Edited version of your written advice

Authorisation Number: 1012845975957

Date of advice: 28 July 2015

Ruling

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

Question

Are the following parking facilities a commercial car parking station as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

(a) Car Park 1

(b) Car Park 2

(c) Car Park 3

(d) Car Park 4

Answer

(a) Yes

(b) Yes

(c) Yes

(d) Yes

This ruling applies for the following periods:

Year ended 31 March 2015

Year ended 31 March 2016

Year ended 31 March 2017

Year ended 31 March 2018

Year ended 31 March 2019

Year ended 31 March 2020

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.

Employees are provided with car parking for at least four hours at one of your business premises.

The business premises are located within a one kilometre radius of four parking facilities which charge more than the car parking threshold.

No other commercial parking stations are located within a one kilometre radius of the premises on which the cars are parked.

A car parking fringe benefit will arise from the provision of the parking if the relevant parking facility is a commercial parking station.

Car Park 1

The Car Park is a multi-level undercover car park that is open 24 hours a day, 7 days per week to the public. The rates charged for parking on Monday through to Sunday inclusive are:

• 1 Hour - $7.00

• 2 Hours - $15.00

• 3 Hours - $19.00

• 4 Hours - $23.00

• Max - $27.00

The above rates are applied on any hour of a 24 hour day/night.

Payment is via the AutoPay stations before leaving the car park.

There are no 'early bird' rates. Weekly parking and monthly parking tickets are available.

Car Park 2

The Car Park is a multi-level undercover car park that is open 24 hours a day, 7 days per week to the public. The rates charged for parking on Monday through to Sunday inclusive are:

• 1 Hour - $2.50

• 2 Hours - $5.00

• 3 Hours - $7.00

• 4 Hours - $8.00

• 5 Hours - $9.00

• 6 Hours - $10.00

• 7 Hours - $11.00

• 8 Hours - $12.00

• Max - $13.00

Payment is via the AutoPay stations before leaving the car park.

There are no 'early bird' rates. Weekly parking and monthly parking tickets are available.

Car Park 3

Car Park 3 is a secure undercover storage facility that provides a free shuttle service to and from the secure storage facility and airport.

The rates charged are calculated on the basis of a $10 per day flat fee. However, there is also a $30 'after hours' call out fee for persons retrieving cars outside of business hours.

Business hours are 8 a.m. to 5 p.m. Monday to Friday and 8 a.m. to 12 p.m. on Saturdays.

The driver is required to leave their keys to the car to allow the 'shuffling of cars' on the premises, as required.

Payment is made at the office, which is located on the premises, at the time of car drop off.

Car Park 4

Car Park 4 offers both secure undercover and open-air parking. It also provides a free shuttle service to and from the secure storage facility and airport upon 'drop off' and 'pick up' of their car.

Car Park 4 is open from 6 a.m. to 11 p.m. every day.

The fee charged for parking varies with the number of days the facility is used. For example, the fees range from $25 for one day to $620 (average $10 per day) in the open air car park and from $45 for one day to $620 (average $10 per day) in the undercover carpark.

The driver is required to leave their keys to the car to allow the 'shuffling of cars' on the premises, as required.

Payment is made at the office, which is located on the premises, at the time of car drop off.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision

Are the parking facilities a commercial car parking station as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

The parking facilities being considered in this ruling are located within one kilometre of the premises on which an employee has parked his or her car. For the purposes of this ruling it is accepted that a car parking benefit as defined in subsection 39A(1) of the FBTAA will arise from the parking if the relevant parking facility is a commercial parking station.

Commercial parking station is defined in subsection 136(1) of the FBTAA to mean:

a permanent commercial car parking facility where any or all of the car parking spaces are available on 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.

In considering the application of the definition of commercial parking station it is necessary to determine whether the parking facility

• is a permanent car parking facility

• is a commercial car parking facility

• provides car parking spaces in the ordinary course of business to members of the public for all-day parking on payment of a fee, and

• is not a parking facility on a public street, road, lane, thoroughfare or footpath paid by inserting money in a meter or obtaining a voucher.

