Edited version of your written advice

Authorisation Number: 1051185310106

Date of advice: 31 January 2017

Ruling

Subject: Fringe benefits tax: Car parking fringe benefit

Question 1

Does the Council have a fringe benefits tax liability for a car parking fringe benefit in terms of section 39A of the Fringe Benefits Tax Assessment Act 1986?

Answer

No.

This ruling applies for the following period:

1 April 201X to 31 March 201Y

The scheme commences on:

The scheme has commenced.

Relevant facts and circumstances

The Council has offices.

At those Council premises the Council's staff has free access to a secure area to park their personal motor vehicles all day Monday to Friday. That secure area is not available to members of the public. The working hours of the staff are 8 am to 5.pm.

The Council premises are in close proximity, to a shopping centre with a car park. The Council premises and the shopping centre car park are less than 1 kilometre apart.

Members of the public can utilise the shopping centre car park to park their motor vehicles whilst visiting the shopping centre.

The shopping centre introduced paid parking.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986

Section 39A, Subsection 136(1)

Reasons for decision

Question 1

All legislative references are to provisions of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) unless otherwise specified

Summary

The relevant provisions of the FBTAA that are considered in answer to this question are section 39A, which imposes a liability to fringe benefits tax; and subsection 136(1) which contains the definition of key terms namely “all-day parking”, “commercial parking station” and “daylight period”.

Section 39A, which requires a number of conditions to be met in order for that provision to apply, is examined in detail.

The condition in subparagraph 39A(1)(a)(i) requiring that the premises on which the car is parked are business premises of the Council is met.

However, the condition in subparagraph 39A(1)(a)(ii) requiring that there be a commercial parking station located within a 1 kilometre radius of the Council premises is not met.

The definition of a “commercial parking station” in subsection 136(1) is considered. The interpretation of that term is aided by reference to the Explanatory Memorandum to the Taxation Laws Amendment (Car Parking) Act 1992 which introduced Division 10A car parking fringe benefits, including section 39A, into Part III of the FBTAA, and to Taxation Ruling TR 96/26 titled “Fringe benefits tax: car parking fringe benefits”.

A dictionary definition of “commercial” is considered with regard to the way in which the shopping centre car park is operated particularly the parking rates charged.

It is found that the shopping centre car park is not a commercial parking station. It operates for the benefit of short term shoppers. Overall the purpose of providing the shopping centre car park is to assist shoppers and not to provide all-day parking for a fee.

Consequently the condition in subparagraph 39A(1)(a)(ii) is not satisfied.

As a result section 39A does not apply and the Council does not have a car parking fringe benefit tax liability.

Detailed reasoning

Car parking fringe benefits fall for consideration under section 39A.

Section 39A relevantly reads:

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

(iii) The lowest fee charged by 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;

…

the provision of parking facilities for the car during the period or periods is taken to constitute a benefit provided by the provider to the employee or the associate of the employee in respect of the employment of the employee.

In order for a liability to a car parking fringe benefit to arise in respect of the Council's provision of staff car parking it is necessary for all the conditions in section 39A to be satisfied.

Accordingly the application of each condition will be considered.

First, there is a requirement that the provision of parking facilities by the Council to its employees occurs during a “daylight period”.

Subsection 136(1) contains the following definition:

daylight period, in relation to a day, means 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.

In this case the Council provides parking facilities for the cars of Council staff during working hours from 8 am to 5 pm which fall in the defined daylight period.

A further requirement is that the cars of the Council staff are parked on Council premises. The secure area where Council staff park their cars is on Council premises.

Subparagraph 39A(1)(a)(i) requires that the premises on which the car is parked are business premises of the Council. In this case the Council premises are where the Council has its offices and the Council carries on business at those offices.

Thus, the condition in subparagraph 39A(1)(a)(i) is met.

Subparagraph 39A(1)(a)(ii) requires that a commercial parking station be within a 1 kilometre radius of the premises on which a car is parked.

The shopping centre car park is located less than 1 kilometre from the Council business premises on which the cars of Council staff are parked.

Consequently, it is necessary to determine whether the shopping centre car park is a “commercial parking station”.

Subsection 136(1) contains the following definitions:

commercial parking station, 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.

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

The shopping centre car park is a permanent car park where in the ordinary course of the business of the shopping centre the car spaces are available to members of the public, that is, shoppers visiting the shopping centre.

With respect to all-day parking as defined, the shopping centre has opening hours of 6 hours or more each day. In turn the shopping centre car park would be open for longer than the shopping centre opening hours in order to allow shoppers to arrive before trading begins and to depart after trading has ended each day. Thus the shopping centre car park is open for 6 hours or more every day and those 6 hours fall in the daylight period from 7am to 7pm each day.

The shopping centre car park has free parking for a period of x hours or less but parking beyond x hours requires the payment of a fee.

This means that in terms of the definition of a commercial parking station the shopping centre car park is providing all-day parking on payment of a fee.

Satisfying the condition in subparagraph 39A(1)(a)(ii) depends upon the shopping centre car park coming within the definition of a “commercial parking station”.

Assistance in the interpretation and application of the term “commercial parking station” can be found in the discussion in the Explanatory Memorandum to the Taxation Laws Amendment (Car Parking) Act 1992 which introduced Division 10A car parking fringe benefits, including section 39A, into Part III of the FBTAA, and in Taxation Ruling TR 96/26 titled “Fringe benefits tax: car parking fringe benefits”. Accordingly it is necessary to consider those discussions.

The Explanatory Memorandum provides the following:

"Commercial Parking Station"

In relation to the definition of "commercial parking station", the words "permanent" and "commercial" have their normal dictionary meanings. For example, a car park set up for a short period to cater for a special function (like an Easter Show) would not be permanent. A car park which was not run with a view to making a profit (usually reflected in significantly lower car parking rates charged compared with the normal market value for that facility) would not be commercial.

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".

Taxation Ruling TR 96/26 expresses a similar view as it states:

81. We do 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);

● …

The operation of the shopping centre car park does not fall squarely within the arrangement described in the Explanatory Memorandum or Taxation Ruling TR 96/26.

In terms of the Explanatory Memorandum the shopping centre car park is accepted as a permanent car park but the question is whether or not it is “commercial”.

The online Macquarie Dictionary provides eleven (11) definitions of “commercial” including the following:

5. preoccupied with profits or immediate gain

It is considered that the operation of the shopping centre car park is not designed to meet the above definition of commercial. Instead, the way in which the car park fees are structured, the users of the shopping centre car park can avoid paying any charge whatsoever.

An examination of the full parking rate structure also indicates that the shopping centre car park is not operated to provide all-day parking for a fee.

In this case after the first x hours of free parking has expired, the amount charged by the shopping centre car park for each additional hour varies. Note that no additional charge is imposed after a maximum of y hours parking is reached.

This means that the shopping centre car park can be distinguished from a “commercial parking station” because it is not “commercial” as defined in the above dictionary definition. The shopping centre car park is operated in a manner which indicates the operator is not preoccupied with profits or immediate gain from the car park.

The shopping centre car park is not a commercial parking station. It operates for the benefit of short term shoppers. Overall the purpose of providing the shopping centre car park is to assist shoppers and not to provide all-day parking for a fee, although that could be an incidental use.

Therefore, in this case the shopping centre car park is not a commercial parking station in terms of subsection 136(1).

Consequently the condition in subparagraph 39A(1)(a)(ii) is not satisfied.

As a result section 39A does not apply and the Council does not have a car parking fringe benefit tax liability.