Edited version of private advice

Authorisation Number: 1052041773566

Date of advice: 15 December 2022

Ruling

Subject: Car parking fringe benefit

Question

Is a car parking fringe benefit provided to employees?

Answer

No.

This ruling applies for the following periods:

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

Employee A is employed by Council for at least 35 hours per week as an Operations Manager, Leisure Centres at the council Leisure Centre. He works flexible hours however due to the nature of his job he is largely on premises from 9am to 5pm 5 days a week.

Employee A has the use of a car provided to him by Council or uses his own car and parks it on business premises owned by Council. These business premises are parking facilities and are described as the Open-Air Car Park surrounding the facility. The Open-Air Car Park consists of 5 parking zones (A to F), see below for further detail regarding these zones.

The Open-Air Car Park is not located on a public road.

The vehicle used by Employee A is a car, being a motor vehicle designed to carry a load of less than 1 tonne and fewer than 9 passengers. It is not a motorcycle or similar vehicle.

Employee A parks this vehicle at these premises during a daylight period or a combination of periods between 7 AM and 7 PM on any particular day. This is the relevant period or relevant periods.

The Open-Air Car Park and the facility are business premises of Council. The Open-Air Car Park does not have a boom gate.

A commercial parking station is located within 1 km radius of any part of or the entrance to the Open-Air Car Park. This commercial parking station is operated by Secure Car Parks and is located at a nearby Public Hospital. The lowest fee charged by the operator of this commercial car park in the ordinary course of business to members of the public for all day parking on 1 April 2022 exceeds the car parking threshold of $9.25.

Employee A parks in the Open-Air Car Park the for a period or periods which exceeds 4 hours total duration on any particular day.

Employee A has a primary place of employment at the facility.

When Employee A parks in the Open-Air Car Park for the period or periods on any particular day, the car is parked at, or in the vicinity of, his primary place of employment at the facility.

On any particular day the car used by Employee A is used by him in connection with travel by him at least once a day between his place of residence and his primary place of employment at the facility.

The provision of parking facilities at the Open-Air Car Park for the car during the period or periods he parks the car at the Open-Air Car Park is not taken, under the FBT Regulations, to be excluded from section 39A of the FBT Act.

The facility is owned by Council. On its website Council describes the centre as follows:

The Leisure Centre has been our cities go-to fitness hub for more than 40 years.

Whether you're training for competition, health or fun, it has everything you need. We can tailor programs for all ages, abilities, and fitness levels.

Our high-quality facilities include:

•         A fully equipped gym and functional training area

•         Group exercise room

•         Cardio fitness studio

•         A 25-metre heated pool with sauna

•         Athletics Track

•         Table tennis and badminton

•         Basketball court.

Precinct

The facility is part of a precinct, and it shares the precinct with:

1. A Tennis Club which is a licenced commercial club where customers can buy a meal and drinks at the restaurant

2. Adjacent tennis courts

3. Basketball Association stadium

4. Soccer Oval

5. Cricket pitch

Others who use the parking areas in the precinct include:

•         Commuters park in the precinct as they can go to the city on the free bus.

•         Tradies park there, they live in units around the precinct.

There is heavy demand on the weekend for parking due to the tennis, cricket, and soccer games. Parking is even worse when state championships are hosted. Those who can't find parking in the precinct have to find parking in the adjacent streets.

Open air carpark spaces

Spaces taken up by employees, including employee A, are usually no more than 5% of the open-air park spaces.

Operating hours

The operating hours of the precinct are from 5:45 AM and times that vary between 8:30 PM and 10 PM Monday to Friday and on the weekends the centre is open from 6:30 AM to 6 PM. Employee A normally works 9am to 5pm 5 days a week, Monday to Friday.

Where do staff park?

Employee A and other staff need to park in Open Air Car Park which at all of which the public can park and staff openly compete with the public for parking spots. There are no spots allocated to any staff including employee A, there is no timed parking and there is no parking for which a fee is charged.

Essential elements

The essential question for this ruling has 2 elements:

•         is parking 'provided' 'to' employee A.

•         if it is 'provided' 'to' employee A, is it provided 'in respect of' the employment of employee A.

Submission

It is submitted that the Open-Air Car Park adjacent to the facility is a parking facility, but it is not provided to employee A by Council however if it is so provided it is not provided in respect of the employment of employee A.

Arguments

The relevant legislation in the Fringe Benefits Assessment Act 1986 (FBTAA) related to the essential question is:

Section 39A (1)(d)

the provision of parking facilities for the car during the period or periods is in respect of the employment of the employee.

Section 136 FBTAA contains definitions including the definition of 'provide':

provide:

(a) in relation to a benefit-includes allow, confer, give, grant or perform;.....

Although this definition states that an employer 'provides' if it merely allows an employee to use a parking space the car park should have been built specifically as an employee's car park so that the provision of parking for employees was the dominant purpose of the car park. In the present case the car park was built for customers of the facility and other visitors to facilities within the precinct and was built as large as it could be given the high demand for the use of precinct.

Council does need to grant permission to or allow the staff to park in the precinct, they can park there anyway, as a member of the public. Council cannot deny parking to the employees.

Employees, including employee A, who work at the facility have no specific allocated parking spaces and they have to compete with the public for spaces. If they cannot find a space, they have to park in the surrounding streets where there is plentiful free parking available, and the parking is not timed.

