Edited version of your private ruling

Authorisation Number: 1012548089369

Ruling

Subject: Car parking fringe benefits

Question 1

Does a car parking fringe benefit arise under section 39A of the FBTAA when an employee who has garaged an employer provided pool vehicle at their residence returns the car to the employer's car park the next day, where:

· It is parked for more than 4 hours between 7am and 7pm,

· The car is available for use by all employees and

· The car is not driven home by any employee on that day

Answer

No

Question 2

Does a car parking fringe benefit arise under section 39A of the FBTAA when an employee who has garaged an employer provided pool vehicle at their residence returns the car to the employer's car park the next day, where:

· It is parked for more than 4 hours between 7am and 7pm,

· The car is available for use by all employees and

· The car is driven home by a different employee on that day.

Answer

No

Question 3

Does a car parking fringe benefit arise under section 39A of the FBTAA when an employee who has garaged an employer provided pool vehicle at their residence returns the car to the employer's car park the next day, where:

· It is parked for more than 4 hours between 7am and 7pm,

· The car is available for use by all employees and

· The car is driven home by the same employee on that day.

Answer

Yes

This ruling applies for the following periods:

1 April 2013 - 31 March 2014

The scheme commences on:

1 April 2013

Relevant facts and circumstances

· The company (the employer) maintains a small fleet of pool vehicles.

· The employer has a motor vehicle policy outlining the acceptable use for the vehicles.

· The vehicles are used by employees to attend work related meetings and appointments

· Employees book the pool vehicles through an online booking system.

· The vehicle must not be used for travel between work and home. However, approval may be given for the vehicles to be brought home where business use is late evening or early the next morning.

· When the vehicles are not in use they must be parked in the employer provided car park.

· The employer leases office space and as part of the lease, car parking spaces are included. It is considered that the employer has control over the car parking spaces by way of the lease.

· There are commercial car parking stations within a 1km radius of the employer's business premises. These commercial car parking stations charge members of the public rates that are in excess of the car parking threshold.

· There are three scenarios in which an employee will garage a pool vehicle at their residence an then return it to their employer's car park the next day:

1. The employee garages a pool vehicle at their residence and returns it to the car park the next day where it is parked for more than 4 hours between 7am and 7pm. The car is made available to all employees and is not driven home by an employee that day.

2. The employee garages a pool vehicle at their residence and returns it the next day to the car park where it is parked for more than 4 hours between 7am and 7pm. The car is made available to all employees and is driven home by a different employee that day.

3. The employee garages a pool vehicle at their residence and returns it the next day to the car park where it is parked for more than 4 hours between 7am and 7pm. The car is made available to all employees and is driven home by the same employee that day.

· The applicant acknowledges that a car fringe benefit arises when the employee takes home a pool vehicle.

Relevant legislative provisions

Section 39A of the Fringe Benefits Tax Assessment Act 1986

Reasons for decision

Question 1

Section 39A of the FBTAA lists the criteria, all of which must be met before a car parking fringe benefit will arise. Taxation Ruling TR 96/26 Fringe benefits tax: car parking fringe benefits summarises the following criteria at paragraph 9:

a) A car is parked at premises that are owned or leased by or otherwise under the control of the provider (usually the employer).

b) A commercial parking station is located within 1km of the employer-provided parking facility;

c) The lowest fee charged in the ordinary course of business, to members of the public for all-day public parking by a commercial parking station, exceeds the car parking threshold.

d) The car is parked for a total of more than 4 hours between the hours of 7am and 7pm on that day. The 4 hour period need not be continuous, but may be made up of several parking periods.

e) The car is owned by, leased to, or otherwise under the control of, an employee or associate, or it is provided by the employer or associate of the employer.

f) The parking is provided in respect of the employee's employment.

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

h) The car is parked at or in the vicinity of that primary place of employment.

i) The car is used by the employee to travel between place of residence and primary place of employment at least once of that day; and

j) The day is on or after 1 July 1993.

Each of the above will be assessed in turn to determine whether a car parking fringe benefit arises.

a) Car parked on the provider's premises

The employer leases office space and included in the lease are car parking spaces. It is considered that the vehicles will be parked on premises under the control of the employer.

b) Commercial car parking station within 1km

There are commercial car parking stations within 1km radius of the employer provided car park.

c) Lowest fee charged is more than the car parking threshold

The commercial car parking stations charge members of the public rates that are in excess of the car parking threshold.

d) More than 4 hours duration

From the information provided by the applicant, the pool vehicles will be parked at the employer's business premises for more that 4 hours a day.

e) Car is owned by, leased to, or otherwise under the control of, an employee or associate, or the car is provided by the employer (or associate)

In certain circumstances the employer allows employees to take home a pool vehicle and bring it back the next day. Where an employee takes home a pool vehicle and garages it at their residence, a car benefit is provided. Therefore, it needs to be determined whether the employee received a car benefit in respect of their employment pursuant to subparagraph 39A(1)(c)(i) of the FBTAA.

