Edited version of your written advice

Authorisation Number: 1051231357060

Date of advice: 30 May 2017

Ruling

Subject: FBT car parking benefits

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.

Background

1. Company A is a small business entity.

2. Company B offers long term parking at Car Park X to the public, via its website, for the payment of a monthly fee of more than $200.

3. Casual day to day car parking is not offered at Car Park X.

4. Company A leases reserved car parking spaces from Company B on an ongoing basis, at a cost of more than $200 per month.

5. Company A provides these car parking spaces in Car Park X to its staff.

6. The reserved car parking spaces have been leased from Company B by Company A for at least ten years.

7. Car Park X is part of Company B's long term parking. The equivalent 'daily rates' of over $10.00, are higher than the car parking threshold, which is $8.48 for the year ending 31 March 2017 (Tax Determination TD 2016/7)

Information provided

8. You have provided a number of documents containing detailed information in relation to Company A, including:

1. Private Binding Ruling (PBR) Application
2. PBR question requesting a determination with regard to the provision of car parking
3. Additional information outlining Company B's long term car parking arrangements and applicable fees
4. Arguments and references in support of the PBR Application

9. We have referred to the relevant information within these documents in applying the relevant tests to your circumstances.

Assumption(s)

Not applicable.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Division 13, Subsection 58GA(1)

Fringe Benefits Tax Assessment Act 1986 Section 136(1)

Tax Determination TD 2016/7

Taxation Laws Amendment (Car Parking) Act 1992 Explanatory Memorandum

Taxation Ruling TR 96/26 Paragraphs 77, 78, 79, 81

REASONS FOR DECISION

All legislative references are to the Fringe Benefits Tax Assessment Act 1986 ('FBTAA 1986') unless otherwise stated.

QUESTION:

SUMMARY

Small business employers who provides car parking to their employees meet the small business car parking exemption pursuant to subsection 58GA(1) of the FBTAA 1986, if the parking is not provided in a 'commercial car park'; are not a government body, a listed public company; and their gross total income for the last income year before the relevant fringe benefits tax (FBT) year was less than $10 million, or they were a small business entity for the last income year before the relevant FBT year.

DETAILED REASONING

10. For the purpose of this ruling, a determination is to be made regarding the car park provided by Company A to its employees, and whether it fits within the definition of a 'commercial parking station' as defined in subsection 136(1) of the FBTAA 1986. This determination will then impact on whether Company A meet the small business car parking exemption pursuant to subsection 58GA(1) of the FBTAA 1986.

SMALL BUSINESS CAR PARKING EXEMPTION

11. Pursuant to subsection 58GA(1) of the FBTAA 1986, for a small business car parking exemption to apply, the car must not be parked at a 'commercial parking station'.

COMMERCIAL PARKING STATION

12. A 'commercial parking station' is defined in subsection 136(1) of the FBTAA 1986 to mean:

'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'.

13. In considering the application of the definition of 'commercial parking station', it is necessary to determine whether the parking facility:

1. is a permanent parking facility
2. is a commercial parking facility
3. provides car parking spaces in the ordinary course of business
4. to members of the public
5. for all-day parking on payment of a fee, and
6. 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.

14. 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).

'Permanent' parking facility

15. The Explanatory Memorandum to Taxation Laws Amendment (Car Parking) Bill 1992 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.

16. 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;
  1. parking facilities are usually available only after 5 pm to coincide with night events; or
  1. parking is available only for a specific event, and the event is a daytime event; or
  2. 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.

17. The Macquarie online Dictionary defines 'permanent' to mean:

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

'Commercial' parking facility

18. The term 'commercial' is not defined in the FBTAA 1986. The Explanatory Memorandum stated the word 'commercial' has its normal dictionary meaning.

19. 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.

20. 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'.

21. The Macquarie online Dictionary defines 'commercial' as follows:

• adjective
• of, or of the nature of, commerce.
• engaged in commerce.
• capable of returning a profit: a commercial project.
• capable of being sold in great numbers: invention is commercial

Ordinary course of business

22. In considering whether these spaces are provided in the ordinary course of business, a definition of 'ordinary course of business' is provided in the 'Definitions of Terms used to explain small business entity concessions' as cited on ato.gov.au:

• Generally, you derive income in the ordinary course of running a business if you:
• regularly or customarily derive the income in the course of running a business, not from any special circumstance or unusual event
• don't regularly derive the income but you do derive it directly from your normal business activities.

You may derive ordinary income in the ordinary course of running your business, even if the income is not the main type of ordinary income you derive. The income does not need to account for a significant part of your business's overall receipts. It is sufficient that the ordinary income is of a kind derived regularly or customarily in the course of running your business'.

Members of the public

23. 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 ('Qantas').

24. In its submission to the court, Qantas Airways submitted that the Explanatory Memorandum to Taxation Laws Amendment (Car Parking) Bill 1992 said nothing about the meaning of the word 'public'. The submission was that this absence of a meaning for 'public' supported its contention that it should be construed in other than perhaps its ordinary meaning.

