Edited version of private advice

Authorisation Number: 5010076853995

Date of advice: 29 April 2022

Ruling

Subject: Valuation methods for car parking fringe benefits

Question 1

Is the car parking that the employer provides at select locations to its employee, a car parking benefit for the purposes of section 39A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986)?

Answer

Yes.

Question 2

In determining the taxable value of the car parking fringe benefit provided by the employer to the employee, can the employer use car parking rates for all-day parking, charged by a commercial parking station to a subset of the public (i.e., visitors/patients of a public hospital), as the lowest fee charged by the operator of the commercial parking station in the ordinary course of business to members of the public, under the commercial parking station method in subsection 39C(b) of the FBTAA 1986?

Answer

Yes.

Question 3

In determining the taxable value of the car parking fringe benefit provided by the employer to the employee, can the employer use car parking rates for all-day parking, charged by a commercial parking station to a subset of the public (i.e., visitors/patients of a public hospital), as the lowest fee charged by the operator of the commercial parking station in the ordinary course of business to members of the public, under the average cost method in subsection 39DA(3) of the FBTAA 1986?

Answer

Yes.

Question 4

In determining the taxable value of the car parking fringe benefit provided by the employer to the employee, can the employer use car parking rates for all-day parking, charged by a commercial parking station to a subset of the public (i.e. employees of the public hospital and employees of other employers who contract to the hospital), as the lowest fee charged by the operator of the commercial parking station in the ordinary course of business to members of the public, under the commercial parking station method in subsection 39C(b) of the FBTAA 1986?

Answer

Yes.

Question 5

In determining the taxable value of the car parking fringe benefit provided by the employer to the employee, can the employer use car parking rates for all-day parking, charged by a commercial parking station to a subset of the public (i.e. employees of the public hospital and employees of other employers who contract to the hospital), as the lowest fee charged by the operator of the commercial parking station in the ordinary course of business to members of the public, under the average cost method in subsection 39DA(3) of the FBTAA 1986?

Answer

Yes.

This ruling applies for the following periods:

FBT years 1 April 20XX to 31 March 20XX

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

The employer provides employees with car parking across several sites in a State/Territory capital city in Australia, collectively referred to as the car parking locations.

The employer accepts that in providing car parking to its employees at select locations, car parking benefits arise under section 39A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986).

In completing their annual FBT Return preparation and in assessing the lowest fee charged by the operator of a relevant commercial parking station (in the ordinary course of business to members of the public), the employer identified rates which it believes fit within the requirements of the FBTAA and form the basis of this ruling request.

Across the car parking locations, the employer has identified a particular public hospital car park, as within a 1km radius of several of the car parking locations provided to employees. The car park is operated by a commercial operator, evidenced via the operator's website and an individual's direct ability to book a car parking space online.

Per the operator's website, the public hospital car park charges users the following rates:

0.0 - 1.0 hrs = $3.50

1.0 - 2.0 hrs = $7.00

2.0 - 3.0 hrs = $10.50

3.0 - 4.0 hrs = $14.00

4.0 + hrs = $14.50

Based on these rates, all-day car parking is available at the public hospital car park at a maximum rate of $14.50.

Despite these maximum rates applying, in certain circumstances, discounted parking (at reduced rates relative to those advertised) is charged by the operator to the public where they meet certain conditions - i.e., some visitors where family members are in particular treatment units (e.g., visitors for a patient admitted to ICU) and specific patients with on-going appointments (e.g., those undergoing dialysis or cancer treatments). The availability of these discounted rates is evidenced via the following commentary from the public hospital's website.

The operator also charges discounted car parking rates to employees of the hospital and, in some instances, employees of other employers (i.e., where those employers contract with the hospital).

State/Territory regulations provide that the chief executive of the public hospital can set aside within the facility three distinct parking areas:

• ticketed parking (i.e., effectively for the universal public)
• paid staff parking (i.e., as relevant to discounted rate 2 [the discounted rate offered to hospital employees and employees of other employers who contract at the hospital])
• permit parking area (i.e., where limited personnel have a permit to park in the facility at nil cost)

The regulations also prescribe the fees that may be charged for this parking, which is reflected by the commercial operator of the public hospital car park on its website advertising for the car park.

Based on the fact that these discounted parking rates exist and are made available to visitors, patients, hospital staff and contractors, the employer is seeking the Commissioner's confirmation as to whether such rates can be considered in determining the lowest fee charged by the commercial parking station's operator (the commercial operator of the public hospital car park) in the ordinary course of business to members of the public for all-day parking, under subsection 39C(b) and/or subsection 39DA(3).