In this case, the employee was provided a vehicle by the employer to undertake their employment duties. It is considered there is a direct link between the benefit and the employment of the employee.

f) Benefit in respect of the employment of the employee

The applicant submits that the car parking benefit is not provided in respect of the employment of the employee. This is because the employee does not receive any advantage from the car park and therefore does not receive a benefit.

A car parking fringe benefit is defined in subsection 136(1) of the FBTAA to mean 'a fringe benefit that is a car parking benefit'. The definition of a 'fringe benefit' is further defined in subsection 136(1) of the FBTAA as:

fringe benefit, in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit:

(a) provided at any time during the year of tax; or

(b) provided in respect of the year of tax;

being a benefit provided to the employee or to an associate of the employee by:

(c) the employer; or

(d) an associate of the employer; or

(e) a person (in this paragraph referred to as the arranger) other than the employer or an associate of the employer under an arrangement covered by paragraph (a) of the definition of arrangement between:

(i) the employer or an associate of the employer; and

(ii) the arranger or another person; or

(ea) a person other than the employer or an associate of the employer, if the employer or an associate of the employer:

(i) participates in or facilitates the provision or receipt of the benefit; or

(ii) participates in, facilitates or promotes a scheme or plan involving the provision of the benefit;

and the employer or associate knows, or ought reasonably to know, that the employer or associate is doing so;

in respect of the employment of the employee, but does not include:

The definition of 'fringe benefit' was considered by the Full Federal Court in FC of T v Indooroopilly Children Services (QLD) Pty Ltd [2007] FCAFC 16; 2007 ATC 4236; 65 ATR 369 (Indooroopilly). In discussing whether the definition required the identification of a particular employee, Edmonds J at ATC 4253 said:

…I would incline to the views of Kiefel J in Essenbourne and Hill J in Walstern that the references to "the employee" through the definition are reference to a particular employee who has been identified as "an employee" of the employer by reference to the opening words of the definition, the terms of the definition which follow are to be applied by reference to the particular employee so identified.

…

A benefit may only be a "fringe benefit" if it is provided by one of four possible "providers" to one of two possible "recipients" - the employee or an "associate" of the employee. Even then, the benefit will only be a fringe benefit if it is in respect of the employment of an employee.

Benefit provided to a particular employee

In applying the above decision, it is necessary to be able to identify a particular employee to which the benefit relates and the benefit has to be provided in respect of the employment of that particular employee.

In this scenario, there is no particular employee that can be identified as benefiting from the car park. In the given situation, the employee receives a car benefit when they take the car home and garage it at their residence. By returning the car to the employer's car park, the car fringe benefit ends. This situation can be distinguished from a situation in which an employee drives a car to and from work and receives the benefit of having a car parking space in which to park the car. In such a situation, the employee can be seen to be receiving a benefit from the use of the car park.

In respect of employment of an employee

The phrase 'in respect of' in relation to the employment of an employee is defined in subsection 136(1) of the FBTAA to include 'by reason of, virtue of, for or in relation directly of indirectly to, that employment'.

The meaning of the phrase was considered by the Full Federal Court in J & G Knowles v Federal Commissioner of Taxation [2000] 96 FCR 402; 2000 ATC 4151; 44 ATR 22 (Knowles). The Court said at paragraph 26:

Whatever question is to be asked, it must be remembered that what must be established is whether there is a sufficient or material, rather than a, casual connection or relationship between the benefit and the employment.

The Court further stated at paragraph 28-29 stated:

While the width of the definition of 'fringe benefit' was designed to capture benefits that, in truth, were other than remuneration, the stated purpose suggests that asking whether the benefit is a product or incident of the employment will be helpful. If it is not then the benefit is likely to be extraneous to the employment and will not bear FBT, notwithstanding that the employment might have been a casual factor in the provision of the benefit.

…

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 FBTAA merely to enquire whether there is some casual connection between the benefit and the employment: see FCT Rowe (1995) 60 FCR 99 at 114 and 123; 31 ATR 392 at 404 and 412; 95 ATC 4691 at 4703 and 4710. Although Brennan, Deane and Gaudron JJ observed in Technical products (at 47), that the requisite connection will not exist unless there is "some discernable and rational link" between the 2 subject matters which the stature requires to be linked, as was pointed out by Dawson J (at 51) the connection must be material.

In Knowles, it was found that there needs to be a material link between the benefit and the employment. In this scenario, there is no benefit to the employee who parks the pool vehicle in the car park. Rather, the employee is merely returning the car after receiving a car fringe benefit. Neither that employee nor any other employee takes the pool vehicle home that night. Therefore, it cannot be said that the employee who returns the car, benefits from the car park. Consequently, there is no material connection between the employment of the employee and the provision of car parking facilities.

g) Primary place of employment

From the information provided the employee has a primary place of employment at the employer on the day the benefit is provided.

h) Car parked in the vicinity of the primary place of employment

The car is parked at the employer's premises. This is in the vicinity of the employee's primary place of employment.

i) Travel between place of residence and primary place of employment

In this scenario, the employee travels between their residence and their primary place of employment.

j) On or after 1 July 1993

The benefit will be provided after 1 July 1993.

