Car parking on site for employees is a commonly provided benefit — often provided perhaps without any thought to the FBT consequences. Whilst previously this inattention may not have mattered, a recent preliminary change in the ATO’s position, on when a car parking fringe benefit arises, increased the potential for a car parking fringe benefit to arise.
Luckily a timely change, announced in the 2020–21 Federal Budget and legislated by the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Act 2020 (the Economic Recovery Act), has restored the status quo for many employers. This legislative change, effective 1 April 2021, will result in many employers now qualifying for a car parking fringe benefits exemption, where previously they did not.
In applying the FBT rules, it is necessary to identify the benefit first and then see if an exemption applies.
A ‘car parking fringe benefit’ is defined in s. 136(1) of the FBTA Act as a fringe benefit that is a ‘car parking benefit’.
Broadly, under s. 39A of the FBTA Act, a person provides a ‘car parking benefit’ on a particular day when, between 7.00am and 7.00pm:
- a car is parked at a work car park for the minimum parking period;
- an employee uses the car in connection with travel between their place of residence and primary place of employment at least once on that day;
- the work car park is located at or in the vicinity of the primary place of employment, on that day;
- a commercial parking station is located within a one kilometre radius of the work car park used by the employee;
- the lowest representative fee charged by any commercial parking station for all-day parking within a one kilometre radius of the work car park exceeds the car parking threshold;
- the parking is provided to the employee in respect of their employment; and
- the parking is not excluded by the regulations.
A car parking benefit provided in respect of an employee is exempt, under s. 58GA of the FBTA Act, where:
- the car is not parked at a commercial parking station;
- the employer is not a public company or a subsidiary of a public company;
- the employer is not a government body; and
- for the income year ending before the start of the FBT year, the employer’s assessable income is less than $10 million or alternatively, it is a ‘small business entity’ (SBE) as defined in s. 328-110 of the ITAA 1997.
Preliminary change in ATO position
On 13 November 2019, the Commissioner issued draft Taxation Ruling TR 2019/D5 titled Fringe benefits tax: car parking benefits (the draft Ruling), setting out the Commissioner’s preliminary views on when the provision of car parking is a ‘car parking benefit’ for the purposes of the FBTA Act.
The Commissioner’s view in the draft Ruling, which will replace TR 96/26 once finalised, now recognises that a car park, which satisfies all other requirements, can still be considered a ‘commercial parking station’ even if:
- its contractual terms restrict who may use the car park, provided any member of the public that accepts these restrictions can use the car park;
- its fee structure discourages all-day parking with higher fees.
The implication is that public car parks attached to hospitals, shopping centres and universities could potentially be a commercial car park. If these are in an employer’s one kilometre radius, a car parking fringe benefit may arise.
This is a departure from the Commissioner’s previous position which was that car parking facilities, with a primary purpose other than providing all-day parking, that usually charge penalty rates significantly higher than the rates chargeable for all-day parking at commercial all-day parking facilities are NOT commercial car parks. The Commissioner specifically stated that parking provided for short term shoppers or hotel guests was not parking at a commercial car park. That view has now changed.
It is important to note, however, that it is a draft ruling and therefore reflects only the ATO’s preliminary position (and therefore is not binding on taxpayers or the Commissioner). In its ‘advice under development’ page for the draft Ruling, the ATO advises that:
- it has received a significant number of submissions during consultation including feedback on the changed view for car parking stations that charge penalty rates to discourage all-day parking, and the potential impact of this changed view on employers;
- in recognition of the fact that employers will require time to implement these changes following finalisation of the Ruling, it has determined that when the final Ruling is published, any changes in view from TR 96/26 will apply from 1 April 2021.
At the time of publication this ruling had not been finalised.
The Economic Recovery Act, which received Royal Assent 14 October 2020, makes amendments to extend the FBT exemption in relation to small business car parking.
These amendments introduce a new class of entities eligible for the exemption by including entities that would be SBEs if the $10 million threshold in the aggregated turnover test was instead $50 million.
Accordingly, these amendments allow entities with an aggregated turnover of less than $50 million to be eligible for an exemption from FBT on car parking benefits provided to employees.
These amendments apply to car parking benefits provided to employees from 1 April 2021.
What do these changes mean?
Whilst the ATO’s view is far from finalised, it is comforting to know that the impact of any change in position will be sheltered somewhat by the legislative amendments that will take effect from 1 April 2021.
More generally however, increasing the turnover threshold for when employers will need to contemplate the FBT car parking rules will reduce compliance costs for these businesses and reduce their FBT liability.
Further info and training
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Registrations are now open for the annual FBT Roadshow, where we will cover key issues that are relevant to Government and NFP employers when preparing the 2021 FBT return. 2020 was an interesting year in tax (to say the least!) and quite a bit of changes will be covered. Full details are listed in the links below.
If you prefer online learning, they are also offering a comprehensive webinar on two different dates.
- Brisbane | Tuesday 23 February | Info and registrations >
- Darwin | Thursday 25 February | Info and registrations >
- Melbourne | Friday 12 March | Info and registration >
- Online | Thursday 25 March | Info and registrations >
- Online | Thursday 15 April | Info and registrations >