Edited version of private advice

Authorisation Number: 1051844079159

Date of advice: 26 May 2021

Ruling

Subject: Commercial parking station

Question

Is Car Park X a 'commercial parking station' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes.

This ruling applies for the following Fringe Benefits Tax (FBT) periods:

FBT year ending 31 March 2018

FBT year ending 31 March 2019

FBT year ending 31 March 2020

FBT year ending 31 March 2021

FBT year ending 31 March 2022

The scheme commenced on:

1 April 2017

Relevant facts and circumstances

The ruling applicant has a number of offices based within a one-kilometre radius of a car park located at Car Park X.

Car Park X is situated behind business premises owned by Company A.

Car Park X

Car Park X is accessed using a driveway that runs down the side of Company A's office building ('Building A').

The driveway has a boom gate, which is opened by inserting $X.00 into a coin collection box located next to the boom gate.

The Car Park is paved and has marked parking spaces.

The conditions for parking are displayed on a sign located next to the boom gate.

The signs at the entrance to Car Park X advise that the car park is able to be used by clients of Company A's business as well as by any other member of the public who attend conferences, conventions, meetings and training provided by organisations who hire rooms in Building A.

Another sign at the boom gate at the entrance to Car Park X warns that cars parked illegally will be towed away at the owner's expense.

Car Park X provides parking from the time Building A opens in the morning until the conclusion of the last service provided to Company A's clients in the evening.

Car Park X has been operating for over a decade.

The fee of $X.00 charged by Company A for all-day parking at Car Park X is comparable to all-day parking rates charged by other car parking facilities within the vicinity of Car Park X.

Assumption

The fee of $X.00 that is charged to access Car Park X is for 'all-day parking', such that a car can be parked in the car park for a minimum of six continuous hours between 7:00am to 7:00pm, seven days per week (provided the other conditions for parking in Car Park X, as stipulated in the facts, are met).

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision

Question

Is Car Park X a 'commercial parking station' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Summary

Car Park X is a 'commercial parking station' as defined in subsection 136(1) of the FBTAA.

Detailed reasoning

Subsection 136(1) of the FBTAA defines a 'commercial parking station' to mean:

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.

Draft Taxation Ruling TR 2019/D5 Fringe benefits tax: car parking benefits (TR 2019/D5), which sets out the preliminary ATO view on the operation of the car parking fringe benefit provisions, discusses the meaning of the term 'commercial parking station'. Paragraph 12 of TR 2019/D5 provides that a car park will be a commercial parking station if it meets all of the following on a particular day:

•         it is permanent;

•         it is a commercial parking facility;

•         any of the car parking spaces are made available in the ordinary course of business to members of the public for all-day parking on payment of a fee; and

•         the parking is not on-street parking.

Permanent parking facility

Paragraph 14 of TR 2019/D5 provides the following guidance in relation to the meaning of the term 'permanent':

... a permanent commercial parking facility is enduring or lasting as such and not temporary or transient in nature. Factors that would support whether a commercial parking facility is permanent in nature include whether it:

-has pavement or bitumen, or permanently marked bays

-has signage, advertising and/or online booking facilities, or

-is not intended to be solely used for a special event.

With respect to Car Park X, it is paved with permanently marked bays. It has a boom gate that is opened by placing coins in the coin collection box. Further, the car park has been operating for over a decade, which indicates the car park is intended to be operated on an ongoing basis.

It is therefore considered that Car Park X is a 'permanent' parking facility.

Commercial parking facility

Car Park X is considered to constitute a commercial parking facility as:

Car Park X is a purpose-built parking facility intended to be used for the parking of cars, with access to Car Park X restricted by a boom gate, and

the $X.00 fee charged by Company A for all-day parking at Car Park X is comparable to all-day parking rates charged by other car parking facilities within the vicinity of Car Park X (that is, the $X.00 all-day parking fee is not a nominal fee).

All-day parking available to members of the public on payment of a fee

'All-day parking' on 'payment of a fee'

Subsection 136(1) of the FBTAA 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.

'Daylight period' is defined in subsection 136(1) of the FBTAA to mean:

In relation to a day,... so much of a period on that day as occurs:

(a) after 7:00 a.m. on that day; and

(b) before 7:00 p.m. on that day.

It is assumed for the purpose of this ruling that the fee of $X.00 that is charged to access Car Park X is for 'all-day parking', such that a car can be parked in the car park for a minimum of six continuous hours between 7:00am to 7:00pm, seven days per week (provided the other conditions for parking in Car Park X, as stipulated in the facts, are met).

As such, it is considered that all-day parking is available at Car Park X on payment of a fee.

