The Australian Taxation Office (ATO) released a Taxation Ruling (TR) 2021/2 which considers when a parking station is considered a commercial car parking station for the purposes of Fringe Benefits Tax (FBT) provisions. The ruling represents a significant shift in the ATO's view on whether a parking facility is a commercial car parking station for FBT purposes. It is important to take note and consider these changes as they may have an impact on your business' FBT liability.
The change in view applies to car parking fringe benefits provided during FBT years commencing from 1 April 2022.
Overview of car parking fringe benefits
FBT may be payable on car parking provided to employees where there
is a commercial car parking station within one kilometer of the car
parking spot provided, and the all-day charge for parking exceeds
the car parking threshold (currently set at $9.25). On-street
parking is not considered a commercial car parking station.
Reminder
Certain businesses may be exempt from paying FBT on car parking benefits if the car parking is not provided in a commercial car park, and the employer is not:
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The changes
In TR 2021/2, the ATO provides some further guidance on the
characteristics of a commercial car parking station and broadly,
they view a commercial car parking station as one that is:
- A commercial car parking facility
- 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.
If a parking facility is operated by a car parking operator, it
will meet the requirements of being considered a commercial car
parking facility [(a) above]. This includes parking facilities 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.
If a parking facility is not operated by a car parking operator, it may nevertheless still be a commercial car parking facility [(a) above] where two or more of the following characteristics can be displayed:
- The facility has clear signage visible from the street advertising that paid parking is available.
- The facility has mechanisms to control who can enter/exit the parking facility, or park at the facility. This may include boom gates, or 'pay and display' ticketing machines.
- The facility charges more than a nominal fee (usually a significantly lower rate than the local market rate) for paid parking. This includes charging a customer for parking which is not all-day parking (such as parking at an hourly rate).
The ATO's previous views in TR 96/26 (which has now been withdrawn) was that commercial car parks are those run with a primary purpose of providing all day parking. This meant that those parking stations that charged penalty rates for all-day parking (e.g. shopping centres or hotels) may not be considered a commercial car park for FBT purposes. This view has now changed due to a case which involved Qantas where the Federal Court held that airport car parks are commercial car parking facilities even though they charge penalty rates for long term parking.
Example
An employer provides car parking to its employees at their office building. Within one kilometre of the building:
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Practically, businesses who provide parking to their employees will need to consider whether there are any car parks which may be considered commercial car parking stations following the change to the ATO's view. This may include having a look at any shopping centres, hospitals, and hotels etc. within a one-kilometer radius with car parking made available to the public.
Once you have identified whether an issue has arisen, you will then need to work out whether an FBT liability arises from the provision of car parking benefits.
This article is issued as general commentary - please contact us about your specific circumstances.