For the avoidance of doubt, it is not in question if the particular commercial parking station is within a 1km radius of the employer provided car parking facilities, nor that the rates represent "all day parking" charges or that the facility itself is a "commercial parking station". Rather, the employer is seeking the Commissioner's confirmation as to the facts surrounding the provision of the car parking to members of the public by the commercial parking station's operator in the ordinary course of business, and whether the discounted rates can be used in determining the taxable value of car parking fringe benefits it provides.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 39A

Fringe Benefits Tax Assessment Act 1986 section 39C

Fringe Benefits Tax Assessment Act 1986 section 39DA

Reasons for decision

Summary

The car parking that the employer provides at select locations to its employee is a car parking benefit for the purposes of section 39A of the FBTAA 1986.

Detailed reasoning

A car parking benefit is provided by the employer to an employee under section 39A of the FBTAA 1986 in respect of the car parking it provides to the employee at select locations where all the requirements of section 39A of the FBTAA 1986 are satisfied. Subsection 39A(1) of the FBTAA 1986 states:

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;

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

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

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

(g) 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;

(h) 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;

(i) 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.

The car parking that the employer provides at select locations to its employee is a car parking benefit for the purposes of section 39A of the FBTAA 1986.

Question 2

In determining the taxable value of the car parking fringe benefit provided by the employer to the employee, can the employer use car parking rates for all-day parking, charged by a commercial parking station to a subset of the public (i.e., visitors/patients of a public hospital), as the lowest fee charged by the operator of the commercial parking station in the ordinary course of business to members of the public, under the commercial parking station method in subsection 39C(b) of the FBTAA 1986?

Summary

In determining the taxable value of the car parking fringe benefit provided by the employer to the employee, the employer may use car parking rates for all-day parking, charged by a commercial parking station to a subset of the public (i.e., visitors/patients of the public hospital), as the lowest fee charged by the operator of the commercial parking station in the ordinary course of business to members of the public, under the commercial parking station method in subsection 39C(b) of the FBTAA 1986?

Detailed reasoning

Section 39C of the FBTAA 1986 states:

39C TAXABLE VALUE OF CAR PARKING FRINGE BENEFITS - COMMERCIAL PARKING STATION METHOD

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 1km 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 1km 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.

It is accepted that the public hospital car park is a "commercial parking station" as defined in subsection 136(1) of the FBTAA 1986.

It is also accepted the relevant rates (discounted rates for some patients/visitors) represents costs for "all-day parking" as defined in subsection 136(1) of the FBTAA 1986.

The phrase "ordinary course of business" is addressed in Taxation Ruling TR 2021/2 Fringe benefits tax: car parking benefits, which states:

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. ...

37. The offering of a single car space for all-day parking may be in the ordinary course of business if it 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 [emphasis added].

In the High Court of Australia decision in Fairways Estates Pty Ltd v. FC of T 70 ATC 4061 at 4066, discussing the meaning of "in the ordinary course of business", Barwick CJ said:

...the remarks of Rich J in Downs Distributing Cot Pty Ltd v. Associated Blue Star Stores Pty Ltd (1948) 76 CLR 463 at 477 are of use in that they emphasise the notion of a common course in the conduct of a business. The requirement that the transaction be in the ordinary course of the business excludes transactions which are made for purposes other than the carrying on of the business or to achieve ends disparate from those of the business activity.

The term "public" is also addressed in Taxation Ruling TR 2021/2, which 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 [emphasis added].

In FC of T v Qantas Airways Ltd 2014 ATC 20-477 (Qantas 2), with respect to the meaning of the term "public" within Division 10A of the FBTAA 1986, the Full Federal Court stated the following at 16404-16405:

... it is apparent that the work 'public' should be given its ordinary meaning ... there is therefore no ambiguity about the word 'public', which means what it says ... The Tribunal [where the decision was appealed to the Full Federal Court] recognised, correctly with respect ... that something might be available to the public if it were provided to people on a basis, which whilst not necessarily universal, was at least general. Further, the Tribunal thought that the question of how large a section of the public needed to be involved was a matter which depended upon the statutory context ... [our emphasis]

We consider that under the commercial parking station method of valuing car parking fringe benefits under subsection 39C(b) of the FBTAA 1986, an all-day parking rate offered to the public hospital visitors and patients would qualify as the lowest fee charged by the commercial operator at the public hospital car park in the ordinary course of business to members of the public.

Ordinary course of business

As noted in paragraph 35 of Taxation Ruling TR 2021/2: "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."