25. In Federal Commissioner of Taxation v Qantas Airways Ltd [2014] FCAFC 168, the Court held that the word 'public' should be given its ordinary meaning. Further, paragraph 12 stated:

12 … and that there was no rationale for imputing into the definition a further requirement that a commercial parking station be one that employees of the employer commuting to work by car would or could in fact use…

26. The Macquarie online Dictionary defines 'public' to mean:

…done, made, acting, etc., for the people or community as a whole; open to all the people; maintained at the public expense, under public control, and open to the public generally; of or provided by the state rather than an independent, commercial company…

27. 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.

All day parking

28. Subsection 136(1) FBTAA 1986 defines 'all day parking' to mean:

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.

29. Subsection 136(1) defines 'daylight period' to mean:

In relation to a day, … so much of a period on that day as occurs:
1. after 7:00 a.m. on that day; and
2. before 7:00 p.m. on that day.

30. 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”.

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

'On that day' on 'payment of a fee'

32. It is irrelevant that payment of the fee for car parking is made monthly, or that there is no casual car parking provided on a 'pay as you go' basis. Once the member of the public has paid the monthly car parking fee, that member of the public can park their car in the designated space at the car park on any day during the relevant period.

33. The Full Court in Commissioner of Taxation v Qantas Airways [2014] FCAFC 168 ('Qantas Airways') concluded that contractual restrictions imposed by the operator of the car parking stations does not prevent a finding that the car parking station is available to a member of the public, just that the car parks are available to any member of the public on the contractual terms stipulated. The contractual terms impose conditions on the use of the car park, but do not prevent access. From the Qantas Airways decision:

in this case, whilst it is true that the operator of the parking stations imposed the restriction that the car parks were available only to airline passengers and 'meeters and greeters' of airline passengers, the car parks nonetheless are public car parks in the sense that in the ordinary course of the business the car spaces are available to any member of the public on the contractual terms stipulated. The contractual terms do not mean that the car park spaces are not available to members of the public but, rather, that conditions are imposed on the use of the car park by members of the public: Lee v Evans (1964) 112 CLR 276.'

Parking facilities on a public street, road, lane, thoroughfare or footpath

34. A 'commercial parking station' is defined in subsection 136(1) FBTAA and does not include any parking facility on a 'public' street, road, lane, thoroughfare or footpath.

35. The Macquarie online Dictionary defines 'public' to mean:

…done, made, acting, etc., for the people or community as a whole; open to all the people; maintained at the public expense, under public control, and open to the public generally; of or provided by the state rather than an independent, commercial company…

APPLICATION TO YOUR CIRCUMSTANCES

COMMERCIAL PARKING STATION

36. Pursuant to the definition of a 'commercial parking station' in subsection 136(1) FBTAA 1986 and as described in the examples listed in paragraphs 12 through to 14, a determination needs to be made whether the car parking facilities at Car Park X are considered to be a commercial parking station.

'Permanent' car parking facility

37. In applying the definition and examples as listed in paragraphs 15 through to 17, Car Park X is considered to be permanent as it is purpose-built, established and is operating on an ongoing basis into the foreseeable future.

'Commercial' car parking facility

38. In applying the definition and examples as listed in paragraphs 18 through to 21, Car Park X is considered to be commercial as it is run with a view to making a profit 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.

Ordinary course of business

39. In applying the definition as listed in paragraph 22, it is accepted that car parking in Car Park X allows Company B to regularly or customarily derive the income in the course of running a business, not from any special circumstance or unusual event.

Members of the public

40. In applying the definition, examples and cases as listed in paragraphs 23 through to 27, Car Park X is available to be used by the public at large. Members of the public may contract to access Car Park X. Any member of the public can enter into an agreement with Company B to acquire access and use of the car park in return for a monthly fee of $X fee. This monthly amount equates to an approximate daily fee above the threshold per 'business day'. Car Park X is advertised to the public via Company B's website.

41. Subsection 136(1) FBTAA 1986 defines 'business day' to mean:

a day other than a Saturday, a Sunday or a public holiday in the place concerned'.

All day parking

42. In applying the definition and examples as listed in paragraphs 28 through to 31, Car Park X is considered to provide all day parking as it offers car parking facilities on a 24-hour, 7-day basis and therefore satisfies the legislative definition of all day parking.

'On that day' on 'payment of a fee'

43. In applying the examples as listed in paragraphs 32 through to 33, Car Park X is available for members of the public to park their car in their space in the car park, on any day during the relevant period of the month, for which they have paid a fee of $X.

Parking facilities on a public street, road, lane, thoroughfare or footpath

44. In applying the definitions as listed in paragraphs 34 through to 35, Car Park X is considered to not be on a public street, road, lane, thoroughfare or footpath.

CONCLUSION FOR QUESTION:

45. Car Park X meets the necessary conditions to be considered a 'commercial parking station', as defined in subsection 136(1) of the FBTAA 1986 for the purpose of subsection 58GA(1). The contractual requirements governing or stipulating the availability of the parking spaces to the public via a monthly lease only, does not mean that the Car Park X is not a 'commercial car park'.