Guidance for considering each of these issues is provided in Taxation Ruling TR 96/26 Fringe benefits tax: car parking fringe benefits (TR 96/26).

Are the parking facilities a permanent parking facility?

The Explanatory Memorandum to Taxation Laws Amendment (Car Parking) Bill 1992 (Explanatory Memorandum) stated the word 'permanent' has its normal dictionary meaning. It also provided several examples including a car park set up for a short period to cater for a special function (like an Easter Show) which it stated would not be permanent.

Further examples are provided in paragraph 81 of TR 96/26 which states that the following examples are regarded as not constituting commercial parking stations:

• car parking that is established for a short period to cater for a special function;

• parking facilities provided by a sporting venue to persons associated with the venue where;

(a) parking facilities are usually available only after 5 pm to coincide with night events; or

(b) parking is available only for a specific event, and the event is a daytime event; or

(c) parking is available to all members of the public only during sporting events;

provided that, when there is no such event, the parking facilities are not usually available to members of the public.

The Macquarie on line Dictionary defines permanent to mean:

1. lasting or intended to last indefinitely; remaining unchanged; not temporary; enduring; abiding

In applying this definition and the examples, each of the parking facilities are considered to be permanent as they are established carparks that are operated on an ongoing basis into the foreseeable future.

Are the parking facilities commercial facilities?

The term 'commercial' is not defined in the FBTAA. The Explanatory Memorandum stated the word 'commercial' has its normal dictionary meaning. As an example of a parking facility that would not be regarded as a commercial facility it stated that a car parking facility that is not run with a view to making a profit (usually reflected in significantly lower car parking rates charged compared with normal market for that facility) would not be commercial.

This example was also provided in paragraph 81 of TR 96/26 which provided the following example of a parking facility that would not be regarded as being commercial:

a car park that is not run with a view to making a profit or which charges a nominal fee (usually a significantly lower rate than the current value), e.g., an all-day parking fee of less than $2.00 is likely to be a nominal fee.

The Macquarie on line Dictionary defines commercial as follows:

adjective

1. of, or of the nature of, commerce.

2. engaged in commerce.

3. capable of returning a profit: a commercial project.

4. capable of being sold in great numbers: is the invention commercial?

In applying this definition and the examples, each of the parking facilities are considered to be commercial facilities as the fees charged cannot be considered to be nominal and are reflective of the fees that would be charged by a car parking facility that operates on a commercial basis.

Do the parking facilities provide car parking spaces in the ordinary course of business to members of the public for all-day parking on payment of a fee?

Each of the parking facilities provide car parking spaces that can be used on payment of a fee.

Are the car parking spaces provided in the ordinary course of business?

In considering whether these spaces are provided in the ordinary course of business, the definition of business operations in subsection 136(1) of the FBTAA provides that business operations in relation to a government body or a non-profit company includes any operations or activities carried out by that body or company.

In applying this definition it is accepted that the car parking spaces are offered as part of the day to day operations or activities carried out by the carpark operators.

Are the car parking spaces provided to members of the public?

The circumstances in which a parking facility will be considered to provide car spaces to members of the public was considered by the Full Federal Court in FC of T v Qantas Airways Ltd [2014] FCAFC 168; 2014 ATC 20-477 (Qantas).

In its submission to the court, Qantas submitted the meaning of 'public' was to be understood as being the public including persons commuting between home and work and not some broader public constituted by anyone using an airport parking station, such that the airport parking stations should be disregarded because employees did not use them.

The Court held that the word 'public' should be given its ordinary meaning and that there is no rationale for imputing into the definition a requirement that a commercial parking station be one that employees of the employer commuting to work by car would or could in fact use.

The ordinary meaning of 'public' is discussed in paragraphs 19 to 21 of Taxation Ruling TR 2000/10 Income tax: public libraries, public museums and public art galleries (TR 2000/10). At paragraphs 19 and 20 TR 2000/10 refers to the decision In re Income Tax Acts (No 1) [1930] VLR 211.