Within its ordinary course of business, expectedly, a large proportion of individuals who park at the public hospital car park operated by the commercial operator will be hospital visitors and patients. As such, within this population, based on certain criteria (for example, visitors of a patient admitted to the ICU, or a cancer patient attending lengthy appointments across an extended period), the commercial operator charges a discounted rate to those relevant visitors/patients.

This follows from the requirements of the State/Territory regulations. Importantly, the commercial operator, in taking on the operation of the public hospital car park, does so in the knowledge that there are operational prescriptions, namely, the hospital's chief executive sets out a certain area as being for the universal public, with other areas for staff and for permit parkers. Further, in taking on the operation of the public hospital car park, there are also prescriptions on pricing for each area.

In making its commercial decision to operate the hospital car park, the commercial operator understands that its charges to the universal public (and the area set aside for such parking) are pre-set (and it further understands it must charge a staff rate and must set aside a certain number of spaces for staff).

This provision of a discounted rate to a subset of the public is clearly within the ordinary course of business. The commercial operator continues to receive a payment in respect of providing an individual with car parking, but in doing so at a discounted rate is simply changing the terms of business (i.e., the price) in which this is achieved. due to special circumstances which are assessed for the individual/s and the lower rate is then provided accordingly.

The offering of a discount to subsets of the public is commonplace across industries, including by car parking operators. This practice of discounting is still carried on in the "ordinary course of business" and is a considered, commercial decision to offer the discounted rate to some individuals in particular circumstances (attend and leave at particular times, long-term leases, book online, etc), and also helps bolster and maintain occupancy levels in the parking facility.

With respect to the relevant visitor/patient rate, this discounted arrangement is not a one-off for a single visitor or a single patient, or something that commenced and terminated within a short period of time. This is an ongoing program to provide a discount to a certain subset of visitors and patients; it is part of the normal operations for the public hospital car park, given its location as the primary parking facility for attendees at the hospital.

Whilst the discounted rate reduces the fee the commercial operator of the public hospital car park charges when compared to its standard advertised rates, and relevant visitors/patients may represent a small proportion of the overall parking population at the public hospital car park, this does not lend itself to concluding that providing a

discounted rate is not within the ordinary course of business.

Members of the public

As stated above, the Full Federal Court in Qantas 2 noted that the term "public" is not defined, it must first take on its ordinary meaning. In effect, this means that "public" in the context of the car parking provisions is any member of the public, rather than, for example, commuters to/from work or the universal public absent those who obtain or have access to discounted arrangements.

See also paragraph 39 of Taxation Ruling TR 2021/2, which notes "a car park is offered to the public where car spaces are available to any member of the public. A car space is available to the public when any member of the public may park their car in that space [emphasis added]."

In accordance with this guidance, we recognise that the lowest rate does not have to be a rate which is available to every person in the public (i.e., it does not have to be "universal"), but can be to a certain subset, so long as the rate applicable is available to a 'public' person in the ordinary course of business.

While the discounted rates provided to some visitors and patients are not available to every member or the public, they are made available to members of the public who meet certain conditions, consistent with the abovementioned principles. Given the very purpose of the public hospital is to operate as a public hospital, providing healthcare services to the public, we accept that visitors and patients of the public hospital who access discounted car parking rates are considered "members of the public" and accordingly, this requirement is met.

Question 3

In determining the taxable value of the car parking fringe benefit provided by the employer to the employee, can the employer use car parking rates for all-day parking, charged by a commercial parking station to a subset of the public (i.e., visitors/patients of the public hospital), as the lowest fee charged by the operator of the commercial parking station in the ordinary course of business to members of the public, under the average cost method in subsection 39DA(3) of the FBTAA 1986?

Summary

In determining the taxable value of the car parking fringe benefit provided by the employer to the employee, the employer can use car parking rates for all-day parking, charged by a commercial parking station to a subset of the public (i.e., visitors/patients of the public hospital), as the lowest fee charged by the operator of the commercial parking station in the ordinary course of business to members of the public, under the average cost method in subsection 39DA(3) of the FBTAA 1986.

Detailed reasoning

Subsection 39DA(3) states that in applying the average cost method, upon an employer electing to do so, the average cost is:

A + B

2

where:

A is the lowest fee charged in the ordinary course of business to members of the public for all-day parking by any operator of a commercial parking station located within a 1 km radius of any of the relevant parking premises on the day on which a car parking benefit is first provided in that FBT year in relation to the employer in connection with any of those premises.

B is the lowest fee charged in the ordinary course of business to members of the public for all-day parking by any operator of a commercial parking station located within a 1 km radius of any of the relevant parking premises on the day on which a car parking benefit is last provided in that FBT year in relation to the employer in connection with any of those premises.

