The latest Taxation Ruling (“TR”) 2021/2 released by the ATO on 16 June 2021 sets out the Commissioner’s view on when the provision of car parking is a ‘car parking benefit’ for the purposes of the Fringe Benefits Tax Assessment Act 1986.
Importantly, the new ruling expands the ATO’s view of a ‘commercial car parking facility’ from the draft ruling (TR 2019/D5) and the ATO’s prior views which mean that virtually all car parks that charge a fee for all day parking above the car parking threshold ($9.25 for the year ended 31 March 2022) will be caught in the fringe benefits tax (“FBT”) ‘net’.
A car parking benefit is provided to an employee if:
- The employee’s car is parked at one or more work car parks for a combined period of over 4 hours between 7am and 7pm at or near their primary place of employment; and
- A commercial parking station is located within a 1 km radius of the work car park, where the lowest fee charged for all-day parking exceeds the car parking threshold.
It’s hard to see any car parking station in Sydney charging less than $9.25 per day and therefore expectations are that businesses’ FBT exposure will rise.
The interpretation adopted in the finalised ruling means that even if some of the car spaces available in the commercial car parking facility are used for other purposes, these facilities would now be caught. Such situations include hourly parking at a hospital, shopping centre, hotel, university or an airport, or long-term parking, etc. These were previously excluded from being classified as ‘commercial parking stations’.
A simple example of the impact of this change is a business located in a business park which has parking on site where there is a shopping centre within 1km. Historically this would not be subject to FBT, however, the new ruling would bring this within the scope of FBT.
A number of examples have been included in the ruling to illustrate the ATO’s view of what would be considered a commercial parking facility and what would not be.
Generally, the changes announced in the ruling will have practical implications for benefits provided on or after the start of the next FBT year (i.e. 1 April 2022).
Whilst the above changes are not welcome, they are not unexpected given the draft ruling issued by the ATO in 2019, it is hoped that the increase in the small business aggregated turnover threshold will offset this FBT exposure for a number of businesses. An exemption may be available in relation to car parking benefits where the small business aggregated turnover threshold is less than $50 million (up from $10 million) for benefits provided on or after 1 April 2021. To access this concession other criteria needs to be met.
From a practical perspective if you, as an employer, provide car parking for your employees, you should review the FBT implications of these changes including:
- Understanding eligibility for the small business parking concession;
- Identify whether any relevant car parking stations within a 1km radius which may now be caught given the change in definition;
- Reviewing working from home policies and tracking car park usage with a view to mitigating any potential benefits;
- Understanding the FBT cost to the business moving forwards.
Your ESV Engagement Partner can help with a review of your current or proposed employee car parking entitlements, so you can understand the consequences (if any) of these changes on your FBT reporting and calculations.