Edited version of private advice

Authorisation Number: 1052125303468

Date of advice: 8 August 2023

Ruling

Subject: FBT - car parking fringe benefits

Question

Is the car parking facility operated by the Operator at XXX (the Carpark) a 'commercial parking station' for the purposes of the car parking benefit provisions within the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes.

This ruling applies for the following periods:

Fringe benefits tax (FBT) year from 1 April 2021 to 31 March 2022

FBT year from 1 April 2022 to 31 March 2023

FBT period from 1 April 2023 to XX XX 2023

The scheme commenced on:

1 April 2021

Relevant facts and circumstances

You have previously received a private ruling, authorisation number 5010069052695, for the FBT years ended 2020 and 2021. We advised that the Carpark was not a 'permanent' parking facility, based on the facts presented at that time and the guidance provided in the Draft Taxation Ruling TR 2019/D5 Fringe benefits tax: car parking benefits (TR 2019/D5). It has since been replaced by Taxation Ruling TR 2021/2 Fringe benefits tax: car parking benefits (TR 2021/2).

The Carpark is operated on a vacant block of land (the Land), which is constructed of gravel and there is no building or pavement on the surface of the Land.

The Operator:

•         initially operated the Carpark under a X-year planning permit (the initial planning permit);

•         continued operating the Carpark without a planning permit between the expiry of the initial planning permit period and the commencement of a new X-year planning permit period; and

•         continued operating the Carpark under a new X-year planning permit.

The new planning permit allowed the Land to be used between 7am - 7pm, seven days per week.

The Operator has changed the way it operates the Carpark as follows:

•         During the initial planning permit period, the Operator welcomed members of the public for parking, with a signage of 'parking'.

•         Currently, a member of the public is required to apply for a parking permit with a minimum of X months' commitment at the rate of $X per month. A member of the public can no longer utilise the Carpark and 'park for one day at a time'. As most of the parking permits have been issued to one entity, there are limited permits available for the members of the public.

•         There are no parking attendants on site, instead there is a boom gate that requires the permit holder to use the security swipe to enter the Carpark.

•         The Carpark has signage that includes 'Reserved parking only; non-permit holders will be towed at owners expense'.

The owner of the Land is looking for potential buyers and you understood that they didn't have any intention of building a carpark on the Land.

You advised that you anticipate that the entire selling/buying transaction would take at least X years to complete.

Subsequent to your application, you have advised that the owner of the Land has issued a notice to the Operator to cease the occupancy and to vacate the Land by XX XX 20XX (before the expiry of the new X-year planning permit period). After that, the owner of the Land intends to lease the Land directly to the main occupier, to operate the Carpark as a 'private carpark' that limits the parking to its employees and not to the members of the public.

The car parking arrangement to which this application applies will cease on XX XX 20XX when the Operator vacates the Land.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

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) further discusses the term 'commercial parking station' definition by breaking it down in a step-by-step manner. Paragraph 16 of TR 2021/2 provides that a commercial parking station, on a particular day, is a commercial car parking facility which:

•         is permanent

•         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.

Permanent commercial parking facility

Commercial car parking facility

Paragraphs 18 - 22 of the TR 2021/2, outlines what would constitute a 'commercial car parking facility'.

18. 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.

19. 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.

20. A parking facility will be commercial if it is operated by a car parking operator. This includes a parking facility that exists within another complex (such as an office, shopping centre or hospital) where the owner or lessor of that complex outsources the management of the parking facility to a car parking operator.

21. Where a parking facility is not managed by a car parking operator, it may nevertheless be a commercial car parking facility if it displays other hallmark characteristics; namely, if the parking facility:

•        has clear signage visible from the street advertising that paid parking is available

•        has 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

•        charges more than a nominal fee (usually a significantly lower rate than the local market rate) for paid parking. This includes charging a user for parking which is not all-day parking (such as parking at an hourly rate).

22. Generally, if a parking facility displays 2 or more of these characteristics, it is a commercial car parking facility. However, the characteristics of a particular parking facility must be objectively considered.

