Edited version of your written advice

Authorisation Number: 1012763498188

Ruling

Subject: Car parking fringe benefits

Question

Can the lowest fee charged for all-day parking charged by the operator of a commercial car park that is located within one kilometre of the entrances to three of the five car parks, but not the other two car parks be used to determine the taxable value under section 39C of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) of the car parking fringe benefits provided in all five car parks?

Answer

Yes

This ruling applies for the following periods:

Year ended 31 March 2016

Year ended 31 March 2017

Year ended 31 March 2018

Year ended 31 March 2019

Relevant facts and circumstances

You own a property which has five car parks which are located around the building in which you conduct your operations.

Each of the car parks has a separate entrance.

There is no vehicular access between the various car parks. However, each of the car parks has an entrance to the building. Therefore, it is possible to walk between the carparks through the building.

You are looking to utilise the commercial parking method in section 39C of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) to calculate the value of each car parking fringe benefit.

In reviewing the lowest fees charged for all-day parking by the commercial parking stations located within a 1 kilometre radius of the five car parks, you have located a commercial parking station that is located within one kilometre of three of the car parks which charges a rate that is less than the car parking threshold.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 39A

Fringe Benefits Tax Assessment Act 1986 Section 39B

Fringe Benefits Tax Assessment Act 1986 Section 39C

Parliamentary Precincts Act 1988

Reasons for decision

In general terms, a car parking fringe benefit will arise when the conditions in subsection 39A(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) are met. Subsection 39A(1) states in part:

[Provision of car parking facilities] If the following conditions are satisfied in relation to a daylight period, or a combination of daylight 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 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;

…

You accept that these conditions may be met for car parking provided in all five car parks. That is, the lowest rate charged for all-day parking by a commercial parking station located within one kilometre of all five car parks is more than the car parking threshold.

To calculate the taxable value of these car parking fringe benefits you propose to use the commercial parking station method in section 39C.

Section 39C of the FBTAA states the following:

Subject to this Part, the taxable value, in relation to an FBT year, of a car parking fringe benefit provided on a day in the FBT year in connection with one or more premises is equal to:

(a) if, on that day, there is only one commercial parking station located within a 1 km radius of any of those premises - the lowest fee charged by the operator of the parking station in the ordinary course of business to members of the public for all-day parking on that day; or

(b) if, on that day, there are 2 or more commercial parking stations located within a 1 km radius of any of those premises - the lowest fee charged by any of the operators of those parking stations in the ordinary course of business to members of the public for all-day parking on that day;

reduced by the amount of the recipients contribution.

In applying this section you have reviewed the fees charged for all-day parking by all of the commercial parking stations located within one kilometre of any of the five car parks and have identified the commercial parking station that charges the lowest fee. This commercial parking station is located within one kilometre of three of the car parks, but more than one kilometre from the other two car parks.

The issue raised for consideration in this ruling is whether this fee can be used to value the benefits provided in all five car parks?

Can the lowest fee charged for all-day parking charged by the operator of a commercial car park that is located within one kilometre of the entrances to three of the five car parks, but not the other two car parks be used to determine the taxable value under section 39C of the FBTAA of the car parking fringe benefits provided in all five car parks?

Section 39B of the FBTAA sets out the method to be used to determine whether a commercial parking station is located within a one kilometre radius of the premises on which the car parking is provided.

Section 39B states:

For the purposes of this Division, a commercial parking station is taken to be located within a 1 km radius of particular business premises or particular associated premises if, and only if, a car entrance to the commercial parking station is situated less than 1 km, by the shortest practicable route, from a car entrance to those premises.

The relevant measurement points provided in this section are a car entrance to the commercial parking station and a car entrance to the particular business premises or associated premises on which the car is parked. Therefore, in measuring the one kilometre distance it is necessary to identify the particular business premises or associated premises on which the car is parked.

Subsection 136(1) of the FBTAA contains the definitions of 'business premises' and 'associated premises'.

