Private ruling: Fringe benefits tax
Published: March 2014
Ruling period: Year ended 31 March 2013 | Year ended 31 March 2014 | Year ended 31 March 2015 | Year ended 31 March 2016 | Year ended 31 March 2017 | Year ended 31 March 2018
Date scheme commenced: 1 April 2012

Ruling: Q1: Are the Car Parks commercial parking stations as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 ? | A1: Yes

Relevant facts and circumstances: One of the premises which you operate includes car park spaces which are available for employees to park on. There are two car parking stations (the Car Parks) within one kilometre of these premises. They are adjacent to a hospital. Both car parking stations are privately operated and neither has any restriction on who may park there. Local parking control was created to assist local residents to access on street parking. The rates charged by each of the Car Parks has been provided. The Car Parks are the only car parking stations within one kilometre of the premises. There is only one other car parking facility located within one kilometre of the premises. This is at a shopping centre where parking is free for shopping centre customers. The nearest car parking station outside of one kilometre is the on-street parking which is also free.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 Division 10A and | Fringe Benefits Tax Assessment Act 1986 subsection 136(1).

Reasons for decision: Summary: The Car Parks are commercial parking stations as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) regardless of the fact that their primary purpose may be for the convenience of patients and visitors to the nearby hospital. | Detailed Reasoning - Detailed reasoning: Subsection 136(1) of the FBTAA defines a commercial parking station as follows: …in relation to a particular day, means 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. In considering the application of the definition of commercial parking station it is necessary to determine whether each of the car parking facilities: • is a permanent car parking facility • is a commercial car parking facility • provides car parking spaces in the ordinary course of business to members of the public • provides all-day parking on payment of a fee, and • is not a parking facility on a public street, road, lane, thoroughfare or footpath paid by inserting money in a meter or obtaining a voucher. Both of the Car Parks provide parking facilities on an on-going basis. In the circumstances we consider they are a permanent car parking facility. The term 'commercial' is not defined in the FBTAA. In the EM, the term 'commercial parking station' is addressed as part of the explanation of proposed amendments. According to the explanation: • the word 'commercial' has its normal dictionary meaning • a car parking facility that is not run with a view to making a profit (usually reflected in significantly lower car parking rates charged compared with normal market value for that facility) would not be commercial, and • short term shopper parking facilities that charge penalty rates to discourage all-day parking are not treated as commercial parking stations. As is relevant, commercial is defined in the Macquarie Dictionary as follows: adjective 1. of, or of the nature of, commerce. 2. engaged in commerce. 3. capable of returning a profit: a commercial project. 4. capable of being sold in great numbers: is the invention commercial? … The Macquarie Dictionary defines commercial as capable of returning a profit. In applying this definition the examples in paragraph 81 of TR 96/26 also consider whether the fee charged is only a nominal fee. As an example of a nominal fee the ruling states that an all-day parking fee of less than two dollars is likely to be a nominal fee. As the fees charged by the Car Parks for all day parking are considerably higher than two dollars they are not considered to be nominal. Rather, the fees charged indicate a profit motive. Accordingly we consider they are commercial in nature. Where there are no restrictions to prevent members of the public from parking at the car parks, car parking spaces will be available in the ordinary course of business to members of the public. The term 'public' and the phrase 'members of the public' are not further defined in the FBTAA, nor are they technical terms. Therefore the ordinary meaning of the words is to be adopted. The Macquarie Dictionary , [Online], viewed 13 March 2014, www.macquariedictionary.com.au, defines the word 'public' (when used as a noun) to mean 'the people constituting a community, state, or nation' or (emphasis added) ' a particular section of the people' . Both of the Car Parks have spaces available in the ordinary course of business to members of the public. The term 'all-day parking' is relevant in determining: • the meaning of commercial parking station • whether the essential condition under subparagraph 39A(1)(a)(iii) is met for a car parking benefit to arise under subsection 39A(1) of the FBTAA, and • whether a parking station, with a primary purpose other than providing all-day parking, charges 'penalty rates' to discourage all-day parking. The meaning of 'all-day parking' for the purposes of Division 10 of the FBTAA is in accordance with the definition of that term in subsection 136(1) of the FBTAA. In relation to a particular day, this effectively means the parking of a single car for a continuous period of 6 hours or more between 7.00 am and 7.00 pm. on that day. The spaces at the Car Parks are available for all-day parking as spaces are available for anyone to park for six hours between 7am and 7pm on payment of a fee. Noting the definitions of 'all-day parking' and 'daylight period' referred to above, we consider that a car parking facility does not necessarily need to be an all-day focused parking station to provide all-day parking or to be a commercial parking station as defined in the FBTAA. The Car Parks are not a parking facility on a public street, road, lane, thoroughfare or footpath. Guidance on the application of the definition of commercial parking station is provided by paragraphs 80 and 81 of Taxation Ruling TR 96/26 which state: 80. A vacant lot, utilised commercially as a car park, could be considered to be a permanent commercial car park even where it is intended that a building will be erected on the site in due course. 