Edited version of private advice

Authorisation Number: 5010069052695

Date of advice: 17 November 2020

Ruling

Subject: Commercial parking station definition for FBT purposes - permanent parking facility

Question

Is the car parking facility conducted by entity A in Australia (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

No. The Carpark is not 'permanent' and therefore it does not meet all the requirements to be a commercial parking station for the purposes of the car parking benefit provisions within the FBTAA.

This ruling applies for the following periods:

FBT year 1 April 20XX to 31 March 20XX

FBT year 1 April 20XX to 31 March 20XX

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

A local government authority in a state or territory within Australia owns several multi-level car parks near its head office, including one operated by entity A, the Carpark. They are both open to the public and the local government authority also provides their employees with parking in these car parks.

Apart from the Carpark, the lowest representative fee charged by car parks located within a 1km radius of the two work car parks owned by the applicant (including the two work car parks themselves) is less than the relevant fringe benefits tax (FBT) car parking threshold.

The local government authority holds a planning permit which allows the parcel of land the Carpark is situated on to be used as a car park for a two-year period that ends on 6 December 20XX.

The Carpark is a vacant block of land earmarked for future development by the state or territory government. The surface of the land where the cars are parked is gravel. The planning permit requires entity A to conduct shielding and watering of the surface and deal with dust issues and drainage of the site.

Entity A does not offer long-term parking at the Carpark for more than one month at a time.

The current day parking rates for the Carpark are $XX dollars for three hours+ and monthly parking rates are available on application.

Upon advice from their tax representative, the local government authority has regarded the Carpark as a 'permanent' car park in its 20XX-XX FBT return and has paid FBT on the value of the car parking provided to their employees in the two work car parks they own. An amended FBT return will be lodged if the ATO rules that the Carpark is not considered 'permanent'.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 39A

Fringe Benefits Tax Assessment Act 1986 section 136

Reasons for decision

The presence of a commercial parking station located within a 1 km radius of the premises, or each of the premises, on which the car is parked is one of several elements to be satisfied for a car parking benefit to be provided under section 39A of theFBTAA.

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.'

In considering the application of the definition of 'commercial parking station' it is necessary to determine whether the parking facility:

a)    Is a permanent parking facility

b)    Is a commercial parking facility

c)    Provides car parking spaces in the ordinary course of business

d)    To members of the public

e)    For all-day parking on payment of a fee, and

f)     Is not a parking facility on a public street, road, lane, thoroughfare or footpath paid by inserting money in a meter or obtaining a voucher.

We agree that the Carpark meets all the tests from 'b' to 'f' above.

We now need to consider whether the parking facility is a "permanent" parking facility as per 'a' above.

Draft Taxation Ruling TR 2019/D5, which sets out the preliminary ATO view on the operation of the car parking fringe benefit provisions, discusses the meaning of 'permanent' at paragraph 14:

The term 'permanent' is not defined. Considering its ordinary meaning[1] and the statutory context, a permanent commercial parking facility is enduring or lasting as such and not temporary or transient in nature. Factors that would support whether a commercial parking facility is permanent in nature include whether it:

•         has pavement or bitumen, or permanently marked bays;

•         has signage, advertising and/or online booking facilities, or

•         is not intended to be solely used for a special event [emphasis added].

The Draft Chapter 16 of Fringe Benefits Tax - A Guide for Employers, which specifically deals with car parking fringe benefits, also provides relevantly:

16.1.6.1 When does a commercial parking station qualify?

A commercial parking station must meet all of the following requirements.

•         It must be a permanent commercial car parking facility (not a temporary or a 'pop up' car park). ...

Example 6 - commercial parking station comparison

Towers Pty Ltd purchases three properties to build apartments, but makes the properties available (through various arrangements) for parking while obtaining the approvals. It is not known how long the approvals will take from the outset.

Property 1 - lacks permanency

Property 1 is a vacant block of land with an unsealed surface, no marked parking bays and no signs that advertise parking on the premises. Towers Pty Ltd advertises the parking on its website and offers monthly parking rates that are substantially similar to monthly rates charged by comparable parking facilities nearby. Fees are paid via a monthly direct debit arrangement. Users of the car park are notified at the outset that availability of parking at Property 1 is temporary and direct debit arrangements only run month to month. Users are notified that Property 1 will only be available to them whilst building approvals are being sought.

The car park at Property 1 does not meet the definition of a commercial parking station. Property 1 lacks permanency. Property 1 is only made temporarily available to the public whilst the building approvals are obtained.

We consider that Property 1 in Example 6 is similar to the Carpark in several key respects as both are vacant blocks of land with an unsealed surface, both are available to users for one month maximum and both are only available to users while building approvals are being obtained, so that the Carpark lacks permanency on the same basis.

Moreover, while unlike Property 1 in Example 6, the Carpark does have a sign that advertises parking on the premises, as well as marked parking bays, these factors are not decisive in distinguishing the Carpark from Property 1 in Example 6 so that a different conclusion on the matter of permanence might be reached.

We also consider that the following factors indicate that the Carpark is not permanent as it is not enduring or lasting as such and is instead temporary or transient in nature, as per paragraph 14 of TR 2019/D5:

•         The permit to use the land as a car parking facility is only two years in duration;

•         Secure do not provide committed parking for more than one month at a time (although this is not necessarily a decisive factor);

•         The Carpark's unsealed gravel surface indicates a lack of permanency

•         Secure has not spent money on converting the surface from gravel to concrete or bitumen, which demonstrates that it has no long-term commitment to the site.

As the Carpark is not 'permanent', it therefore does not meet all the requirements to be a commercial parking station for the purposes of the car parking benefit provisions within the FBTAA.

[1] Macmillan Publishers Australia, The Macquarie Dictionary online,www.macquariedictionary.com.au, viewed7 November 2019.