The definition of 'business premises' states:

business premises, in relation to a person, means premises, or a part of premises, of the person used, in whole or in part, for the purposes of business operations of the person, but does not include:

…

This definition requires the premises to be premises of the person. This requirement is similar to the requirement in paragraph 39A(1)(a) for the car to be parked on 'premises of a person (the provider)'

The definition of 'associated premises' states:

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

(a) owned by the person; or

(b) leased by the person; or

(c) otherwise under the control of the person;

but does not include:

…

The phrase 'premises of the person' in the context of the definition of business premises is discussed in paragraphs 25 to 36 of Taxation Ruling TR 2000/4 Fringe benefits tax: meaning of 'business premises'.

Paragraphs 25 and 26 of TR 2000/4 indicate that in identifying whether the premises are premises of the person it is necessary to consider the nature of the person's interest in the premises.

Paragraphs 25 and 26 state:

Premises of the person

25. The question of whether 'premises, or a part of premises' are premises 'of the person' is to be determined having regard to the nature of the person's interest in the premises, evidenced by the person's rights and obligations in relation to the premises.

26. The term 'premises' is not defined in the FBTAA and, therefore, it must be given its ordinary meaning. 'The word "premises" has a long history of use as a wide and general word referring to land or land and buildings' (per Burchett J in FC of T v. Reynolds Australia Alumina Ltd & Ors (1987) 19 ATR 598, at 617; 87 ATC 5018, at 5033; (1987) 77 ALR 543, at 559; (1987) 18 FCR 29, at 49).

Paragraph 31 of TR 2000/4 in discussing the word 'of' states:

The word 'of' as used in relation to the words 'the person' in the definition of 'business premises' in subsection 136(1), is the key to the interpretation of the words 'premises, or a part of premises, of the person'.

TR 2000/4 at paragraph 32 refers to the decision of Merkel J in Esso Australia Ltd v. FC of T 98 ATC 4953; (1998) 40 ATR 76; 157 ALR 652 (Esso). At ATC 4958 Merkel J said:

In other contexts it has been accepted that the word "of" is not a word of precision in defining a relationship between a person and a thing and generally, is apt to embrace a connection, association or relationship which may fall short of a proprietorial relationship or one involving ownership: see Bailey v Worsley (1969) VR 79 at 83 per Lush J and Re Simersall; Blackwell v Bray (1992) 35 FCR 584 at 591 per Gummow J.'

'The Macquarie Dictionary relevantly defines "of" as: "Belonging or possession, connection, or association." '

'It seems to me that, under s 47(2), for the relevant business premises to be those of an employer, the employer must have a right to possession of the premises, at least to the extent necessary to enable the conduct thereon of the relevant recreational or child care facility. If the employer has the requisite possessory entitlement in respect of the premises it does not appear to matter whether that entitlement is one of ownership, exclusive possession or non-exclusive possession.'

At paragraph 48 to 50, TR 2000/4 states:

48. The employer must have a right of possession and control over the use of the premises during the course of its business operations. The absence of a right of possession and control may indicate the premises are not 'of the person', or the activities being carried out on the premises are not truly 'business operations' of the person.

49. In most situations where premises are owned or held under a normal commercial lease, both possession and control exist. Conversely, for example, the ad hoc hire of squash courts by an employer does not make the squash courts 'business premises' of the employer. This is because any rights the employer has are subject to the overriding control of the operator. In a practical sense, the premises are not those of the employer.

50. It should be noted that situations do arise where a person has ownership of premises, while at the same time another person has exclusive occupancy rights as lessee of the premises, and so the premises could be described as premises of each of those persons. In other words, the premises could, in a particular period, be described as the premises of the owner and the premises of the lessee.

In applying this discussion to paragraph 39A(1)(a) for the premises to be premises of the provider it is necessary for the provider to have a right of control or possession over the premises. This right will be set out in a document (e.g. a land title or a lease agreement) which will describe the boundary of the premises.

Therefore, in considering whether the five car parks are on single premises, or are on multiple premises it is necessary to refer to the document that provides the right of control or possession. This is the ownership document which sets out the boundaries. As all five car parks are within the land title they are all on the same premises.

Therefore, the one kilometre radius will be determined by whether there is a car entrance to the property which is within one kilometre of an entrance to the commercial parking station. As there is an entrance within the one kilometre radius the fee charged by the commercial parking station will apply to the car parking benefits provided in all five car parks.