercial all-day parking facilities (such as parking provided for short term shoppers or hotel guests) are excluded from the definition of commercial parking station.

The exclusion of short-term shopper parking facilities by the Commissioner in the first example of Paragraph 81 of TR 96/26 did not result from the express words of the FBTAA. It is reasonable to assume that in interpreting the meaning of 'commercial parking station' the Commissioner took into account extrinsic materials to determine the intent of Parliament, including the EM referred to above.

Car parking facilities provided for short-term shoppers or hotel guests are excluded from the definition of 'commercial parking station' not just because their primary purpose is not the provision of all-day parking, but because they also charge penalty rates to discourage all-day parking. The meaning of 'all-day parking' in this context is as quoted above, i.e. as defined in subsection 136(1) of the FBTAA.

In interpreting the meaning of 'commercial parking station' under subsection 136(1) of the FBTAA, we do not consider that there exists a single 'primary purpose test' that can be applied to all car parks such that if a particular car park's primary purpose/focus is not on all-day parking, it is excluded from the definition of 'commercial parking station'.

However, as stated and in accordance with the EM and paragraph 81 of TR 96/26 where a car parking facility (such as a short term shopper parking facility) does apply a penalty rate to discourage all-day parking, it will not be a 'commercial parking station' for the purposes of the FBTAA.

Application to TP's circumstances

It is apparent from XYZ shopping centre car park's fee structure that its primary purpose is other than providing all-day parking. It follows that in order to be excluded from the meaning of a commercial parking station as clarified in TR 96/26, it remains to be established that the rates it charges are significantly higher than the rates charged for all-day parking at commercial all-day parking.

Meaning of penalty rate

In determining whether a shopping centre car park is charging significantly higher rates (penalty rates) to discourage all-day parking, it is not appropriate to compare all-day parking fees of shopper parking facilities to all-day parking fees charged by commercial all-day parking facilities in distant CBDs. For the comparison to be meaningful, the commercial car parking facilities need to be operating in the same market place and providing a similar level of service as the shopping centre car park.

The ATO accepts that it would be reasonable and appropriate for TP to confine the comparison of the car parking rates within a 2km radius in determining whether the XYZ's all-day car parking fee would be regarded as "higher than the rates charged for all-day parking at other commercial all-day parking facilities to determine if it was charging penalty rates to discourage all day parking.

The all day parking fee of $15.00 charged by XYZ shopping centre car park is almost double that charged for all-day parking by the QPR commercial all-day parking facility, which is within 2Km of the XYZ car park .This fee is considered significantly higher than that charged by the QPR commercial all-day parking facility.

Accordingly, it is concluded that the XYZ shopping centre car park does not constitute a commercial parking station: