Edited version of private advice

Authorisation Number: 1052091489380

Date of advice: 22 March 2023

Ruling

Subject: FBT - commercial car parking facility

Question 1

Is the car parking facility a "commercial parking station" located within a 1 km radius of your premises such that it can be utilised as the lowest fee charged by the operator of a commercial parking station for the purposes of section 39C of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes.

This private 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

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

The organisation provides selected employees with car parking at a location within the central business district.

The lease agreement between the organisation and the car park stipulates a minimum of 40 bays being maintained for the organisations' employees.

The Car Park location used by the organisations' employees is within a one-kilometre radius of the Building.

The Car Park is accessed by using a driveway that runs down the side of the Building.

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

The Car Park is paved and has marked parking spaces.

The Car Park has maximum capacity of 50 car parking spaces.

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

The sign at the boom gate at the entrance to the Car Park also states that cars parked illegally will be towed away at the owner's expense.

The Car Park provides parking from the time the building opens in the morning until the conclusion of activities in the evening.

The Car Park has been operating for over a decade.

Assumption

The fee of $X that is charged to access the car park 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.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

Reasons for decision

Question 1

Summary

The car parking facility conducted is a "commercial parking station" for the purposes of the car parking provisions within the FBTAA.

Detailed reasoning

The definition of 'commercial parking station' under subsection 136(1) of the FBTAA is:

'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.'

Taxation Ruling TR 2021/2 Fringe benefits tax: car parking benefits (TR 2021/2) discusses the meaning of the term "commercial parking station". Paragraph 16 of TR 2021/2 provides that a car parking facility, on a particular day, is a "commercial car parking facility" if it:

•         Is a permanent parking facility

•         Is not on-street parking

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

For a car parking benefit to arise, the commercial parking station must be located within a one-kilometre radius of the work car park.

According to TR 2021/2, "commercial car parking facility" takes its ordinary meaning. In considering its ordinary meaning and the statutory context, there must first be a parking facility. Without limiting what might be a parking facility, it may be:

• A purpose-built complex designed for car parking; or
• An area of land dedicated or adapted to providing car parking.

The ordinary meaning of "commercial" should also be considered in the compound phrase "commercial car parking facility". As such, a commercial car parking facility is a parking facility that displays certain characteristics that are hallmarks of such a facility.

A parking facility will be commercial if it is operated by a car parking operator, including a parking facility which exists within another complex, such as an office.

Nevertheless, where a parking facility is not managed by a car parking operator, it will generally be considered a commercial car parking facility if it displays two or more of the following characteristics:

• Clear signage visible from the street advertising that paid parking is available;
• Mechanisms to control who can enter and/or exit the parking facility, or park at the facility. This may include boom gates, or 'pay and display' ticketing machines; and
• Charges more than a nominal fee (usually a significantly lower rate than the local market rate) for paid parking.

Applying TR 2021/2, the Car Park is a purpose-built parking facility designed for the parking of cars as part of. The Car Park is operated by owners of the building. There is clear signage at the entrance to the Car Park stating "Parking. Access to the Car Park is restricted by a boom gate with a coin collection box for entry on payment.

We need to explore the further three criteria to ensure that the Car Park is a commercial car parking facility.

Permanent parking facility

Paragraph 32 of TR 2021/2 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.

Paragraph 33 of TR 2021/2 goes on to say that many of the hallmarks of a commercial car parking facility would also support a conclusion that the parking facility is permanent, such as it has:

•     signage, advertising and/or online booking facilities,

•     infrastructure which controls the entry and exit of cars or payments for parking.

With respect to the Car Park, 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 10 years, which indicates the car park is intended to be operated on an ongoing basis.

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

Parking is not on-street parking

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

All-day parking available in the ordinary course of business to 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 that is charged to access the Car Park 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 the Car Park, as stipulated in the facts, are met).

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

Members of the public

Paragraph 39 of TR 2021/2 states:

39. 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. Contractual terms and conditions may restrict who or how someone may use the parking facility, for instance, an airport car park may be restricted to passengers and those meeting and greeting passengers. Such restrictions do not prevent the car park from being available to the public, provided any member of the public who agrees to the terms and conditions can use the parking facility.

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).

At paragraph 12 and 14, the Court said:

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 the Car Park advise that the Car Park is able to be used by anyone who used the building.

Therefore, having regard to the Qantas decision and paragraph 39 of TR 2021/2, the Commissioner considers that the restrictions limiting the use of the Car Park does not prevent the Car Park from being available to members of the public. Any member of the public is able to use the Car Park provided they are attending something in the building.

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

Ordinary course of business

Paragraphs 34 to 37 of TR 2021/2 state:

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. Such purposes include:

•         short-term parking, such as hourly parking at a hospital, shopping centre, hotel, university or an airport, or

•         long-term parking, that is, parking over a period exceeding one day

37. The offering of a single car space for all-day parking may be in the ordinary course of business if it is intended to be repeated, or it can be shown that the transaction was the first step in the carrying on of a business. Some entities have been held to carry on a business where ongoing activities are relatively limited, and the key activity consists of letting the company's premises for rent on an ongoing basis

A footnote to paragraph 37 of TR 2021/2 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 2021/2 and TR 2019/1 to the current circumstances, the Commissioner considers that:

1.    the fact that car parking has been provided at the Car Park for at least 10 years 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 the Car Park 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 Car Park is a significant size given the parking facility consists of 50 parking spaces, and

5.    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 the Car Park are provided in the ordinary course of business.

Conclusion

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

•         is permanent

•         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.