Edited version of private advice

Authorisation Number: 5010073399689

Date of advice: 25 March 2022

Ruling

Subject: Valuation of car parking fringe benefits using commercial parking station method

Question

Can the lowest fee charged for all-day parking by the operator of a commercial car park that is located within one kilometre of a car entry point to the employer's wider business premises, be used to determine the taxable value of the car parking fringe benefits provided in several car parks under the commercial parking station method in section 39C of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No

This ruling applies for the following periods:

FBT year ending 31 March 2022

FBT year ending 31 March 2023

FBT year ending 31 March 2024

FBT year ending 31 March 2025

FBT year ending 31 March 2026

The scheme commences on:

1 April 2021

Relevant facts and circumstances

The employer owns a large area of real estate, and conduct business operations in a building at the centre of the area.

The employer provides car parking to its employees in several separate car parking complexes that are situated in different parts of the area surrounding the building.

Each of the car parks has a separate entrance.

There is no vehicular access between the various car parks. However, each of the car parks has an entrance to the building. Therefore, it is possible to walk between the car parks through the building.

The employer wishes to utilise the commercial parking station method in section 39C of the FBTAA 1986 to calculate the value of each car parking fringe benefit it provides.

In reviewing the lowest fees charged for all-day parking by the commercial parking stations located within a 1-kilometre radius of the car parks, the employer has located a commercial parking station that is located within 1 kilometre of the car parks which charges a rate that is less than the car parking threshold.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 39A

Fringe Benefits Tax Assessment Act 1986 Section 39B

Fringe Benefits Tax Assessment Act 1986 Section 39C

Reasons for decision

Is a car parking benefit provided?

A car parking benefit is provided where all the requirements of section 39A of the FBTAA 1986 are satisfied:

39A(1)

If the following conditions are satisfied in relation to a daylight period, or a combination of daylight periods, on a particular day:

(a) during the period or periods, a car is parked on one or more premises of a person (the provider), where:

(i) the premises, or each of the premises, on which the car is parked are business premises, or associated premises, of the provider; and

(ii) a commercial parking station is located within a 1 km radius of the premises, or each of the premises, on which the car is parked; and

(iii) the lowest fee charged by the operator of any such commercial parking station in the ordinary course of business to members of the public for all-day parking on the first business day of the FBT year is more than the car parking threshold;

(b) the total duration of the period or periods exceeds 4 hours;

(c) any of the following applies:

(i) a car benefit relating to the car is provided on that day to an employee or an associate of an employee in respect of the employment of the employee;

(ii) the car is owned by, or leased to, an employee or an associate of an employee at any time during the period or periods;

(iii) the car is made available to an employee or an associate of an employee at any time during the period or periods by another person, where:

(A) the other person is neither the employer of the employee nor an associate of the employer of the employee; and

(B) the other person did not make the car available under an arrangement to which the employer of the employee, or an associate of the employer of the employee, is a party;

(C) the provision of parking facilities for the car during the period or periods is in respect of the employment of the employee;

(D) on that day, the employee has a primary place of employment;

(E) during the period or periods, the car is parked at, or in the vicinity of, that primary place of employment;

(F) on that day, the car is used in connection with travel by the employee between:

(i) the place of residence of the employee; and

(ii) that primary place of employment;

(G) the provision of parking facilities for the car during the period or periods is not taken, under the regulations, to be excluded from this section;

(H) the day is on or after 1 July 1993;

the provision of parking facilities for the car during the period or periods is taken to constitute a benefit provided by the provider to the employee or the associate of the employee in respect of the employment of the employee.

Pursuant to section 39A of the FBTAA 1986, the employer provide car parking benefits in relation to the car parking provided in several car parks.

Section 39B of the FBTAA 1986 sets out the method to be used to determine whether a commercial parking station is located within a 1 km radius of the premises on which the car parking is provided.

Section 39B states:

For the purposes of this Division, a commercial parking station is taken to be located within a 1 km radius of particular business premises or particular associated premises if, and only if, a car entrance to the commercial parking station is situated less than 1 km, by the shortest practicable route, from a car entrance to those premises.

Commercial parking station method

To calculate the taxable value of these car parking fringe benefits you propose to use the commercial parking station method in section 39C of the FBTAA 1986.

