Edited version of private advice

Authorisation Number: 1051938730267

Date of advice: 22 March 2022

Ruling

Subject: FBT car parking - commercial parking station

Question

Is the Car Park 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:

Fringe Benefits Tax (FBT) year ended 31 March 20XX

FBT year ended 31 March 20XX

FBT year ended 31 March 20XX

FBT year ended 31 March 20XX

FBT year ended 31 March 20XX

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

Company A is a private Australian Company.

Company A provides car parking spaces for their employees at their business premises. Company A engaged a third-party consultant to determine if there were any 'commercial car parking' stations within one kilometre of Company A's business premises.

The consultant identified the Car Park as being a car parking facility within a one-kilometre radius of Company A's business premises.

The Car Park is operated by Z, an agency of a State or Territory Government department. By providing parking for the users of a public transport service, the primary purpose of the Car Park is to encourage public transport patronage and increase ease/efficiency of using public transport.

The fee structure of the Car Park is as follows:

•                    Free parking is available to commuters who complete a public transport journey. Valid public transport is determined by the consumer using a smartcard issued by Z for their trip on public transport and then using the same smartcard to exit the Car Park within X hours of entering. That is, free parking is applicable for a period of up to X hours, after which a flat fee will apply).

•                    A flat fee on weekends and public holidays, is charged for members of the public who park their vehicles but who do not use public transport. This same fee is applicable for users of valid public transport who park their car for a period exceeding X hours.

External entry signage to the Car Park advertises the availability of free parking for public transport commuters, with the availability of parking to members of the public who are not using public transport services secondary, and in smaller, less evident font.

Boom gate mechanisms operate at the entry and exit to the Car Park. The exit mechanism requires a patron to tap their smartcard (issued by Z) as evidence of a trip on valid public transport in order to exit the Car Park without payment.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 39A

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision

Question

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

Summary

The Car Park is not a 'commercial parking station' as defined in subsection 136(1) of the FBTAA.

Detailed reasoning

Subsection 136(1) of the FBTAA defines a 'car parking fringe benefit' to mean a fringe benefit that is a 'car parking benefit'. A 'car parking benefit' is defined in subsection 136(1) of the FBTAA to mean a benefit referred to in section 39A of the FBTAA.

Section 39A of the FBTAA outlines all of the conditions that need to be satisfied to constitute the provision of a car parking fringe benefit. One of these conditions is that there must be a 'commercial parking station' within a one-kilometre radius of a work car park (that an employer provides to an employee in respect of their employment) which charges a fee for all-day parking.

Definition of a 'commercial parking station'

Subsection 136(1) of the FBTAA defines a 'commercial parking station', in relation to a particular day, 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.

In other words, as provided in paragraph 16 of Taxation Ruling TR 2021/2 Fringe benefits tax: car parking benefits (TR 2021/2), in order to meet the definition of a 'commercial parking station' in subsection 136(1) of the FBTAA, a car parking facility would need to satisfy all of the following elements in that definition on a particular day:

1.            It must be a commercial car parking facility.

2.            It must be permanent.

3.            It has car spaces available in the ordinary course of business to the public for all-day parking on payment of a fee.

4.            It is not on-street parking.

Whether the car parking spaces in the Car Park are available in the ordinary course of business to the public for all-day parking on payment of a fee is the key consideration given the facts and circumstances.

Car spaces available in the ordinary course of business to the public for all-day parking on payment of a fee

'Ordinary course of business'

The phrase 'ordinary course of business' is not defined in the FBTAA or in the Income Tax Assessment Acts. Its meaning must therefore be taken from its ordinary usage and context.[1]

Paragraphs 34 to 36 of TR 2021/2 provides the following guidance:

34. Only one car space within a commercial car parking facility needs to be available in the ordinary course of business to members of the public for all-day parking for the facility to meet this part of the definition of a commercial parking station.

35. Whether a car space is available in the ordinary course of business for all-day parking depends on the business being carried on by the operator of the parking facility. That is, 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 parking facility may still qualify as a commercial parking station even if some of its car spaces are available for other purposes.