The operation of the average cost method of valuing car fringe benefits in section 39DA of the FBTAA depends on the same principles as those applying in the commercial parking station method in section 39C of the FBTAA 1986 i.e., the lowest fee charged by the operator of the commercial parking station in the "ordinary course of business" to "members of the public", and which were discussed in our response to question 2.

Therefore, in determining the taxable value of the car parking fringe benefit provided by the employer to the employee, the employer can use car parking rates for all-day parking, charged by a commercial parking station to the same subset of the public (i.e., visitors/patients of the public hospital), as the lowest fee charged by the operator of the commercial parking station in the ordinary course of business to members of the public, under the average cost method in subsection 39DA(3) of the FBTAA 1986, for the same reasons as given in our response to Question 2.

Question 4

In determining the taxable value of the car parking fringe benefit provided by the employer to the employee, can the employer use car parking rates for all-day parking, charged by a commercial parking station to a subset of the public (i.e. employees of the hospital and employees of other employers who contract to the hospital), as the lowest fee charged by the operator of the commercial parking station in the ordinary course of business to members of the public, under the commercial parking station method in subsection 39C(b) of the FBTAA 1986?

Summary

In determining the taxable value of the car parking fringe benefit provided by the employer to the employee, the employer can use car parking rates for all-day parking, charged by a commercial parking station to a subset of the public (i.e. employees of the hospital and employees of other employers who contract to the hospital), as the lowest fee charged by the operator of the commercial parking station in the ordinary course of business to members of the public, under the commercial parking station method in subsection 39C(b) of the FBTAA 1986.

Detailed reasoning

Given the common use of terms relevant across the ruling questions, we refer to that part of our answer to Question 2 in confirming the satisfaction of the terms "commercial parking station", "all day parking" and 'in the ordinary course of business".

In particular, as previously noted, the concept of "in the ordinary course of business" requires that an all-day parking rate offered exclusively to employees of the public hospital and employees of other employers who contract to the hospital, is part of the normal operations for the public hospital car park, which it is. This segment of the population, similar to patients/visitors, whilst not universal, is a general population and would represent fees normally and ordinarily charged by the commercial operator to certain individuals, as part of its business operations. Importantly, the width of the population, i.e., beyond just the public hospital employees, but also including employees of other employers who contract to the hospital, indicates that this is a clear commercial arrangement to enable discounted parking to a section of the population which is likely to repeatedly use the public hospital car park (and therefore serves the purpose of ensuring occupancy levels at that car park).

We also consider the term "members of the public", as to whether employees of the public hospital and employees of employers who contract with the public hospital would fall under this concept, for the purposes of determining the application of the rate provided to this group under subsection 39C(b) of the FBTAA 1986.

While a different subset of the public is considered, where compared to the population for question 2 above (i.e., visitors/patients), based on the parking rate provided to employees of the public hospital and employees of employers who contract with the public hospital, we consider that the same outcome is achieved upon applying the same principles outlined on this point in Question 2. That is, whilst not a universal discount available to every member of the public, this is a discount available to a general subset of the public which, as noted above, is provided "in the ordinary course of business".

Question 5

In determining the taxable value of the car parking fringe benefit provided by the employer to the employee, can the employer use car parking rates for all-day parking, charged by a commercial parking station to a subset of the public (i.e. employees of the public hospital and employees of other employers who contract to the public hospital), as the lowest fee charged by the operator of the commercial parking station in the ordinary course of business to members of the public, under the average cost method in subsection 39DA(3) of the FBTAA 1986?

Summary

In determining the taxable value of the car parking fringe benefit provided by the employer to the employee, the employer can use car parking rates for all-day parking, charged by a commercial parking station to a subset of the public (i.e. employees of the public hospital and employees of other employers who contract to the public hospital), as the lowest fee charged by the operator of the commercial parking station in the ordinary course of business to members of the public, under the average cost method in subsection 39DA(3) of the FBTAA 1986?

Detailed reasoning

The operation of the average cost method of valuing car fringe benefits in section 39DA of the FBTAA depends on the same principles as those applying in the commercial parking station method in section 39C of the FBTAA 1986 i.e., the lowest fee charged by the operator of the commercial parking station in the "ordinary course of business" to "members of the public", and which were discussed in our response to Question 2.

Therefore, in determining the taxable value of the car parking fringe benefit provided by the employer to the employee, the employer can use car parking rates for all-day parking, charged by a commercial parking station to the same subset of the public (i.e., employees of the public hospital and employees of employers who contract with the public hospital), as the lowest fee charged by the operator of the commercial parking station in the ordinary course of business to members of the public, under the average cost method in subsection 39DA(3) of the FBTAA 1986, for the same reasons as given in our response to Question 2.