Private ruling: Discount car parking - residual benefit
Ruling period: n Year ended 31 March 2011 | n Year ending 31 March 2012
Date scheme commenced: 1 April 2010

Ruling: Q1: Does the provision of discounted car parking to an employee of the employer by an unrelated third party give rise to a residual fringe benefit for the purposes of section 45 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Yes | Q2: If the answer to question 1 is yes, is the taxable value of the fringe benefit nil? | A2: Yes | Q3: Does any other fringe benefit arise in the circumstances outlined? | A3: No.

Relevant facts and circumstances: The operator of a car park (the Operator) provides a discounted rate to employees of the employer who enter the car park at any time apart from between 7.30am and 12 noon Monday to Friday. The employer and the Operator are not 'associates' as defined in the FBTAA. The agreement between employer and the Operator is between unrelated parties dealing at arm's length. The employer did not and does not incur any costs to the Operator nor provide any incentive to it to provide the discounted car parking to its employees. Employees are not provided with a specific or reserved car parking space. The Operator has a commercial purpose in providing car parking discounts to the employees. The purpose is to increase their market share by using 'discount rates' during off peak times as an incentive to sell their services. The Operator carries on a business of providing identical or similar benefits principally to outsiders. All discounted tickets are stamped at the place of employment by machine to "validate" them and make the employee eligible for the discount. The employees pay the Operator for the parking at the discounted rate (this cost is not reimbursed by the employer) There are no other payments or reimbursements between the employer, the employees or the Operator in relation to the parking. The Operator provides the same benefit to employees of up to nine (9) other employers.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 Section 45. | Fringe Benefits Tax Assessment Act 1986 Section 50. | Fringe Benefits Tax Assessment Act 1986 Subsection 136(1). | Fringe Benefits Tax Assessment Act 1986 Subsection 149(1).