Members of the public

Paragraph 17 of TR 2019/D5 states:

17. The term 'public' takes its ordinary meaning. A car park is offered to the public where car spaces are available to any member of the public. Contractual terms may restrict who may use the car park, for instance, an airport car park may be restricted to passengers and meeters and greeters of passengers. Such restrictions do not prevent the car park from being available to the public, provided any member of the public that accepts these restrictions can use the car park.

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).

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.

In Qantas, the Court rejected Qantas Airways' submission for the following three reasons:

1.    The subject matter of the tax is the 'taxable value' of the car parking facilities provided by the employer to the employees, not the value to an employee of the provision of car parking by the employer. The FBTAA does not operate on the basis that the commercial parking station must be something the employee might or could use.

2.    The requirement that there be a commercial parking station within one kilometre of the employer's premises is a trigger for liability to the tax but it is not the concept which is taxed. The proximity requirement is simply the statute's way of working out which car spaces are likely to be sufficiently valuable to warrant assessment.

3.    There is no ambiguity about the word 'public'.

Further, the Court said at paragraphs 12 and 22:

12. ...it is apparent that the word 'public' should be given its ordinary meaning and there is no rationale for imputing into the definition a requirement that the commercial parking station be one that employees of the employer commuting to work by car would or could in fact use.

22. 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.

As per the facts in the current circumstances, the signs at the entrance to Car Park X advise that the car park is able to be used by employees and clients of Company A's business as well as by any other member of the public who attend conferences, conventions, meetings and training provided by organisations who hire rooms in Building A.

Therefore, having regard to the Qantas decision and paragraph 17 of TR 2019/D5, the Commissioner considers that the restrictions limiting the use of Car Park X behind Building A to people attending Building A does not prevent Car Park X from being available to members of the public. Any member of the public is able to use Car Park X provided they are attending Building A. These restrictions are akin to the "conditions ... imposed on the use of the car park" described by the Court in paragraph 22 of Qantas.

As such, Car Park X provides parking to members of the public.

Parking is not on-street parking

As per the facts, parking in Car Park X is off the street, and therefore does not constitute on-street parking.

Provision of car parking spaces in the ordinary course of business

Paragraphs 21 and 22 of TR 2019/D5 state:

21. A commercial parking station offers parking in the ordinary course of its business. What constitutes the 'ordinary course' depends on the business being carried on and whether the offer of all-day parking is a usual or regular part of business activities even if it is not the sole business activity. A car parking facility may still qualify as a commercial parking station even if the facility has another purpose other than providing all-day parking. For example, it may also have a purpose of providing short term parking, such as hourly parking at a hospital, shopping centre, hotel, university or an airport.

22. The offering of a single car space may be in the ordinary course of business if it is intended to be repeated...

A footnote to paragraph 22 of TR 2019/D5 refers to Taxation Ruling TR 2019/1 Income tax: when does a company carry on a business? (TR 2019/1). Paragraph 21 of TR 2019/1 summarises the key indicia considered by the courts in determining whether the activities carried on by an entity amount to the carrying on of a business. The indicia listed include:

•         whether the person intends to carry on a business

•         the nature of the activities, particularly whether they have a profit-making purpose

•         whether the activities are:

§  repeated and regular

§  organised in a business-like manner, including the keeping of books, records and the use of a system

•         the size and scale of a company's activities including the amount of capital employed in them, and

•         whether the activity is better described as a hobby, or recreation.

The definition of 'business operations' in subsection 136(1) of the FBTAA provides that business operations of government and not for profit organisations includes "any operations or activities carried out by that body or company".

In applying the above paragraphs from TR 2019/D5 and TR 2019/1 to the current circumstances, the Commissioner considers that:

1.    the fact that car parking has been provided at Car Park X for over a decade indicates that the car parking activities are repeated and regular

2.    the use of a boom gate and coin collection box at the entrance to Car Park X to ensure payment is received for parking indicates that the car parking activities are undertaken in a business-like manner

3.    ensuring that payment is enforced with cars that are illegally parked being taken away at the owner's expense is another indicator that car parking activities are undertaken in a business-like manner

4.    the $X.00 fee charged by Company A for all-day parking at Car Park X is not a nominal fee

5.    Car Park X is a significant size given the parking facility consists of Y parking spaces, and

6.    the provision of parking is not usually regarded as being a hobby or recreation.

For these reasons, the Commissioner considers that the parking spaces at Car Park X are provided in the ordinary course of business.

Conclusion

Car Park X is a 'commercial parking station' as defined in subsection 136(1) of the FBTAA as, for a particular day, it:

•         is permanent

•         is a commercial car parking facility

•         makes all-day parking available to the public on payment of a fee

•         is not on-street parking, and

•         does this in the ordinary course of business.