Argument conclusion - In the above-described circumstances it is submitted that the parking facility has not been 'provided' to employee A or any other employees of the Leisure Centre.

Only provided if 'to' the employees

In any event the benefit can only be provided if it is provided 'to' the employees. Refer to the judgement of Edmonds J in FC of T v Indooroopilly Children Services (Qld) Pty Ltd [2007] FCAFC 16. The judgement of Edmonds J included the following statement:

19.... However, unless a benefit is provided to an employee or to an associate of the employee, it will not be a " fringe benefit " even if it is provided by an employer, an associate of the employer or a person within pars (e) or (ea) of the definition. In short, a benefit will not be a " fringe benefit " as defined unless it is provided to one of two possible " recipients " and is provided by one of four possible " providers ". The dual requirement of the definition is quite clear.

In the present case no records are kept regarding when employee A or any other employee is able to secure a spot in the Open-Air Car Park and when they have to park on the street. In these circumstances where the identity of employee A or any other employees who may be lucky enough to obtain a spot in the parking area is not known and no permission is given or required to be given to employee A or any other employee to park at the Open-Air Car Park it could not be said that the benefit has been provided 'to' the employee.

In respect of

Parking must be "in respect of" the employee A's employment. Section 136(1) FBTAA definitions:

"in respect of, in relation to the employment of an employee, includes by reason of, by virtue of, or for or in relation directly or indirectly to, that employment."

The meaning of the phrase 'in respect of' the employment of an employee was considered by the Full Federal Court in J & G Knowles v Commissioner of Taxation [2000] FCA 196.

This case dealt with the question of loans to directors and considered the facts against this proposition:

"11........the taxable value of a fringe benefit provided by a company to its director or to an associate of that director was taxable if the benefit was provided "in respect of the employment of" the director. By s 136(1) the phrase "in respect of, in relation to the employment of an employee include[d] by reason of, by virtue of, or for or in relation directly or indirectly to, that employment".

In considering the meaning of the phrase "in respect of" the Federal Court said:

22. The words "in respect of" have no fixed meaning. They are capable of having a very wide meaning denoting a relationship or connection between two things or subject matters. However the words must, as with any other statutory expression, be given a meaning that depends on the context in which the words are found...

23. The AAT was correct in stating that the phrase requires a "nexus, some discernible and rational link, between the benefit and employment"... what is required is a sufficient link for the purpose of the particular legislation... It cannot be said that any causal relationship between the benefit and the employment is a sufficient link so as to result in a taxable transaction...

The Federal Court also made reference to Smith v Federal Commissioner of Taxation (1987) 164 CLR 513 with this comment:

26 The differences in approach in Smith show how difficult it is to state a test to determine whether the requisite relationship or connection exists.

In the case of s 26(e) the question was said to be resolved by asking any one of the following questions:

•         is the benefit a "product or incident of the employment"? (Wilson J at 519);

•         is some aspect of the employment a substantial reason for the benefit? (Brennan J at 526);

•         is "in a very real sense the payment ... a consequence of the existing relationship of employer and employee"? (Toohey J at 533); or

•         is the employment one of the "proximate causes" of the payment? (Gaudron J at 537).

Whatever question is to be asked, it must be remembered that what must be established is whether there is a sufficient or material, rather than a, causal connection or relationship between the benefit and the employment. There is, in any event, a danger in placing too much emphasis on causation. As Lord Hoffman pointed out in Environment Agency v Empress Car Co Ltd [1999] 2 AC 22 at 29, an answer to the question of whether A has caused B will differ according to the purpose for which the question is asked.

No nexus to employment

It is submitted that there is insufficient connection to the employment because the Open-Air Car Park was built predominantly for customers of the main facilities and the other facilities within the precinct and is public parking. The parking area also provides parking for the neighbouring sports fields and also the adjacent basketball stadium etc.

Neither employee A or any other employees have parking privileges as a result of being employed. They have no parking privileges other than the fact that they are a member of the public and any member of the public can park there at any time of the day or night.

There is only a causal connection between the employment and the ability for employee A and other employees to park in the Open-Air Car Park, accordingly there is not sufficient nexus to be able to say that employee A or other employees can park on the site because they are employees.

That nexus could only arise if there was preferential treatment shown to employee A or other employees such as an allocated parking space. There are no allocated spaces and there is nothing in the employment arrangements between Council and employee A or any other employees regarding whether they can or cannot park in the Open-Air Car Park. It is entirely up to the employee to find a space to park either in the car park or on the street.

The Open-Air Car Park is similar to a Bunnings store. In the case of Bunnings there is a shop surrounded by a car park available for any of the public to use, they do not have to be customers of Bunnings to park there. Bunnings staff are in the same position as Leisure Centre staff, if they can find a spot they can park there, if not they need to park in the surrounding streets.

Argument conclusion - There is no nexus between the ability of employee A to park in the Open-Air Car Park and his employment by Council.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 S39A (1)(d)

Fringe Benefits Tax Assessment Act 1986 S136

Reasons for decision

Question 1

Is a car parking fringe benefit provided to employees?

Summary

Are areas where employees of the facility park vehicles they drive to work parking facilities provided to those employees in respect of the employment of those employees within the meaning of section 39A FBTAA?

No.

Detailed reasoning

The car park is open to the public there are no assigned spaces and if there are no free car parks staff park in surrounding streets and council does not know where staff have parked. Therefore, parking is not provided to staff meaning there is no connection to their employment.