Conclusion

As the car parking facility is not provided in respect of the employee's employment, a car parking fringe benefit under section 39A of the FBTAA will not arise in these circumstances.

Question 2

In this scenario, instead of the pool vehicle being returned to the car park and stationed there, the car is driven home by another employee that day. Therefore, the only factor that needs to be reconsidered to determine whether a car parking fringe benefit arises is whether the provision of the car parking facility is in respect of the employment of the employee.

The facts in this scenario are similar to the previous question where an employee who has no on-going entitlement to use a pool car returns the car to the car park the next day. In accordance with the response given in question 1, this employee will not receive a benefit once the car is returned to the car park. Prior to that time, the benefit will be a car fringe benefit. The fact that another employee drives the car home that day will not alter the answer for the first employee who returns the car to the car park in the morning.

The same principal applies to the second employee who drives the pool vehicle home that day. Provided the employee does not have an ongoing entitlement to use the car to travel between home and work, the employee cannot be said to have received a car parking benefit prior to the time at which he or she drives the car home. Therefore, there is no nexus between the employee and the provision of a car parking facility. The only benefit that can be identified as been provided to the employees is a car benefit, the car being driven to the car park (the first employee) and driven home (the second employee).

In this scenario, no employee can be identified as receiving a car parking benefit or receiving a car parking benefit in respect of their employment.

Conclusion

As the car parking facility is not provided in respect of the employee's employment, a car parking fringe benefit under section 39A of the FBTAA will not arise in these circumstances.

Question 3

In this scenario, the employee drives a pool vehicle home at night and returns it to the car park the next day. After being available to all employees and parked for more than 4 hours between 7am and 7pm, the pool vehicle is again taken home at the end of the day by the same employee. All other facts remain the same as the two previous scenarios. Based on this information, a car parking fringe benefit may arise if the benefit is provided in respect of the employment of the employee (paragraph 39A(1)(f) of the FBTAA).

The applicant submits that the car parking benefit is not provided in respect of the employment of the employee as the employee has no ongoing entitlement to take the vehicle home.

As was found in Indooroopilly, there needs to be a particular employee to which the benefit is provided. In this scenario, it is evident that the employee who returns the car to the car park in the morning and drives it home that night benefits from the provision of the car park. There is an identifiable employee who has received the benefit.

In Knowles, the phrase 'in respect of' was discussed and it was considered that there must be a material rather than casual connection between the benefit and the employment. In Knowles, the taxpayer argued that the directors did not receive interest-free loans because they were employees but on the basis that they were owners. The Court in Knowles referred to the High Court decision in Smith v FC of T 87 ATC 4883; (1987) 164 CLR 513 (Smith), which assessed whether a payment was made in respect of an employee's employment or for reasons extraneous to the employment and made the following findings at paragraph 26:

· Is the benefit a product or incident of the employment? (Wilson J at 4886; CLR 519)

· Is some aspect of the employment a substantial reason for the benefit? (Brennan J at ATC 4890; CLA 526)

· Is "in a very real sense the payment…a consequence of the existing relationship of employer and employee" (Toohey J at ATC 4894; CLR 533); or

· Is the employment one of the "proximate causes" of the payment? (Gaudron J at ATC 4896; CLR 537)

In Smith, it was found that an allowance was paid (under an 'encouragement to study scheme') in respect of the employee's employment because it was an incentive to an employee to improve his skills to his own advantage and to the advantage of the bank. The relationship between the employment of the taxpayer and the payment of the allowance was substantial. The employment was a direct cause of the payment and was paid in consequence of the employment. It was only as an employee that the taxpayer qualified for the benefit payable under the scheme. There was no element of gift or personal bounty or of consideration extraneous to the taxpayer's employment.

In considering the judgements in Knowles and Smith to determine whether a benefit is made in respect of employment it is important to consider the reason as to why the benefit was made and whether the benefit is an incident or consequence of employment.

According to the employer's motor vehicle policy, when the pool vehicles are not in use they should be parked at the employer's car park. Therefore the purpose of the provision of a car parking facility is to enable employees to park the pool vehicles after using them for meetings and appointments. In the event an employee drives a pool vehicle home, returns it the next day, drives it home again that night then returns it to the car park the next day, the provision of the car parking space is made in consequence of the employee's employment. The employee would not have been able to receive the benefit had they not been an employee of the employer. Further, the provision of the car parking facility is only made available to employees to undertake their employment duties. It is not considered that the car park is provided for reasons extraneous to the employment of the employee.

Conclusion

In these particular circumstances, a car parking fringe benefit will arise under section 39A of the FBTAA, as the benefit is made in respect of the employment of the employee.