Edited version of your written advice

Authorisation Number: 1012935512375

Date of advice: 13 January 2016

Ruling

Subject: Fringe benefits tax - car parking benefits

Question 1

Are the car parking benefits provided by the State Government Department (SGD) to a branch of employees, who are employed exclusively in connection with public education institutions considered to be exempt benefits under either subsections 58G(2) or 58G(3) of the Fringe Benefit Tax Assessment Act 1986 (FBTAA)?

Answer

Yes. Car parking benefits provided by the SGD will be exempt benefits pursuant to subsection 58G(3) of the FBTAA.

Question 2

Can certain car parking benefits provided by the SGD be regarded as minor benefits under section 58P of the FBTAA?

Answer

Unable to rule - see 'Reasons for Decision'.

This ruling applies for the following periods:

1 April 2015 to 31 March 2018

Relevant facts and circumstances

The SGD administers the state education and training system and is responsible for workforce development throughout the state.

The SGD administers colleges which provide vocational education and training to students. These colleges are public educational institutions.

The SGD provides a range of finance, payroll, human resources and system related services to the colleges through its Business Services Branch (BSB) under service level agreements.

There are three sections of BSB - Finance Sector Services, Business Improvement and Reporting and Human Resource Sector Services, structured as follows:

• Finance Sector Services work to meet finance related requirements for the SGD and all the colleges administered by the SGD.

• Human Resources, works in partnership with the colleges and other external stakeholders to deliver payroll and human resources services.

• Business Improvement and Reporting works in partnership with the colleges and other external stakeholders to deliver reporting and other system related services.

• Certain staff, are dedicated to performing tasks for the colleges such as accounts payable, accounts receivable or payroll generation. These staff are dedicated to performing duties relating to colleges but occasionally assist with backfill and perform tasks relating to the SGD.

All staff are located at a building in the CBD of a capital city. The building and car parking spaces on these premises are owned by the State Government and are under the SGD's management.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986

Section 39A

Section 39C

Section 39DA

Section 57A

Subsection 57A(2)

Section 58G

Subsection 58G(2)

Subsection 58G(3)

Section 58P

Subsection 136(1)

Reasons for decision

Question 1

Car parking fringe benefits

Section 39A of the FBTAA lists the following criteria, all of which must be met, before a car parking fringe benefit will arise;

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 1 km 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 parking by a commercial parking station, exceeds the car parking threshold figure;

d)  the car is parked for a total of more than 4 hours between the hours of 7 am and 7 pm on the 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 used by the employee to travel between place of residence and primary place of employment at least once on that day; and

i) the day is on or after 1 July 1993.

The SGD acknowledges that it provides car parking fringe benefits as the criteria in Section 39A of the FBTAA are all satisfied. All the following criteria are satisfied by the corresponding facts:

Criterion: The car must be parked on one or more business premises or associated premises of the employer.

Fact: There are car parking spaces located on the business premises of which employees are permitted to use for their own use

Criterion: A commercial car parking station is located within a 1 kilometre radius of the premises or each of the premises on which the car is parked.

Fact: The commercial car parking station is located within a 1 kilometre radius of the SGD's business premises where the staff, carry out their work.

Criterion: The car parking fee charged in the ordinary course of business by the operator for all day parking on the first business day of the FBT year exceeds the car parking threshold.

Fact: The commercial car parking station continues to charge, a daily parking fee in excess of the car parking threshold. This parking fee exceeds the car parking threshold for the relevant year.

Exempt car parking benefits

Under section 58G of the FBTAA certain employers who are otherwise liable to pay FBT are exempt from car parking fringe benefits and car parking expense payment benefits:

• a scientific institution (other than an institution run for the purposes of profit or gain to its shareholders or members)

• a religious institution

• a charitable institution

• a public educational institution

• a government body, but only in relation to an employee who is employed exclusively in, or in connection with, a public educational institution.

Subsections 58G(2) and 58G(3) of the FBTAA relevantly state:

58G(2)  [Employer scientific, religious, charitable or public education institution]

If the employer of an employee is:

(a) a scientific institution (other than an institution carried on by a company, society or association for the purposes of profit or gain to its individual shareholders or members); or

(b) a registered charity; or

(c) (Repealed by No 169 of 2012)

(d) a public educational institution;

the following benefits provided in respect of the employment of the employee are exempt benefits:

(e) an eligible car parking expense payment benefit;

(f) a car parking benefit.

58G(3)  [Employees of government public educational institutions]

If:

(a) the employer of an employee is a government body; and

(b) the employee is exclusively employed in, or in connection with, a public educational institution;

the following benefits provided in respect of the employment of the employee are exempt benefits:

(c) an eligible car parking expense payment benefit;

(d) a car parking benefit.

Exemption under subsection 58G(2) of the FBTAA - public educational institutions

The term 'public educational institution' is not defined in the FBTAA.

The ATO publication Income Tax Guide for Non-Profit Organisations (NAT 7967) sets out the Commissioner's view on what constitutes a 'public educational institution', as follows:

A public educational institution is an institution that is available or open to the public or a section of the public and whose sole purpose is providing education. Any other purpose of the organisation must be incidental or ancillary to providing public education. Education in this context does not extend to merely providing information or lobbying.

Public educational institutions include:

• universities or colleges managed by public bodies

• grammar schools

• primary and secondary schools run by churches or religious bodies

• non-profit business colleges.

