Edited version of your written advice

Authorisation Number: 1051243036565

Date of advice: 29 June 2017

Ruling

Subject: Fringe benefits tax

Question 1

Is the paid-parking facility a commercial parking station?

Answer

Yes

Question 2

If so, are you liable for fringe benefits tax (FBT) on the provision of car parking to your employees that

a) park their cars near the paid-parking facility?

b) park vehicles that are not cars near the paid-parking facility?

Answer

a) Yes

b) No

This ruling applies for the following periods:

Year ended 31 March 2017

Year ended 31 March 2018

The scheme commences on:

April 201X

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.

A paid-parking facility at an airport has been built within a one kilometre radius of your business premises.

The businesses that are within a one kilometre radius of the paid-parking facility provide their own parking free of charge.

The intention of the paid-parking facility is for it to be used by airline passengers and visitors not the entire general public.

The paid-parking facility is run at a profit. You have provided details of those rates. The rate for parking for six hours is greater than the car parking threshold for the year ended 31 March 2018.

Spaces are available for short and long term parking.

Based on usage, the majority of parking at the paid-parking facility is for a time frame of less than six hours.

Your employees work at your premises which are within a one kilometre radius of the paid-parking facility.

The employees do not contribute anything towards the parking.

Each of the employees would typically park in these spots for more than four hours.

They own their own vehicles and use them to travel between home and work. The vehicles that are driven often alternate between cars and non-car vehicles.

This is the employee’s primary place of employment.

Assumption

The rate for all-day parking at the paid-parking facility will be above the car parking threshold for future years.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 39A,

Fringe Benefits Tax Assessment Act 1986 section 58G,

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

Income Tax Assessment Act 1997 subsection 995-1(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.

All references made in these reasons for decision are to the Fringe Benefits Tax Assessment Act 1986 unless otherwise stated.

Question 1

Summary

The paid-parking facility is classified as a commercial parking station as it is a permanent commercial parking facility with parking spaces available in the ordinary course of business to members of the public for all-day parking between 7.00am and 7.00pm on payment of a fee.

Detailed reasoning

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

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 is defined in subsection 136(1). In relation to a particular day, this effectively means the parking of a single car for a continuous period of six hours or more between 7.00am and 7.00pm on that day.

The paid-parking facility is a permanent and commercial facility.

There are parking spaces available at the paid-parking facility for six hours or more between 7.00am and 7.00pm to anyone who wants to park there. This is consistent with the requirement that '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’.

Taking into account your contentions we will address the relevance of the primary purpose and use of a parking facility in determining whether the facility is a commercial parking station.

Paragraph 81 of Taxation Ruling TR 96/26 Fringe benefits tax: car parking fringe benefits provides an example of a facility where all-day parking is available but is discouraged and is considered to not constitute a commercial parking station:

● 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 exclusion of short-term shopper parking facilities by the Commissioner in this example did not result from the express words of the Fringe Benefits Tax Assessment Act 1986. It is reasonable to assume that in interpreting the meaning of commercial parking station, the Commissioner took into account extrinsic materials to determine the intent of Parliament including the Explanatory Memorandum to the Taxation Laws Amendment (Car Parking) Bill 1992):

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”.

A shopping centre, for example, may have a parking facility that has a primary purpose of allowing car parking for up to three hours for free for short term shoppers, but they charge high penalty rates for more than three hours to discourage all-day parking.

Although parking at businesses within a one kilometre radius of the paid-parking facility is free, the paid-parking facility’s fees are not consistent with penalty rates aimed at discouraging all-day parking.

Notwithstanding the example provided in paragraph 81 of TR 96/26, we do not consider that there exists a single primary purpose test that can be applied to all parking facilities such that if a particular parking facility’s primary purpose is not all-day parking it is excluded from the definition of commercial parking station.

In Qantas Airways Limited v. Commissioner of Taxation [2014] AATA 316; 2014 ATC 10-360; (2014) ATR 467 (Qantas Tribunal case), the Administrative Appeals Tribunal (Tribunal) held that the airport parking stations (other than those at Canberra) are commercial parking stations such that the provision of parking spaces at those parking stations may be a car parking fringe benefit.

Qantas appealed to the Federal Court against the decision in respect of the provision of parking spaces at airport parking stations other than at Canberra Airport. In Federal Commissioner of Taxation v. Qantas Airways Ltd (2014) 227 FCR 554; [2014] FCAFC 168; 2014 ATC 20-477; (2014) 100 ATR 97, the Federal Court considered the question of whether the provision of parking spaces at various airport parking facilities is a car parking fringe benefit. The Court concluded that the Tribunal was correct in relation to this question (but incorrect in relation to Canberra Airport).