Paragraphs 19 and 20 of TR 2000/10 state:

19. In deciding whether other institutions make their collections available to the public, some guidance is given by the principles In re Income Tax Acts (No 1) [1930] VLR 211. This case considered whether a benevolent asylum was 'public'. The asylum had been founded and controlled by Freemasons for the benefit and their wives and widows. The Court held that the institution was not carried on for the benefit of the public. The word 'public' in relation to institutions connotes 'the carrying on of the institution for the benefit of the public generally, or at least of a definitely ascertainable section of the public, where the benefit of the institution is available without discrimination to every member of the public or of that section of it' (per Lowe J at [1930] VLR 222).

20. By example, Lowe J went on to suggest that a club, literary society or trade union would not be construed as public. He distinguished these associations by the power they had to admit or exclude members of the public. The provision of rules and regulations, which accorded some arbitrary test before membership, distinguished these bodies. Public character was missing due to selective membership. Where admission to membership of a body or inclusion in a class depends on the consent of members or of a committee of members, it is not provided for 'a section of the public'. Such associations exist for the benefit of their members, not the public or a section of the public.

Paragraph 81 of TR 96/26 provides the following examples of parking arrangements that are not considered to be made available to members of the public:

• car parking spaces leased to a tenant by a property developer as part of an overall lease arrangement for business premises;

• parking provided by a business for its own employees and those of a nearby business, but to no other person;

• in an area without a commercial parking station and where street parking is not permitted, arrangements made by a business for its employees to park during business hours in yards and driveways of surrounding houses.

In applying this discussion, each of the parking facilities are available to be used by the public at large.

Are spaces available for all-day parking?

All-day parking is defined in subsection 136(1) of the FBTAA to mean:

parking of a single car for a continuous period of 6 hours or more during a daylight period on that day.

Subsection 136(1) of the FBTAA defines 'daylight period' to mean the period of the day that occurs after 7 a.m. and before 7 p.m. on that day.

The Explanatory Memorandum provides the following example of a parking arrangement that will not constitute a commercial parking station as it does not provide all-day parking:

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. These rates are significantly greater than the rates that would be charged by a similar facility which encouraged 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".

This example is also included in paragraph 81 of TR 96/26.

Car Park 1

In applying the definition and examples, it is possible to park in Car Park 1 for a continuous period of at least six hours as the car park is open for 24 hours a day 7 days a week. Further, the web site advises that weekly tickets are available.

Although the rates charged are significantly higher than the surrounding area, there is no basis for concluding that these rates have been charged to discourage all-day parking. In this regard, the rates charged can be summarised as follows:

From this table it can be seen that the fee per hour decreases with the length of parking. Further, there is no indication of penalty rates being charged for all-day parking.

The situation is comparable with the airport carparks considered in Qantas. In considering whether the prices charged for parking in the short term carparks were intended to act as a disincentive for six hour or longer stays, the Administrative Appeals Tribunal in Qantas Airways Limited and Commissioner of Taxation [2014] AATA 316; 2014 ATC 10-360 at paragraph 59 said:

In the present circumstances, while the prices charged for short term parking for six hours or more may be high, it is not apparent that the car parking spaces are intended as a disincentive for six hour or longer stays. There are distance, convenience and cover advantages that might be reflected in the rate differentials. At least substantially, if not predominantly, users of all kinds of airport facilities are more likely to be six hour or greater users of the facilities in the ordinary course and, with the possible exception of the Brisbane Airport given its website content, this is not discouraged. In any event, there is not sufficient evidence to conclude that the rates are a penalty as opposed to a situation of a facility provider charging a fee that the market will bear having regard to the cost of alternate convenient transport to and from the airport.

This conclusion was not raised when the matter was considered by the Federal Court.

Car Park 2

The car park is open for 24 hours a day 7 days a week. Further, weekly and monthly parking is available. Therefore, car park spaces are available for all-day parking.

The fees charged can be summarised as follows:

From this table it can be seen that the fee per hour decreases with the length of parking. Further, there is no indication of penalty rates being charged for all-day parking.