In this case,

•        the Carpark is an area of land dedicated or adapted to providing car parking, and

•        it is operated by a carparking operator, the Operator.

Therefore, the Carpark is a commercial parking facility.

Permanent

Paragraphs 32 and 33 of the TR 2021/2 provide some guidance to the term 'permanent'

32. The term 'permanent' is not defined. Considering its ordinary meaning and the statutory context, a permanent commercial car parking facility is enduring or lasting as such and not temporary or transient in nature. For example, a parking facility set up for a special event (like a sporting event) would not be permanent. A vacant lot, operated as a commercial car parking facility, could be considered to be a permanent commercial car parking facility even where it is intended that a building will be erected on the site in due course.

33. 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.

The hallmark characteristics of this commercial parking facility include:

•         The website allows online enquiry about the availability; it also provides the contact details of the Operator

•         Fence erected around the Carpark which prevents unauthorised access

•         The utilisation of boom gates that is operated by using an access/security card for entry and exit

•         The parking fees are paid for a minimum of X months to secure a spot

All these characteristics indicate a permanent car parking facility and do not point to an ad hoc, transient or temporary nature of such facility.

While we acknowledge the landowner's intention of developing the land through a potential buyer in the foreseeable future, there is no suggestion that a potential buyer began negotiations to date. Even if this is the case, it will take a reasonable time frame for such transaction to occur.

It is also noted that the 'only two years' consideration in the previous ruling, has in fact been extended for a period of 'operation without a permit' and an additional period of operation under a 'new X-year planning permit'. The total period of this car parking facility in operation is far longer than the initial X-year period foreshadowed.

Therefore, the Carpark is considered 'permanent' for the reasons outlined above.

Is not on-street parking

As per the facts, parking in the Carpark is off the street, and therefore does not constitute on-street parking. It is not paid for by inserting money in a meter or by obtaining a voucher.

All-day parking available in the ordinary course of business to the public on payment of a fee

All day parking

Subsection 136(1) of the FBTAA defines 'all-day parking', in relation to a particular day, means:

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 as:

In relation to a day, means 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.

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

The new planning permit also allows the Land to be used between 7am - 7pm, it is therefore reasonable to conclude that the parking permit allows access to the Carpark for 'all-day parking' - for a minimum of six continuous hours between 7:00am to 7:00pm.

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

To the public

Paragraph 34 of the TR 2021/2 clarifies that 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.

Paragraph 39 of the TR 2021/2 states that 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.

Having regard to paragraph 39 of TR 2021/2, the Commissioner considers the restrictions such as the commitment to use the Carpark for at least a minimum of X months, the fee of $X per month is charged to access the Carpark and the signages indicating 'Reserved parking only; non-permit holders will be towed at owners expense' do not prevent the Carpark from being available to members of the public. So long as a member of the public is agreeable to the terms and conditions of the Operator under contractual terms, the Carpark is still available to the public.

In FCT v Qantas Airways Ltd (2014) 100 ATR 97, the Full Federal Court noted that the word 'public' should be given its ordinary meaning and that short and long term airport car parks at Australian airports are 'commercial parking stations'. The Full Court noted that even if the operator of a parking station imposed restrictions (eg allowing only a certain section of the public such as airline passengers to use it), the car spaces would nevertheless be available in the ordinary course of business to the public and therefore the carpark would be a commercial parking station.

Even though the Carpark is predominantly occupied by one entity, it is reasonable to believe that there are some or at least one parking spot available in the ordinary course of business to the members of the public.

The Commissioner is of the view that the example 6 of the TR 2021/2, has little relevance or application to the Carpark. Example 6 refers to 'all of the car spaces are available for lease by businesses', while the Carpark is available to any member of the public under the agreeable terms and conditions.

Therefore, the Carpark is available to public on payment of a fee.

Conclusion

The Carpark is a commercial parking station as it meets all of the criteria in the definition of a 'commercial parking station' under subsection 136(1) of the FBTAA.