As we edge closer to the end of the 2021 Fringe Benefits Tax (FBT) year on 31 March 2021, employers should be aware of two notable changes to the FBT regime regarding car parking benefits.
Firstly, as announced in the October 2020 Federal Budget, the Government has expanded the definition of the Small Business Car Parking exemption. From 1 April 2021, the exemption should apply to employers with an aggregated turnover of less than $50 million, where the parking facilities provided to employees are not located at a commercial parking station.
Secondly, the ATO intends to revise its interpretation of what constitutes a commercial parking station. Under the proposed revised interpretation, a parking facility which does not have the primary purpose of providing all-day parking may now be considered a commercial parking station. This means employers may be liable for FBT where staff are provided parking within 1km of a shopping centre, hospital or airport that charges for all-day parking.
What is a Car Parking Fringe Benefit?
By way of background, a car parking fringe benefit may arise where an employee is provided with the use of a car park on business premises or associated premises of a provider. For a car parking fringe benefit to be subject to FBT, all the following criteria must be satisfied:
- A car is parked at premises that are owned or leased by, or otherwise under the control of, the employer (this includes, where an employer has an arrangement with the operator of a commercial parking station)
- Within a one-kilometre radius of the premises on which the car is parked, there is a commercial parking station that charges a fee for all-day parking, which is more than the car parking threshold ($9.15 for the 2021 FBT year)
- The car is parked for a total of more than four hours between 7.00am and 7.00pm on the day
- The car is owned by, leased to, or otherwise under the control of, an employee, or is provided by the employer
- The parking is provided in respect of the employee’s employment
- The car is parked at or near the employee’s primary place of employment on that day
- The car is used by the employee to travel between home and work (or work and home) at least once on that day, and
- The commercial parking station referred to above must also, on the first business day of the FBT year, charge a representative fee for all-day parking that is more than the car parking threshold.
FBT exemptions are available for car parking provided in certain circumstances, including disabled parking and parking provided by small or medium business employers.
Small Business Car Parking Exemption
Prior to the 2020 Federal Budget, a car parking fringe benefit exemption was available for small business entities with annual turnover less than $10 million.
As part of the Federal Budget on 8 October 2020, the Government announced an expansion of the Small Business Car Parking exemption, to include businesses with an aggregated turnover of less than $50 million.
The expanded exemption is effective from 1 January 2021 and will apply to car parking fringe benefits provided from 1 April 2021.
Importantly, the expanded $50 million threshold refers to an entity’s ‘aggregated turnover’, which is broadly the sum of:
- The entity’s annual turnover for the income year; and
- The annual turnover for the income year of any entity that is connected with the entity at any time during the income year; and
- The annual turnover for the income year of any entity that is an affiliate of the entity at any time during the income year.
Determining an employer’s aggregated turnover can be a significant task, particularly when they are part of a large group of entities. We suggest employers seek guidance from their William Buck advisor on this matter.
Commercial Parking Station – ATO to alter view
For a car parking fringe benefit to arise, a commercial parking station must be located within a 1km radius of the employer-provided parking facility.
A ‘commercial parking station’ is defined for FBT as:
“….a permanent commercial car parking facility where any or all of the car parking spaces are available in the ordinary course of business to members of the public for all-day parking on that day on payment of a fee, but does not include a parking facility on a public street, road, lane, thoroughfare or footpath paid for by inserting money in a meter or by obtaining a voucher.”
The ATO’s interpretation of the definition of a commercial parking station was previously set out in Taxation Ruling TR 96/26 (now withdrawn) and asserted that car parking facilities with a primary purpose other than providing all-day parking should not be considered a commercial parking station.
The ATO has now issued Draft Taxation Ruling TR 2019/D5 to replace TR 96/26, with the revised view that certain parking facilities previously excluded (e.g. shopping centres, hospitals and airports) could now meet the definition of a commercial parking station.
The Draft Ruling was due to be finalised in 2020 but has been postponed due to the significant number of submissions received during consultation. The ATO has recently indicated that the final Ruling should be issued in early 2021, and any changes in interpretation will apply from 1 April 2021.
We recommend employers who provide parking to employees within the vicinity of parking facilities at shopping centres, airports and hospitals monitor the progress of Draft Taxation Ruling TR 2019/D5.
We suggest these businesses review the potential FBT implications that may arise under the ATO’s current view of a commercial parking station within Draft Taxation Ruling TR 2019/D5 and discuss the potential FBT obligations with your William Buck advisor.
Please read our article on potential changes to your 2021 FBT exposure due to COVID here.