Edited version of private advice

Authorisation Number: 1052005446499

Date of advice: 15 August 2022

Ruling

Subject: FBT - car parking

Question

Can the fee charged for the Annual Parking Pass be used to determine the all-day parking fee's value under sections 39C and 39E of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

This private ruling applies for the following periods:

Fringe Benefits Tax (FBT) year ending in 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

FBT year ending 31 March 20XX

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

Company X is in the business of managing the Precinct, this includes holding the lease, assets and collecting revenue.

Company Y is the management entity and employer of staff.

The Precinct operates on a 24-hour 7-day a week basis.

The business premises of Company X and Company Y are located within the Precinct.

There are a number of short and long stay carparks located within the Precinct and are available to members of the Public.

Employees of company Y are permitted to park on the premises.

Employees of company Y are provided with car parking located within the Precinct for at least 4 hours at a time at one of their business premises. The business premise is within the one-kilometre radius of the car park.

There are no other car parking station operators within a one-kilometre radius of car parking facilities provided to employees.

Company X has introduced a new car parking product, the Annual Parking Pass which provides unlimited parking for 12 months. The Annual Parking Pass was introduced in response to the COVID-19 pandemic as a measure of utilising excess carparking capacity in the parking stations.

The Annual Parking Pass will provide an additional source of car parking revenue from frequent weekday business.

The Annual Parking Pass is priced at $X.

The Annual Parking Pass can be used at all the commercial car parking stations within the Precinct.

The Annual Parking Pass is available to all members of the public and is advertised on a website.

Parking is available via the Annual Parking Pass on weekdays between 6 am and 9 pm ("the permitted hours") and cannot be used on weekends.

Further charges apply when used outside the permitted hours.

Each of the car parking stations within the Precinct, meet the definition) to be a 'commercial parking station' pursuant to subsection 136(1) of the Fringe Benefits Tax Assessment Act (FBTAA 1986).

Relevant legislative provisions

Section 39A of the Fringe Benefits Tax Assessment Act 1986

Subsection 39A(1) of the Fringe Benefits Tax Assessment Act 1986

Section 39C of the Fringe Benefits Tax Assessment Act 1986

Section 39E of the Fringe Benefits Tax Assessment Act 1986

Subsection 39E(2) of the Fringe Benefits Tax Assessment Act 1986

Subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986

Reasons for decision

A 'car parking fringe benefit' is defined in subsection 136(1) of the FBTAA as a fringe benefit that is a 'car parking benefit' referred to in subsection 39A(1)). The taxable value of a 'car parking fringe benefit' may be ascertained using the 'commercial parking station method' in section 39C of the FBTAA.

Taxable value of a car parking fringe benefit - commercial parking station method

Section 39C of the FBTAA states that the taxable value of a car parking fringe benefit provided on a day in the FBT year in connection with one or more premises is equal to:

(a) if, on that day, there is only one commercial parking station located within a 1 km radius of any of those premises - the lowest fee charged by the operator of the parking station in the ordinary course of business to members of the public for all-day parking on that day; or

(b) if, on that day, there are 2 or more commercial parking stations located within a 1 km radius of any of those premises - the lowest fee charged by any of the operators of those parking stations in the ordinary course of business to members of the public for all-day parking on that day;

reduced by the recipient's contribution.

Therefore, this section will be satisfied where there is a 'commercial parking station' within a one-kilometre radius of the business premises on which an employee's car is parked.

'Commercial parking station'

Under subsection 136(1) of the FBTAA, a 'commercial parking station' is defined as:

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:

•         It must be a commercial car parking facility.

•         It must be permanent.

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

•         It is not on-street parking.

Each of the car parking stations within the Precinct that are operated by Company X satisfy all of the above elements such that they each constitute a 'commercial parking station' pursuant to the definition in subsection 136(1) of the FBTAA.

Therefore, as each of the car parking stations within the Precinct constitute a 'commercial parking station', and each are located within a one kilometre radius of Company Y's business premises on which an employee's car is parked, section 39C of the FBTAA is satisfied. As such, the taxable value of a car parking fringe benefit would be equal to the lowest fee charged by the car parking station operator (Company X) in the ordinary course of business to members of the public for all-day parking on that day.

Lowest fee for all-day parking

As provided in Chapter 16.1 of the ATO's Fringe benefits tax: a guide for employers publication, the all-day parking fee charged by a commercial parking station must be a representative fee. The fee for any particular day is not representative if it differs substantially from the average lowest fee ordinarily charged for all-day parking. For this purpose, the fee for a particular day can be compared with the average fee charged during a 4 week period beginning or ending on that particular day.

Paragraph 53 of TR 2021/2 states that:

The lowest representative fee charged cannot be:

•         nil

•         worked out from fees for longer-term parking if users are prevented from entering and exiting the car park on a daily basis during that period, or

•         a fee that is not available to the public on the day that the work car park is provided.

Daily rate equivalent for periodic parking arrangements

Subsection 39E(1) of the FBTAA provides a daily rate equivalent where there is a periodic parking arrangement, which states that:

For the purposes of this Division, if the operator of a commercial parking station provides all-day parking in the ordinary course of business to members of the public on a weekly, monthly, yearly, or other periodic basis, the operator is taken to charge a fee for all-day parking on a particular day during the period equal to the amount worked out using the formula:

Total fee÷business days in period

Where:

Total fee is the total fee charged by the operator in respect of all-day parking on days in that period;

Business days in period means the number of business days in that period.

As the FBTAA does not define 'business days', it would take its ordinary meaning. However, subsection 136(1) of FBTAA previously defined 'business days' as 'days other than a Saturday, a Sunday and a public holiday'. In accordance with the Acts Interpretation Act 1901, a business day is defined similarly as 'a day that is not a Saturday, a Sunday or a public holiday in the place concerned'. This would mean for the FBT year ending on 31 March 2021.

In applying the formula in subsection 39E(1) of the FBTAA, the daily rate equivalent for all-day parking on a particular day using the amount charged for the Annual Parking Pass would therefore be $8.00:

Total Fee ÷ Business Period = $X ÷ 250 business days = $X per day

The ATO has published the car parking threshold for the year ended 31 March 20XX as $XX per day and the threshold for the year ended 31 March 20XX as $XX per day.

As per paragraph 54 of TR 2021/2, there are rules to prevent manipulation of the lowest representative fee charged by commercial parking stations for all-day parking. These rules are provided in subsection 39E(2) of the FBTAA, which states:

(2) If either or both of the following apply:

(a) a transaction between the operator of a commercial parking station and a customer is not at arm's length;

(b) the operator of a commercial parking station sets the level of a fee for the sole or dominant purpose of enabling one or more employers to obtain reductions in the taxable values of car parking fringe benefits;

The Commissioner is satisfied that both paragraphs in subsection 39E(2) do not apply in the current circumstances for the following reasons:

•         As the Annual Parking Pass is advertised on the car parking operator's website, the Commissioner is satisfied that it is available to members of the public.

•         The Commissioner is satisfied that, in the absence of any evidence to the contrary, Company Y (the employer) and Company X (the commercial parking station operator) are operating at arm's length.

•         The daily rate equivalent is not considered to be undervalued compared to the lowest all-day parking fees of other commercial parking stations in similar locations.

Conclusion

The fee charged by Company X for the Annual Parking Pass can be used to calculate the all-day parking fee's value under sections 39C and 39E of the FBTAA. Using the formula in subsection 39E(1) of the FBTAA, the daily rate equivalent is considered to be commercial based on the average all-day parking fee charged to members of the public by Company X and other similar commercial car parking providers around Australia.