Edited version of private advice

Authorisation Number: 1052193366871

Date of advice: 21 November 2023

Ruling

Subject: FBT - commercial parking station

Question 1

Is the shopping centre's parking facility a 'commercial parking station' under Section 39A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes.

Question 2

Notwithstanding whether the parking facility is a 'commercial parking station', would the lowest representative fee charged, with reference to Subparagraph 39A(1)(a)(iii)of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), be $x.xx?

Answer

Yes.

This ruling applies for the following periods:

Year ending 31 March 2023

Year ending 31 March 2024

Year ending 31 March 2025

Year ending 31 March 2026

The scheme commenced on:

1 April 2022

Relevant facts and circumstances

The shopping centre has a large parking facility. The parking facility has been charging for parking for several years. The parking facility rates are up to three hours free, and then a sliding scale of rates increasing every 30 minutes, with a daily maximum rate if parking exceeds 7 hours.

The shopping centre also offers customers that live outside the area and shop for more than three hours all day parking at a flat-rate (Roof-top zone)

The car parking threshold for the FBT year ended 31 March 2023 is $X.XX.

The shopping centre has a ticketless parking system that uses licence plate recognition to track parking without the need for a paper ticket.

Upon exiting, customers will stop at the boom gates while the camera scans the license plate details and calculates the time spent and if any costs are incurred. If customers have been under 3 hours the boom gates will automatically open.

Payment machines are located at mall entrances and credit card payment can be accepted at the exit barriers.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 39A

Fringe Benefits Tax Assessment Act 1986 section 39 AA

Fringe Benefits Tax Assessment Act 1986 Section 39AB

Fringe Benefits Tax Assessment Act 1986 subparagraph 39A(1)(a)(iii),

Fringe Benefits Tax Assessment Act 1986 Subsection 136(1)

TR 2021/2 Fringe benefits tax: car parking benefits

Reasons for decision

Question 1

Is the shopping centre parking facility a 'commercial parking station' under Section 39A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes.

Detailed reasoning

Subsection 136(1) of the FBTAA defines a 'commercial parking station' 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.

Taxation Ruling TR 2021/2 Fringe Benefits tax: car parking benefits, which sets out the ATO view on the operation of the car parking fringe benefit provisions, discusses the meaning of the term 'commercial parking station'.

Paragraph 16 of TR 2021/2 provides that a commercial car parking facility, on a particular day, is a 'commercial parking station' if:

•         It is permanent

•         It 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 parking facility

Paragraph 32 and 33 of TR 2021/2 provides guidance in relation to the meaning of the term 'permanent'

32. The term 'permanent' is not defined 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.

With respect to the shopping centre car park:

•         Payment machines are located at mall entrances and credit card payment can be accepted at the exit barriers.

•         Boom gates have been installed that control the entry and exit of the cars.

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.

Commercial car parking facility

Paragraphs 18 - 22 of TR 2021/2 provides the following guidance in relation to 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 could be:

•        A purpose-built complex designed for car parking (including parking provided as part of an office or apartment building), or

•        An area of land dedicated or adapted to providing car parking (including on-street parking).

19. The ordinary meaning of 'commercial' is not to be viewed in isolation. 'Commercial' informs the ordinary meaning of 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 a commercial car parking facility 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).

Generally, if a parking facility displays two 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 applying this guidance to the current circumstances, the shopping centre car parking constitutes a commercial car parking facility as it is a purpose-built parking complex designed for car parking. Customers are charged more than a nominal fee for paid parking which is charged after the first 3 hours and increases every 30 minutes. When a car is parked for a period exceeding 7 hours the maximum daily rate is charged.

Entry and exit are controlled by boom gates. There are payment machines located at mall entrances and credit card payment can be accepted at the exit barriers.

It was contended the primary intention behind the introduction of paid parking at the shopping centre car park is not to generate profit from the operation of the car parking facility in its own right, but rather to discourage commuters and other non-shoppers from taking genuine shoppers' car parking spaces. In doing so, the shopping centre aims to encourage its shoppers to 'turn over', which drives additional foot traffic and profitability for the shopping centre tenants and consequently, for the shopping centre as landlord.

The test of whether the facility is a 'commercial car parking facility' does not turn simply on whether a car parking facility is 'commercial' from a profit-making intent perspective. Per paragraph 19 of TR 2021/2, and consistent with the comments of the High Court in Owners of Ship Shin Kobe Maru v Empire Shipping Co Inc [1994] HCA 54 and the Full Federal Court in SZTVU v Minister for Home Affairs [2019] FCAFC, a compound phrase in a statutory provision 'should be interpreted in the context of the phrase in its entirety rather than just a word of the phrase in isolation.'