Reasons for decision: Detailed Reasoning - Residual fringe benefit: The definition of a fringe benefit in subsection 136(1) of the FBTAA provides that a benefit will be a fringe benefit when that benefit is provided to an employee or an associate of the employee in respect of the employment of the employee by an employer (or its associate) or under an arrangement between the employer and a third party, unless the benefit is specifically excluded from being a fringe benefit. The definition of the term 'arrangement' in subsection 136(1) of the FBTAA provides: arrangement means: (a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings; and (b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise. The agreement between the employer and the Operator to provide discounted car parking falls within the above definition of an arrangement. The definition of the term 'benefit in subsection 136(1) of the FBTAA provides: benefit includes any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under: (a) an arrangement for or in relation to: (i) the performance of work (including work of a professional nature), whether with or without the provision of property; (ii) the provision of, or of the use of facilities for, entertainment, recreation or instruction; or (iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; (b) a contract of insurance; or (c) an arrangement for or in relation to the lending of money. The provision of the discounted car parking is a benefit provided by the Operator under an arrangement between the employer and the Operator. Accordingly, as the benefit is provided to employees of the employer during the year of tax by an independent third party under an arrangement with the employer in respect of the employment of the employee, the benefit is a fringe benefit pursuant to subsection 136(1) of the FBTAA. Section 45 of the FBTAA states: A benefit is a residual benefit for the purposes of this Act if the benefit is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive). The provision of discounted car parking is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to11, accordingly the benefit provided is a residual benefit for the purposes of section 45 of the FBTAA. | Detailed Reasoning - Taxable value: The taxable value of a residual fringe benefit will be calculated in accordance with the valuation rules provided by sections 48 to 51 of the FBTAA. These sections provide different valuation rules depending upon whether the residual benefit is: a period, or non-period residual fringe benefit ; and an in-house, or external residual fringe benefit. PERIOD or NON-PERIOD RESIDUAL FRINGE BENEFIT In determining whether the benefit provided is a period benefit subsection 149(1) of the FBTAA states that a benefit shall be taken to be provided during a period if the benefit is provided during a period of more than one day and is not deemed by a provision of the FBTAA to be provided at a particular time or on a particular day. The benefit of the discounted car parking is provided on each occasion that an employee enters the car park of the Operator, apart from between 7.30am and 12 noon, Monday to Friday and has their ticket validated by the employer. As the benefit is not provided over a period it is a non-period residual benefit. IN-HOUSE or EXTERNAL RESIDUAL FRINGE BENEFIT The definition of external non-period residual fringe benefit in subsection 136(1) of the FBTAA states that an external non-period residual fringe benefit means a non-period residual fringe benefit other than an in-house residual fringe benefit. The distinction between an in-house residual fringe benefit and an external residual fringe benefit depends on the definition of in-house residual fringe benefit in subsection 136(1) of the FBTAA. There are two elements to the definition: (a) where both of the following conditions are satisfied: (i) if the provider of the benefit is the employer or an associate of the employer; (i) at or about the comparison time the provider must have carried on a business consisting of, or including, the provision of identical or similar benefits principally to outsiders; or (b) where all of the following conditions are satisfied: (i) if the provider is not the employer (or an associate); (ii) the provider must have purchased the benefit from the employer (or associate); (iii) at or about the comparison time both the provider and the seller must have carried on a business consisting of, or including, the provision of identical or similar property principally to outsiders. In the present case, the providers are not the employer or associates of the employer. The providers have not purchased the benefit from the employer or an associate of the employer. Therefore the benefit is an external non-period residual fringe benefit, not an in-house residual fringe benefit. TAXABLE VALUE Section 50 of the FBTAA prescribes the valuation rules that are to apply to external non-period residual fringe benefits. Section 50 of the FBTAA states: Subject to this Part, the taxable value of an external non-period residual fringe benefit in relation to an employer in relation to a year of tax is: (a) where the provider was the employer or an associate of the employer and the benefit was purchased by the provider under an arm's length transaction - the amount paid or payable by the provider for the benefit; (b) where the provider was not the employer or an associate of the employer and the employer, or an associate of the employer, incurred expenditure to the provider under an arm's length transaction in respect of the provision of the benefit - the amount of that expenditure; or (c) in any other case - the notional value of the benefit at the comparison time; reduced by the amount of the recipients contribution. For the purpose of determining the taxable value, the benefit is valued under subsection 50(c) of the FBTAA as the rules in subsections 50(a) and 50(b) do not apply in the circumstances because: (a) the provider is not the employer or an associate of the employer; (b) the employer or an associate of the employer does not incur expenditure to the provider in respect of the provision of the benefit. Where the employer does not incur any consideration to the provider for the supply of benefits to any employee under an arrangement, the taxable value of a residual fringe benefit is the notional value of the benefit, less the recipient's contribution. The notional value is defined in subsection 136(1) of the FBTAA to mean the amount that the recipient could reasonably be expected to have been required to pay to obtain the benefit from the provider under an arm's length transaction. According to the facts provided an employee of up to 9 employers receive the same benefit, as such the amount that an employee of the employer could reasonably be expected to pay is the same amount which he does in fact pay. The term 'recipient contribution' is defined in subsection 136(1) of the FBTAA as follows: recipients contribution : (a) in relation to an airline transport fringe benefit, a car parking fringe benefit, a property fringe benefit, a residual fringe benefit or a board fringe benefit, being a fringe benefit provided in respect of the employment of an employee of an employer, means the amount of any consideration paid to the provider or to the employer by the recipient or by the employee in respect of the provision of the recipients transport, the recipients parking, the recipients property, the recipients benefit or the recipients meal, as the case may be, reduced by the amount of any reimbursement paid to the recipient in respect of that consideration; and (b) in relation to an expense payment fringe benefit provided in respect of the employment of an employee of an employer, being a fringe benefit to which paragraph 20(a) applies - the amount paid to the provider or to the employer by the recipient or by the employee in respect of the provision of the fringe benefit. Based on the above, the amount of the employee contribution in respect to each benefit provided is the amount the employer pays for the discounted parking. After reducing the notional value of the benefit by the amount of the employee contribution we are left with a taxable value of nil. | Detailed Reasoning - Any other benefit?: Section 45 of the FBTAA states: A benefit is a residual benefit for the purposes of this Act if the benefit is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive). As previously stated, the provision of discounted car parking is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to11, accordingly the benefit provided is a residual benefit for the purposes of section 45 of the FBTAA.

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