Car Park 3

In your private ruling application you put forward a contention that Car Park 3 is a storage facility, rather than a car parking facility. In considering this contention, reference is made to ATO Interpretative Decision ATO ID 2012/18 Fringe Benefits Tax Exempt benefits: reimbursement of parking fees - remote area employees.

In considering whether the reimbursement of expenses incurred in parking at the local airport whilst the employee is working interstate at a remote location, ATO ID 2012/18 considers the meaning of motor vehicle parking facilities. In so doing, it states:

'Motor vehicle parking facilities' is not a defined term in the FBTAA. It is considered that any defined area which may be utilised for the purposes of parking motor vehicles would qualify as a 'motor vehicle parking facility'.

The Macquarie Dictionary on-line edition defines 'car park' as:

an area or building which is designed or adapted for the parking of cars.

Parking is defined to mean:

1.  the act of someone or something that parks.

2.  space in which to park vehicles.

3.  permission to park vehicles.

-adjective 4.  of, relating to, or used for parking.

Storage is defined to mean:

1.  the act of storing.

2.  the state or fact of being stored.

3.  capacity or space for storing.

4. Computers the capacity of a device to hold information.

5.  a place where something is stored.

6.  the price charged for storing goods.

In considering these definitions, we consider that car parking facility has a broad meaning that can apply to any defined area which may be utilised for the purposes of parking a car. This can include facilities that can also be described as storage facilities.

Support for this conclusion is provided by agenda item 7 of the meeting of the FBT Subcommittee of the National Taxation Liaison Group held on 16 November 2006 which concerned the question of whether a car park storage facility which offered park and ride options for airport travellers was a commercial parking station. The agenda item and ATO response stated:

7. Definition of 'commercial parking station' for the purposes of section 39A of the FBTAA (CPA Aust)

Section 39A of the FBTAA states that a car parking fringe benefit will arise where:

39A(1)(a) ...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 1km radius of the premises, or each of the premises, on which the car is parked; and

(iii) the lowers 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;...

Section 136(1) defines 'commercial parking station' as:

in relation to a particular day, ... 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.

'All-day parking' is defined in section 136(1) as:

in relation to a particular day, ... parking of a single car for a continuous period of 6 hours or more during a daylight period on that day.

'Daylight period' is defined in section 136(1) as:

in relation to a day, ... so much of a period on that day as occurs:

(a) after 7 a.m. on that day; and

(b) before 7 p.m. on that day.

The question has arisen as to what constitutes a 'commercial parking station'. More specifically, clarification is sought as to whether a car parking facility is 'available in the ordinary course of business to members of the public for all day parking'.

There are a number of commercial parking facilities that operate near airports. Commonly, these parking facilities are much like commercial parking facilities that operate in central business districts (CBD), with the exception that they have significantly different pricing schemes and often offer a free shuttle service to the airport from the parking station. A typical pricing scheme is set out below:

Day 1: $18.70

Day 2 - Day 5: $13.20 per day

Day 6 - Day 9: $11 per day

Day 10 - Day 13: $8.80 per day

Day 14 - Day 17: $7.70 per day

Day 18 - Day 21: $6.60 per day

Day 22+: $5.50 per day

Examining the above pricing scheme, there are significant penalty rates that apply to those who park a car in the facility for only one day. While the car parks are open to the public, it would not appear that this type of facility in its ordinary course of business is aimed at providing all day car parking spaces to the public. Rather, they exist to provide car parking spaces to interstate or overseas travellers.

Indeed, this view seems to be confirmed in previous tax office publications. Taxation Ruling TR 96/26 provides a list of car parking arrangements that are specifically excluded from this requirement. Paragraph 81 of TR 96/26 does 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 chargeable for all-day parking at commercial all-day parking facilities (such as parking provided for short term shoppers or hotel guests)

Therefore, we submit that parking facilities such as those that are located near airports and have pricing arrangements that are not directed at the general public but at airline passengers are not commercial parking facilities as defined in section 136(1) of the FBTAA.