Regarding the phrase "commercial car parking facility", the ordinary meaning of "commercial" informs the compound phrase in which it appears, and the definition is not satisfied based solely on the meaning of the word "commercial" when isolated from any context (that is, whether something is operated with profit-making intent.)

Additionally, the Administrative Appeals Tribunal in Qantas Airways Ltd v Commissioner of Taxation [2014] AATA 316 (Qantas) confirmed that the test does not turn on whether a car parking facility has a primary intended use or uses.

Therefore, a primary purpose of promoting shopping centre foot traffic, rather than a profit-making intention does not preclude a car parking facility from being a commercial car parking facility for the purpose of the definition of 'commercial parking station'. The hallmark characteristics outlined in paragraphs 20 and 21 of TR 2021/2 provide an objective test to determine if a car park is a commercial car parking facility.

Car spaces available in the ordinary course of business to the public for 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.

Paragraphs 34 to 36 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. 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.

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.

Paragraph 39 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.

In applying the above paragraphs from TR 2021/2 to the current circumstances, it can be concluded that the car spaces are available in the ordinary course of business to the public for all-day parking on payment of a fee, for the following reasons:

•        The car park has been operating for several years

•        The car park has car spaces available to the public for all day parking, on payment of a fee;

•        There is licence plate recognition functionality at each entrance and boom gates at each exit to the parking facility; and

•        Payment machines are located at mall entrances and credit card payment can be accepted at the exit barriers.

It was contended that the all-day rates charged are intended to discourage commuters and other non-shoppers from taking genuine shoppers' car parking spaces and have indicated that the standard all-day rate is higher than some other all-day parking rates by other car parks in the general region.

However, this point alone does not demonstrate that that the car spaces are not made available in the ordinary course of business for paid all-day parking. As noted by the AAT in Qantas, the fact a car park has expensive fees for all-day parking may be attributed to a number of factors, and indeed is precisely what the provisions are seeking to identify. It was found in Qantas that a carpark charging "high rates" for all-day parking was still a "commercial parking station"

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

•         is a commercial car parking facility

•         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.

Question 2

Notwithstanding whether the parking facility is a 'commercial parking station', would the lowest representative fee charged, with reference to Subparagraph 39A(1)(a)(iii) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), be $7.50?

Answer

Yes.

Detailed reasoning

Subsection 39A(1) sets out the various requirements in order for a car parking fringe benefit to arise.

Subparagraph 39A(1)(a)(iii) provides that one of the relevant requirements is that the lowest fee charged by the operator of a commercial parking station in the ordinary course of its business to members of the public for all-day parking on the first business day of the FBT year must be more than the car parking threshold.

However, section 39AA provides that:

For the purposes of subparagraph 39A(1)(a)(iii), any fee charged on the first business day of an FBT year that is not representative is to be disregarded.

Section 39AB further provides that:

A fee charged by an operator of a commercial parking station on a particular day is not representative if the fee is substantially greater or less than the average of the lowest fee charged by the operator in the ordinary course of business to members of the public for all-day parking on each of the days in whichever of the following periods chosen by the employer:

(a) The 4-week period beginning on the day; or

(b) The 4-week period ending on the day.

Lowest representative fee charged

Paragraph 50 to 53 of TR 2021/2 provides the following guidance to work out the lowest representative fee charged:

50 To work out if an all-day parking fee is the lowest representative fee, you identify the fee charged on the first business day of the fringe benefits tax (FBT) year. You then compare that fee against the average fee charged for the same all-day parking by the same operator during:

•        the four-week period beginning on that first day of the FBT year, or

•        the four-week period ending on that first day of the FBT year.

51. To be considered representative, the fee being tested should not be substantially greater or less than the average fee on each day during the relevant four-week period.

52. The lowest representative fee charged may include fees charged on 'early bird' parking rates or car-pooling arrangements, where a reasonable number of parking spaces are set aside for those purposes.

53. 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

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

The shopping centre charges a flat-rate for all day parking (roof-top zone) for customers that live outside the area and intend to shop at the shopping centre for more than three hours. This rate is lower than the rate charged to other members of the public for all-day parking.

A car space is available to the public when any member of the public may park their car in that space. In Federal Commissioner of Taxation v Qantas Airways Ltd [2014] FAFC 168 the Full Federal Court confirmed that despite contractual restrictions being imposed by the operator of the relevant parking stations, all-day parking was still available to members of the public on the contractual terms stipulated. The contractual terms did not mean that the car park spaces were not available to members of the public but, rather, that conditions were imposed on the use of the car park by members of the public.

The all-day rate of $x.xx is available to any member of the public who satisfies the terms and conditions of the parking facility, being they live outside of the urban centre and park their vehicle at the shopping centre for more than 3 hours. The Commissioner considers $x.xx is the lowest representative fee charged to the public for all-day parking.

Conclusion

$x.xx is the lowest representative fee.