36. All-day parking may still be provided in the ordinary course of business, even if a parking facility's fee structure appears to encourage short-term parking and discourage all-day parking. The fact that all-day parking charges are expensive will not, on its own, mean all-day parking is outside the ordinary course of business.

Taxation Ruling TR 92/3 Income tax: whether profits on isolated transactions are income (TR 92/3) provides guidance regarding what is considered to be 'in the ordinary course of business'. Although the focus of TR 92/3 is whether a profit or gain is in the ordinary course of business, the reasoning is also relevant to determining whether an action is in the ordinary course of business.

When considering the concept of 'ordinary course of business', TR 92/3 at paragraph 32 lists the following factors:

(i)            whether the transaction is part of the ordinary business (judged by reference to the transactions in which the taxpayer usually engages); and

(ii)           whether the transaction is an ordinary incident of the business activity of the taxpayer.

Further guidance regarding the meaning of 'in the ordinary course of carrying on a business' can be found in paragraph 2.15 of the Explanatory Memorandum to the Tax Laws Amendment (Small Business) Bill 2007:

In general, income is derived in the ordinary course of carrying on a business if the income is of a kind that is regularly or customarily derived by the entity in the course of carrying on its business, arising out of no special circumstance or unusual event. Similarly, the income is derived in the ordinary course of carrying on a business if the income, although not regularly derived, is a direct result of the normal activities of the business.

'To the public'

According to paragraph 39 of TR 2021/2, the term 'public' takes its ordinary meaning. A car space is available to the public when any member of the public may park their car in that space.

'All-day parking'

'All-day parking' is defined in subsection 136(1) of the FBTAA to mean parking of a car for a minimum of six continuous hours between 7.00am to 7.00pm.

'On payment of a fee'

As per paragraph 41 of TR 2021/2, a fee must be charged to access all-day parking.

Is 'all-day parking on payment of a fee' provided in the ordinary course of Z's business?

In applying the above guidance to the current circumstances, the Commissioner considers that, for the following reasons, all-day parking on payment of a fee is not providedin the ordinary course of business for Z in operating the Car Park:

•                    In providing parking for users of a public transport service, the predominant use of the Car Park is to provide free parking to encourage public transport patronage and increase ease/efficiency of using public transport.

•                    The Commissioner accepts that:

-        the vast majority of commuters who use the Car Park on a particular day also carry out a valid trip on public transport such that, in most cases, car parking is free, and

-        only a small number of customers do not meet the requirements for free parking such that they are required to pay the flat fee on weekdays on weekends and public holidays. As such, it is only in the extraordinary case that a fee is paid for all-day parking.

•                    Considering the factors listed in paragraph 32 of TR 92/3, the provision of all-day parking on payment of a fee is not a 'usual transaction' nor is it an 'ordinary incident' of the business. Given public transport is utilised by most commuters, a fee is not usually paid for all-day parking.

Conclusion

In order to meet the definition of a 'commercial parking station' in subsection 136(1) of the FBTAA, the Car Park would need to satisfy all of the following elements on a particular day:

1.            It must be a commercial car parking facility.

2.            It must be permanent.

3.            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 payment of a fee.

4.            It is not on-street parking.

The Commissioner considers that all-day parking on payment of a fee is not provided in the ordinary course of Z's business in operating the Car Park. This is because, in the vast majority of cases, parking is free as commuters access public transport and swipe out of the Car Park using their smartcard to prove public transport was utilised on that day. It is the exception that a fee is paid for parking, such that paid parking is outside the ordinary course of business.

The third element above in the definition of a 'commercial parking station' in subsection 136(1) of the FBTAA is therefore not satisfied. As all four elements of the definition needs to be met in order for the Car Park to be a 'commercial parking station', it is not necessary to consider the other three elements of the definition.

As such, the Car Park is not considered to constitute a 'commercial parking station' pursuant to the definition in subsection 136(1) of the FBTAA.

[1] The same approach was adopted by the Explanatory Memorandum to the Tax Laws Amendment (Small Business) Bill 2007, which introduced section 328-120 of the Income Tax Assessment Act 1997, and the Full Federal Court in Doutch v Commissioner of Taxation [2016] FCAFC 166 at [8] and [74] per Greenwood, McKerracher and Moshinsky JJ.