Edited version of your written advice

Authorisation Number: 1012988812459

Date of advice: 23 March 2016

Ruling

Subject: Fringe benefits tax

Question 1

For the purposes of section 58GA of the Fringe Benefits Tax Assessment Act 1986, are the car parking spaces that you lease for employees deemed to be provided in a commercial parking station as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986?

Answer

No

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

The scheme commences on:

1 March 2014

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.

As you have limited onsite parking for your employees at your business premises, you currently lease a number of car parking spaces at properties nearby.

The properties are privately owned and are leased under a monthly rental agreement. There is no defined end date in the lease agreement but each party can give 30 days of notice to terminate the agreement.

The spaces at Locations 1 to 3 are leased to external tenants and are only available to individuals/businesses under a monthly lease agreement which is in writing. There is no casual or daily parking on the premises.

At Location 4 you have an informal agreement based on a personal relationship. There is no casual or daily parking on the premises.

It is common practice for people to contact real estate agents in order to find car spaces available for lease. This often involves being on a waiting list until a parking space is available.

You previously included the car parking benefits arising from the use of these spaces in your FBT return.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 58GA and

Fringe Benefits Tax Assessment Act 1986 subsection 136(1).

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

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

in relation to a particular day, means 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.

In considering the application of the definition of commercial parking station it is necessary to determine whether on a particular day 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 that day 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).

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 properties where the parking is provided have permanent parking spaces and are leased for more than a short period.

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?

All of the properties lease parking spaces for a monthly rate that is more than just a nominal amount.

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.

Business operations of each of the properties can be said to include leasing car parking spaces to external tenants.

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 Federal Commissioner of Taxation v Qantas Airways Ltd [2014] FCAFC 168; 2014 ATC 20-477.

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. Paragraphs 19 and 20 of TR 2000/10 state:

… 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' …

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.

The parking spaces at the property at Location 4 have been provided under an informal agreement resulting from a personal relationship. They are not considered as being available to members of the public.

The parking spaces at Locations 1 to 3 potentially could be leased by anyone. In this sense they are available to members of the public. However there is a further consideration.

The definition of a commercial parking station is in relation to a particular day and the availability of spaces to members of the public on that day is on payment of a fee. At each of the properties, Locations 1 to 3, parking spaces are made available to members of the public by way of a lease. This is more than just the payment of a fee.

Paragraph 81 of TR 96/26 provides the following examples of parking arrangements that do not constitute commercial parking stations:

• 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, if there is no commercial car park within 1km

• 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.

The arrangement described at dot point two has similarities to your own and is considered to not constitute a commercial parking station.

Therefore, the parking facilities at the four properties are not considered to be commercial parking stations as defined in subsection 136(1) of the FBTAA. Consequently, for the purposes of section 58GA of the FBTAA, the car parking spaces that you lease for employees are not deemed to be provided in a commercial parking station.