The ATO’s changed view of whether a shopping centre car park is a commercial car parking station (for FBT purposes) won’t be an April Fools’ Day joke come 1 April 2022.
For many employers this will mean, for the first time, a car parking fringe benefits liability exists as from 1 April 2022.
Initially, let us say, this is not meant to be a 101 on the topic of car parking fringe benefits. For those interested in more detail take a look at Division 10A of the FBT law and/or draft chapter 16 of the ATO’s ‘Fringe benefits tax – a guide for employers’.
The ATO’s long standing FBT and car parking benefits ruling, TR 1996/26, was replaced by TR 2021/2 ‘Fringe benefits tax – car parking benefits‘ after a lengthy consultation process (including the release of TR 2019/D6 of the same name).
Perhaps the most significant issue was the change from the long held ATO view that a typical shopping centre car park was not a commercial car parking station.
Why? As the ATO reasoned in paragraph 81 of the now withdrawn TR 1996/26, the typical shopping centre car park existed to provide free short-term parking to shoppers and, whilst all day parking was possible, the all- day parking fee was generally set at a rate to discourage all day parking.
In TR 1996/27 the ATO expressed the position as follows:
“81. We do not regard the following parking arrangements as constituting commercial parking stations:
* 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 (such as parking provided for short term shoppers or hotel guests);
The ATO’s new view is illustrated by Example 2 in TR 2021/2. reproduced below:
Example 2 – parking facility is a commercial car parking facility
23. An inner-suburban shopping centre provides dedicated car spaces in a multi-level concrete structure attached to the shopping complex. The car park is operated by the landlord of the shopping centre.
24.There is licence plate recognition functionality at each entrance and boom gates at each exit to the parking facility. A car can be parked for free for the first two hours, after which parking costs $5 per hour. There is signage visible from the street and at each entrance advertising that car parking is available.
25.This parking facility is a commercial car parking facility. While the parking facility is not managed by a car parking operator, it satisfies all three hallmark characteristics in paragraph 21 of this Ruling. The parking facility is a commercial parking station if it meets the other requirements in paragraph 16 of this Ruling.
Fortunately, there is some good news, the new ATO view only applies to shopping centre car parks from 1 April 2022.
The bad news is that 1 April 2022 looms large.
Many employers enjoy exemption from the car parking rules, notably (subject to meeting the exemption criteria):
- Small businesses (section 58GA of the FBT law, refer ATO website for further details, click here)
- Various NFP entities (section 58G of the FBT law, refer ATO website for further details, click here)
- Employers where the vehicle parked is a not a car for fringe benefits purposes (section 58G of the FBT law refer ATO website for further details, click here)
For employers not fortunate to benefit from an exemption several issues require some immediate consideration as a result of the changed ATO view:
- Is there a commercial car parking station within 1km of the employer provider parking that will charge more the 2022/23 car parking threshold for all-day parking? The 2022/23 car parking threshold is yet to be announced although the 2021/22 threshold is $9.25. ‘All-day parking’ means parking of a single car for a continuous period of more than 6 hours on a day during a daylight period.; and
- if there is, what type of FBT exposure may result and what may be the best taxable value calculation basis to apply.
For many suburban and regional shopping centre car parks the ‘standard’ all-day parking rate will comfortably exceed the 2022/23 car parking threshold. However, it is critical employers ascertain what is the lowest all-day parking rate on the 1st working day in the 2022/23 FBT year (which will be Friday 1 April).
As provided by section 39E of the FBT law, the ATO confirm (in draft chapter 16 of the ‘Fringe Benefits Tax – a guide for employers’) that where periodical parking arrangements are available (i.e. monthly or yearly) it is possible to derive the all-day daily rate by reference to the total fee charged for the period divided by the number of business days in the period. It should be noted that the number of business days in the period excludes Saturdays and Sundays and public holidays (in the relevant state/territory).
Employers should be certain they are applying the lowest all-day rate charged by a shopping centre when considering whether the threshold is exceeded. In this regard, the ‘ordinary’ all-day rates should not be relied upon to make decisions without checking whether any periodical rates exist that may produce a lower all-day parking rate (and hopefully one below the threshold!).
Formal enquiries should be made as to the existence of periodical rates and any terms and conditions applicable given the rate must be available to “…members of the public”.
If the above line of enquiry does not permit an employer to disregard a shopping centre car park then employers should consider what taxable value may apply to the employer provided parking.
For the purposes of this article, we focus only on why employers should consider the ‘market value’ taxable value calculation as a possible option. Readers are referred to draft chapter 16 of the ATO’s ‘Fringe benefits tax – a guide for employers’ at section 16.4 for the specifics of the market value method.
Where the only commercial car parking station within 1km from the employer provided parking is a shopping centre car park, if there is ample free parking near the employer provided parking it is possible the market value of the employer provided parking may be nil (despite the commercial car parking station).
Employers should also keep in mind, where a low all-day taxable value is applicable (say $1 per day), the section 58X ‘minor benefits exemption’ is not likely to be available given the provision of parking benefits (whatever the value) is generally not infrequent and irregular.
On a cheerier note, a very Happy Christmas and holiday season to you all.
This article provides a general summary of the subject covered and cannot be relied upon in relation to any specific instance. Webb Martin Consulting Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.