Meeting discussion

In discussion at the meeting, a further issue was raised. In the example in the CPA Aust submission it is stated that from day 22 and beyond, the fee charged is $5.50 per day. This, it was suggested, meant that the car parking threshold would not be met and accordingly no car parking fringe benefit could arise.

The Tax Office noted that the 'lowest fee charged' for a customer parking for a single day, in the example in the CPA Aust submission, would be $18.70. The 'lowest fee charged' for a single day parking is not $5.50; this is the rate charged for each day after 22 days continuous parking.

As the commercial parking station offers parking based on a fee structure which becomes progressively lower after a number of days parking, section 39E of the FBTAA applies for the purposes of Division 10A to determine the daily rate equivalent.

The analysis of such arrangements and a factual arrangement where a progressive fee structure is adopted is set out and considered in ATO Interpretative Decision ATO ID 2006/93.

As the daily rate equivalent obtained under section 39E will be less than $18.70, the daily rate equivalent obtained under section 39E will represent the 'lowest fee charged' under section 39A Car Parking Benefits. The outcome is not simply that $5.50 in the example is the 'lowest fee charged'.

Tax Office response

The issue raised in the CPA Aust submission is whether parking facilities such as those located near airports and have certain pricing arrangements are considered to be a 'commercial car park' for the purposes of the FBTAA.

The Tax Office indicated that such facilities, on the facts set out in the submission, would be considered to be a 'commercial parking station' as such facilities satisfy the definition of 'commercial parking station'. These facilities are presumed to be permanent facilities, with parking spaces available to members of the public for all-day parking for the payment of a fee. The term 'commercial parking station' is defined in sub-section 136(1) of the FBTAA, as referred to in the CPA Aust submission. The term is also noted at paragraph 77 of TR 96/26.

The CPA Aust view is that the parking facilities the subject of this request are, because of their pricing structure and that they are targeted at 'travellers', not a commercial parking station in accordance with paragraph 81 of TR 96/26.

The Tax Office stated that paragraph 81 provides an indication of some instances where it does not regard parking arrangements as being commercial parking stations. The first point in paragraph 81 considers 'car parking facilities, with a primary purpose other than providing all-day parking, that usually charge penalty rates significantly higher than the rates chargeable for all-day parking at commercial all-day parking facilities (such as parking provided for short term shoppers or hotel guests).'

The Tax Office stated that this reference was not applicable to the arrangements set out in the submission; clearly the primary purpose of such facilities is to provide all-day parking and is distinguishable from a shopping centre car park for short term shoppers or parking provided to hotel guests.

This is of course a response to a general request for a Tax Office view. An employer may nonetheless seek, in a particular factual situation, a private binding ruling from the Tax Office.

The facts as provided are that a car can be parked in the facility for at least 6 hours during a daylight period as it is possible to park at the facility for multiple days. Further, the facility does not charge penalty rates for all-day parking as a flat daily rate is charged. Therefore, the same amount will be paid if the car is parked for one hour or six hours.

Car Park 4

Similar to Car Park 3, Car Park 4 provides both parking and a free shuttle service between the storage facility and the airport. As with Car Park 3, the fee charged is determined by the number of days for which the car is parked at the facility.

Although the facility may be marketed primarily to those people who wish to travel by air from the nearby airport, the use of the facility is not restricted to air travellers.

Further, the fact that the facility is unlikely to be used by employees commuting to and from work by car on a daily basis will not prevent the facility being a commercial parking station. As discussed above, the Federal Court in Qantas held that the word 'public' should be given its ordinary meaning and that there is no rationale for imputing into the definition a requirement that a commercial parking station be one that employees of the employer commuting to work by car would or could in fact use.

Therefore, it is considered that Car Park 4 provides all-day parking as the fees for parking are charged on a daily basis and there are no factors that indicate that all-day parking is discouraged.

Are the parking facilities on a public street, lane, thoroughfare or footpath?

None of the parking facilities at the four locations are a parking facility on a public street, road, lane, thoroughfare or footpath.

Conclusion

Each of the facilities are a commercial parking station within the meaning of subsection 136(1) of the FBTAA.