Section 39C of the FBTAA 1986 states the following:

Subject to this Part, the taxable value, in relation to an FBT year, of a car parking fringe benefit provided on a day in the FBT year in connection with one or more premises is equal to:

(a) if, on that day, there is only one commercial parking station located within a 1 km radius of any of those premises - the lowest fee charged by the operator of the parking station in the ordinary course of business to members of the public for all-day parking on that day; or

(b) if, on that day, there are 2 or more commercial parking stations located within a 1 km radius of any of those premises - the lowest fee charged by any of the operators of those parking stations in the ordinary course of business to members of the public for all-day parking on that day;

reduced by the amount of the recipient's contribution.

'Premises' for the purpose of determining a 1km radius

'Premises' is undefined in the FBTAA 1986 and takes its ordinary meaning. Courts have given the term 'premises' a wide import and acknowledged that its meaning differs depending on the context in which it is used(Gardiner v Sevenoaks Rural District Council [1950] 2 All ER 84 at 85).

The word 'premises' is used in several different ways, and with differing context, across section 39A and section 39B of the FBTAA 1986.

Section 39A refers to 'the premises, or each of the premises, on which the car is parked are business premises.' The Commissioner views the 'premises' in section 39A(1)(a) as specifically being the location where the car is parked, and not encompassing the entire business premises of the employer.

This view is reflected in Section 39B, which references a 'particular business premises' and requires the commercial parking station to be within a 1km radius of a 'car entrance' to those premises. While 'car entrance' is undefined, the statutory context of its use in section 39B is clearly consistent with the object of the test being the 'car parking' premises, as opposed to some larger real estate that also satisfies the business premises definition, noting:

•                     It is used identically within the provision to refer to the entrance to a commercial parking station and to 'car parking' premises, and

•                     Its statutory function is to measure the distance between two 'car parks' for comparative purposes

Section 39A read as a whole also demonstrates that the car parking premises can be separately identifiable business premises from a larger area that is also business premises. In paragraph 39A(1)(h), and the concluding sentence to subsection 39A(1), "parking facilities for the car" is used as an alternative phrase to identify the 'car parking' premises referred to in paragraph 39A(1)(a).

These premises are also very clearly contemplated as being able to be different from the recipient's primary place of employment given the 'in vicinity' test in paragraph 39A(1)(f), even though the primary place of employment must also be business premises of the employer where they are also the provider.

In determining from what point does one commence measurement of the 1km radius for the purposes of section 39C, often the entrance to the employer's business premises (or associated premises) will be the same as a car entrance to the employer-provided car parking facility. Distinguishing between multiple car entrances is therefore not always necessary. However, in this instance the entrances to the business premises (of which there are several and which includes public roads) are not the same as the car entrances to each of the seven employer-provided car parking facilities.

The Commissioner's view therefore is that section 39C requires measurement of the 1km radius to commence at the car entrance to the employer-provided car parking facility and extend to the car entrance to the commercial parking station.

This position is consistent with the legislative intent behind the provision expressed in the Explanatory Memorandum to the Taxation Laws Amendment (Car Parking) Bill 1992, which introduced Division 10A - car parking fringe benefits. The Explanatory Memorandum notes specifically:

Generally, a car parking benefit exists where an employer provides to an employee any car parking facilities on business premises which are owned, controlled or leased, in whole or in part, by the employer. However, no benefit will exist unless:

                              i.        A permanent commercial car parking facility available for all-day parking is within 1 kilometre of the employer provided car parking facilities. If there is no commercial parking station within a 1-kilometre radius, there will be no benefit;

The Bill specifically sets out that the 1-kilometre distance between the commercial parking station and the employer provided parking facility is measured by the shortest practicable route. This route can be travelled by foot, car, train, boat, etc., whichever produces the shortest route. The route starts from the car entry point at the employer provided car parking facility and extends to the car entry point at the commercial parking station. [New section 39B][emphasis added]

Therefore, in determining the lowest fee charged by a commercial parking station for all-day parking within a 1km radius of each of the several car parking facilities located within the wider business premises, it is necessary to measure the 1km radius from the car entry to each of the seven car parks and extend to the car entry to any commercial parking stations within the 1km radius. A car entry to the wider business premises cannot be used for this purpose.

Under section 39C, if two or more commercial parking stations are located with the 1km radius, the lowest fee charged for all-day parking by the operators of the commercial parking station may be used to determine the taxable value of the car parking fringe benefit.