In reaching its decision that the parking facilities at the airports were commercial parking stations the Tribunal had noted the following at paragraphs 35 and 36 in the Qantas Tribunal Case:

The statute is not expressed to, and does not seek to, differentiate car parking facilities by reference to any confined class of intended primary or predominant customers or uses as contended by Qantas. The statute does differentiate car parking facilities by reference to four criteria:

(a) first, by reference to the hours of availability of car parking spaces, namely whether car parking spaces are available in the ordinary course of business … for all-day parking – i.e. parking for six or more hours between 7 a.m. and 7 p.m.;

(b) second, by reference to the range of customers able to use the car parking spaces, namely whether car parking spaces are available in the ordinary course of business to members of the public …;

(c) third, by reference to location and manner of payment of fees, namely whether the parking facility is on a public street, road, lane, thoroughfare or footpath paid for by inserting money in a meter or by obtaining a voucher; and

(d) fourth, by reference to users of car parking facilities from a particular group in the community, namely whether the facility is used by disabled people.

…

Without being specifically excluded, a kerbside car park with a ticket machine or a meter that allow six hours parking in daylight periods would qualify if the fees exceeded the car parking threshold. Kerbside parking may or may not have a predominant use by, or be intended predominantly for, commuters to and from work. The exclusion of such car parking facilities suggests the concept of commercial parking station is wider than Qantas contends.

A commercial parking station for the purposes of section 39A is not intended to exclude parking facilities on the basis of who might use them and how they might be used. The criteria for determining what constitutes a commercial parking station are set out in its definition in subsection 136(1).

If the criteria set out in the legislation are met then the paid-parking facility will be a commercial parking station even though most of the people parking there are users of the airport and most cars are parked for less than six hours.

Therefore as the paid-parking facility is a permanent commercial parking facility with parking spaces available in the ordinary course of business to members of the public for all-day parking on payment of a fee, it is a commercial parking station.

Question 2

a)

Summary

You are liable for FBT on the provision of car parking to your employees who park their cars at your business premises as all of the conditions in subsection 39A(1) are satisfied.

Detailed reasoning

You will be liable to FBT on the provision of car parking to your employees if the provision of that parking is a car parking fringe benefit. A car parking fringe benefit is defined in subsection 136(1) to mean 'fringe benefit that is a car parking benefit’.

A car parking benefit will arise on a day if all of the conditions as outlined in subsection 39A(1) are satisfied during the hours from 7.00am to 7.00pm on that 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 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;

(b) the total duration of the period or periods exceeds 4 hours;

(c) any of the following applies:

(i) a car benefit relating to the car is provided on that day to an employee or an associate of an employee in respect of the employment of the employee;

(ii) the car is owned by, or leased to, an employee or an associate of an employee at any time during the period or periods;

(iii) the car is made available to an employee or an associate of an employee at any time during the period or periods by another person, where:

(A) the other person is neither the employer of the employee nor an associate of the employer of the employee; and

(B) the other person did not make the car available under an arrangement to which the employer of the employee, or an associate of the employer of the employee, is a party;

(d) the provision of parking facilities for the car during the period or periods is in respect of the employment of the employee;

(e) on that day, the employee has a primary place of employment;

(f) during the period or periods, the car is parked at, or in the vicinity of, that primary place of employment;

(g) on that day, the car is used in connection with travel by the employee between:

(i) the place of residence of the employee; and

(ii) that primary place of employment;

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.

(h) the provision of parking facilities for the car during the period or periods is not taken, under the regulations, to be excluded from this section;

(i) the day is on or after 1 July 1993;

Paragraph (a)

For a car parking benefit to exist the vehicle parked must be a car as defined in subsection 136(1) which has the given by subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997):

car means a motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers.

Your employees sometimes drive vehicles that are cars to work. They park their cars on your business premises.

Your employees’ cars are parked within a kilometre of the paid parking facility which is a commercial parking station. It which charges a fee for all day parking that is above the car parking threshold.

For future years you have asked us to assume that the rate charged by the airport car park will be above the car parking threshold.

Paragraph (b)

Your employees typically park for more than four hours.

Paragraph (c)

Your employees own the cars.

Paragraph (d), (e) and (f)

You provide the car parking to your employees at their primary place of employment.

Paragraph (g)

Your employees use their cars to travel between home and work.

Paragraph (h) and (i)

The provision of the parking facilities is not excluded under the regulations and it is after 1 July 1993.

As all of the conditions in subsection 39A(1) are met on the days when your employees park their cars at your business premises, a car parking fringe benefit arises and you will be liable to FBT.

b)

Summary

You are not liable for FBT on the provision of parking to your employees when they park vehicles that are not cars as you are not providing car parking fringe benefits but residual benefits that are exempt benefits.

Detailed reasoning

An employer will be liable to FBT where the benefit provided to the employee is a fringe benefit. The definition of a fringe benefit excludes benefits that are exempt benefits.

Where an employer provides parking for a vehicle that is not a car as defined in subsection 136(1), a car parking benefit will not arise. The benefit provided by the employer will be a residual benefit.

Subsection 58G(1) provides that 'a residual benefit where the recipients benefit consists of motor vehicle parking facilities’ will be an exempt benefit.

Motor vehicle has the meaning given by subsection 995-1(1) of the ITAA 1997, which is 'any motor-powered road vehicle (including a 4 wheel drive vehicle)’.

Therefore, where your employees drive to work and park a vehicle that is not a car you will not be liable to FBT as the residual benefit that you provide is an exempt benefit.