Organisations that are not public educational institutions include:

• colleges run for the profit of the private owners

• associations operated for their members' professional benefit

• promotional and lobbying bodies.

Many other organisations connected with education are not public educational institutions. Examples are a parents and friends committee and a scholarship provider.

It is accepted that colleges are public educational institutions as their sole purpose is to provide vocational education and training to members of the public.

However the employer in this instance is a government body, namely the SGD.

Accordingly, an exemption under subsection 58G(2) of the FBTAA is not available.

Exemption under subsection 58G(3) of the FBTAA - employees of government public educational institutions

The exemption in subsection 58G(3) of the FBTAA only applies to employers which are government public educational institutions. Taxation Ruling TR 96/26 states at paragraph 86:

Car parking benefits will be exempt if the employer is a non-profit scientific institution, a religious institution or a Commonwealth, State or Territory government educational institution. (Emphasis added)

The Explanatory Memorandum to the Tax Laws Amendment (FBT Cost of Compliance) Bill 1995 (EM) explains why subsection 58G(3) of the FBTAA was introduced. The EM states:

3.65 A car parking benefit is provided, broadly, if commercial car parking is available and an employee is given car parking at the place of employment for a car used for travel to and from work.

3.66 Car parking benefits provided by certain employers, including public educational institutions, are exempt from tax under section 58G. On the other hand, government-provided benefits, including car parking benefits, are generally taxable.

3.67 The exemption provided by s.58G does not cover car parking benefits provided by a Commonwealth, State or Territory government educational institution because the employer is the Commonwealth, State or Territory government, not the public educational institution. This unintended outcome is contrary to the original intention of the provision, and will be corrected by this amendment.

The term 'government body' is defined in subsection 136(1) of the FBTAA. 'Government body' means the Commonwealth, a State, a Territory or an authority of the Commonwealth or of a State or Territory.

It is accepted that the SGD is a government body and that the colleges are public educational institutions.

As the SGD is the employer, car parking benefits will be exempt where the employee is exclusively employed, or in connection with, a public educational institution (as stipulated in paragraph 58G(3)(b) of the FBTAA).

However the exemption will not extend to car parking benefits provided to employees who engage in other departmental functions not directly concerned with public educational institutions.

Question 2

Minor benefits exemption - section 58P of the FBTAA

In limited circumstances the provision of a car parking benefit may be exempt if the minor benefits exemption conditions in section 59P of the FBTAA are satisfied.

Where:

(a) a benefit (in this section called a minor benefit) is provided in, or in respect of, a year of tax (in this section called the current year of tax) in respect of the employment of an employee of an employer;

(b) …

(c) …

(d) …

(e) the notional taxable value of the minor benefit in relation to the current year of tax is less than $300; and

(f) having regard to:

(i) the infrequency and irregularity with which associated benefits, being benefits that are identical or similar to:

(A) the minor benefit; or

(B) benefits provided in connection with the provision of the minor benefit;

have been or can reasonably be expected to be provided;

(ii) the amount that is, or might reasonably be expected to be, the sum of the notional taxable values of the minor benefit and any associated benefits, being benefits that are identical or similar to the minor benefit, in relation to the current year of tax or any other year of tax;

(iii) the amount that is, or might reasonably be expected to be, the sum of the notional taxable values of any other associated benefits in relation to the current year of tax or any other year of tax;

(iv) the practical difficulty for the employer in determining the notional taxable values in relation to the current year of tax of:

(A) if the minor benefit is not a car benefit - the minor benefit; and

(B) if there are any associated benefits that are not car benefits - those associated benefits; and

(v) the circumstances surrounding the provision of the minor benefit and any associated benefits including, but without limiting the generality of the foregoing:

(A) whether the benefit concerned was provided to assist the employee to deal with an unexpected event; and

(B) whether the benefit concerned was provided otherwise than wholly or principally by way of a reward for services rendered, or to be rendered, by the employee;

it would be concluded that it would be unreasonable to treat the minor benefit as a fringe benefit in relation to the employer in relation to the current year of tax;

the minor benefit is an exempt benefit in relation to the current year of tax.

Generally, a fringe benefit will be a minor benefit if the notional taxable value of the benefit(s) is less than $300 in an FBT year and the benefit is provided on an irregular or infrequent basis.

If a car parking benefit is provided on a regular basis it is unlikely to be considered to be a minor benefit, even if the notional taxable value may be less than $300.

For example, In National Australia Bank Ltd v. Commissioner of Taxation (1993) 46 FCR 252; 93 ATC 4914; (1993) 26 ATR 503 (NAB case) Ryan J held that expenditure on taxi fares by the employer in relation to shift employees travelling to and from work were not exempt benefits.

Ryan J held on the facts before the Court that even accepting that the notional taxable value of each taxi cab trip was 'small', the benefit was nevertheless not an exempt benefit under section 58P. It was not unreasonable to treat the presumptively minor benefit provided to the employee as a fringe benefit, as it was necessary to regard each journey by taxi cab undertaken in similar circumstances in the relevant year as an associated benefit. The sum of the presumptively minor benefits was substantial.

As the taxable value of car parking benefits is determined by reference to fees charged by commercial car parks (which can vary significantly), we are unable to prescribe the minimum or maximum number of times a car parking benefit can be provided before it is no longer considered to be a minor benefit.