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); • a car park that is not run with a view to making a profit or which charges a nominal fee (usually a significantly lower rate than the current market value), e.g., an all-day parking fee of less than $2.00 is likely to be a nominal fee; • car parking that is established for a short period to cater for a special function; • car parking spaces leased to a tenant by a property developer as part of an overall lease agreement for business premises; • parking facilities provided by a sporting venue to persons associated with the venue where: (a) parking facilities are usually available only after 5 pm to coincide with night events; or (b) parking is available only for a specific event, and the event is a daytime event; or (c) parking is available to all members of the public only during sporting events; and provided that, when there is no such event, the parking facilities are not usually available to members of the public; • parking provided by a business for its own employees and those of a nearby business, but to no other person, if there is no commercial car park within 1 km; • in an area without a commercial parking station and where street parking is not permitted, arrangements made by a business for its employees to park during business hours in yards and driveways of surrounding houses; • a kerb side parking meter, from the FBT year commencing 1 April 1994, even where it is possible to purchase all-day parking at the meter in a single transaction. In the first dot point in paragraph 81 of TR 96/26 the excluded parking facilities are described as having 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. Two examples of such parking facilities are parking provided for short term shoppers or hotel guests. This exclusion (and the examples given), in paragraph 81, does not appear in the language of the FBTAA. It is reasonable to assume that in interpreting the meaning of 'commercial parking station' in this context, the Commissioner took into account the Explanatory Memorandum to the Taxation Laws Amendment (Car Parking) Act 1992 (EM TLACP). The EM TLACP observes that some car parking facilities have a 'primary purpose to provide short-term shopper parking'. To discourage all-day parking, the operators of these facilities charge penalty rates for all-day parking. The FBTAA does not define (or even refer to) a 'penalty rate'. The EM TLACP suggested that rates that were 'significantly greater than the rates that would be charged by a similar facility which encouraged all-day parking' would be treated as penalty rates. The rates charged by the Car Parks are not rates that discourage all-day parking. The rates charged take into account the various conditions in the area that they are servicing. The rates are an indication that a large number of users of the car parks would be patients or visitors to the hospital. There are also other factors which may indicate that the Car Parks may have a primary purpose of providing parking for hospital users. However, the fact that a car park may have a primary purpose of providing parking to the patients and visitors of the hospital is not relevant to the application of Division 10A of the FBTAA. Although it may be that the fees charged by the Car Parks may lead to an artificial representation of the value of parking spaces at your business premises, there is no indication in the FBTAA or TR 96/26 that such facilities cannot be a commercial parking station. This view is supported by Example 8 at paragraph 49 of TR 96/26 which states: Untitled Airlines provides parking to its employees on premises adjacent to Capital Airport. All the surrounding public parking is either leased from the Airport Authority or is operated by the Airport Authority, and is provided to the public at a minimum cost of $20.00 per day. In determining the market value of the parking provided to the employees of Untitled Airlines, it is appropriate to take into account that the value is inflated by the existence of a captive market for public parking and the monopoly held by the Airport Authority. It may be inappropriate in these circumstances to base the market value on values which are inflated. The market value method (section 39D of the FBTAA) was introduced in 1995 to provide an alternative to the commercial parking station method under section 39C of the FBTAA. The market value method allows for an alternative in a situation where, for example, the 'commercial parking station' valuation method would lead to an unreasonable valuation as the only car parking facilities within 1 km of an employer's business premises charges inflated prices. Regardless of the fact that the Car Parks may provide parking primarily for the hospital and that the rates they charge are not representative with other parking in the area, both are a commercial parking station as defined in subsection 136(1) of the FBTAA.