Private ruling: Car parking benefits
Published: May 2014
Ruling period: 1 April 2013 to 31 March 2014.
Date scheme commenced: 1 April 2013.

Ruling: Q1: Will a car parking benefit arise under section 39A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) from the provision of parking facilities for a pool car used by on-call employees? | A1: No.

Relevant facts and circumstances: You provide a service, including an after-hours service, which requires employees to be available to attend call outs. To respond to the call outs, you have a pool of cars fitted out with the equipment that may be required to respond to the call out. During the day the cars are parked at your office. Your office is located within one kilometre of a commercial parking station that charges members of the public an amount for all-day parking that is more than the car parking threshold. The on-call employees are rostered on for seven consecutive days. These vehicles are only used to respond to call outs and are taken home overnight by the on-call employee.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 39A | Fringe Benefits Tax Assessment Act 1986 subsection 136(1).

Reasons for decision: Summary: Will a car parking benefit arise under section 39A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) from the provision of parking facilities for a pool car used by on-call employees? Subsection 39A(1) of the FBTAA sets out the conditions that must be met for a car parking benefit to arise. Subsection 39A(1) states: If the following conditions are satisfied in relation to a daylight period, or a combination of daylight periods, on a particular day: (a) during the period or periods, a car is parked on one or more premises of a person (the provider ), where: (i) the premises, or each of the premises, on which the car is parked are business premises, or associated premises, of the provider; and (ii) a commercial parking station is located within a 1 km radius of the premises, or each of the premises, on which the car is parked; and (iii) the lowest fee charged by the operator of any such commercial parking station in the ordinary course of business to members of the public for all-day parking on the first business day of the FBT year is more than the car parking threshold; (b) the total duration of the period or periods exceeds 4 hours; (c) any of the following applies: (i) a car benefit relating to the car is provided on that day to an employee or an associate of an employee in respect of the employment of the employee; (ii) the car is owned by, or leased to, an employee or an associate of an employee at any time during the period or periods; (iii) the car is made available to an employee or an associate of an employee at any time during the period or periods by another person, where: (A) the other person is neither the employer of the employee nor an associate of the employer of the employee; and (B) the other person did not make the car available under an arrangement to which the employer of the employee, or an associate of the employer of the employee, is a party; (d) the provision of parking facilities for the car during the period or periods is in respect of the employment of the employee; (e) on that day, the employee has a primary place of employment; (f) during the period or periods, the car is parked at, or in the vicinity of, that primary place of employment; (g) on that day, the car is used in connection with travel by the employee between: (i) the place of residence of the employee; and (ii) that primary place of employment; (h) the provision of parking facilities for the car during the period or periods is not taken, under the regulations, to be excluded from this section; (i) the day is on or after 1 July 1993; the provision of parking facilities for the car during the period or periods is taken to constitute a benefit provided by the provider to the employee or the associate of the employee in respect of the employment of the employee. For the purposes of this Ruling, it is assumed the conditions in paragraphs (a), (b), (c), (e), (f), (g), (h) and (i) are met. That is, a car parking benefit will arise from the parking of the pool car if the parking facilities for the car are provided in respect of the employment of the employee. The phrase 'in respect of' in relation to the employment of an employee is defined in subsection 136(1) of the FBTAA to include 'by reason of, by virtue of, for or in relation directly or indirectly to, that employment'. The meaning of the phrase 'in respect of', was considered by the Full Federal court in J & G Knowles v Federal Commissioner of Taxation [2000] 96 FCR 402; 2000 ATC 4151; 44 ATR 22 ( Knowles). The Full Federal Court considered the judgements in Smith v FCT (1987) 164 CLR 513; 19 ATR 274; 87 ATC 4883 and Federal Commissioner of Taxation v Rowe (1995) 60 FCR 99; 31 ATR 392; 95 ATC 4691, before concluding that it is not sufficient for the purposes of the FBTAA to conclude that there is a casual connection between the benefit and the employment. At paragraph 26 in Knowles , the Court said: 26. The differences in approach in Smith show how difficult it is to state a test to determine whether the requisite relationship or connection exists. In the case of s 26(e) the question was said to be resolved by asking any one of the following questions: • is the benefit a ``product or incident of the employment''? (Wilson J at ATC 4886; CLR 519); • is some aspect of the employment a substantial reason for the benefit? (Brennan J at ATC 4890; CLR 526); • is ``in a very real sense the payment... a consequence of the existing relationship of employer and employee''? (Toohey J at ATC 4894; CLR 533); or • is the employment one of the ``proximate causes'' of the payment? (Gaudron J at ATC 4896; CLR 537). Whatever question is to be asked, it must be remembered that what must be established is whether there is a sufficient or material , rather than a , causal connection or relationship between the benefit and the employment. … 27. Here the question whether there is a sufficient or material connection or relationship between a benefit and employment is assisted by having regard to the purpose or object of imposing FBT on employers. That purpose was stated by the then Treasurer, Mr Keating, in the Second Reading Speech (2 May 1986, Hansard, House of Representatives) at 3020 to be to ``ensure that all forms of remuneration paid to employees bear a fair measure of tax...'' 28. While the width of the definition of ``fringe benefit'' was designed to capture benefits that, in truth, were other than remuneration, the stated purpose suggests that asking whether the benefit is a product or incident of the employment will be helpful. If it is not then the benefit is likely to be extraneous to the employment and will not bear FBT, notwithstanding that the employment might have been a causal factor in the provision of the benefit. In particular, the fact that a benefit is provided to a director because it was authorised by that director will not, of itself, be sufficient to characterise the benefit as one which is ``in respect of'' the employment. Without more, it is not a product or incident of that office. 29. To put the matter another way, although the process of characterising the benefit provided in a particular case can involve questions of fact and degree, it is not sufficient for the purposes of the Act merely to enquire whether there is some causal connection between the benefit and the employment: see FC of T v Rowe 95 ATC 4691 at 4703 and 4710; (1995) 60 FCR 99 at 114 and 123. Although Brennan, Deane and Gaudron JJ observed in Technical Products (at Aust Torts Reports 68,622; CLR 47), that the requisite connection will not exist unless there is ``some discernible and rational link'' between the two subject matters which the statute requires to be linked, as was pointed out by Dawson J (at Aust Torts Reports 68,624; CLR 51), the connection must be ``material''. In Starrim Pty Ltd v Federal Commissioner of Taxation [2000] FCA 952; 2000 ATC 4460; 44 ATR 487 (Starrim) Lindgren J. further considered the phrase "in respect of" in relation to a private company which provided benefits to a husband and wife who were its only shareholders and directors. In considering whether the benefits were provided in respect of their employment as directors, Lindgren J said at ATC 4470: Fourthly, the decision of the full court in Knowles establishes that the required relationship between the provision of a benefit and the employment is not established merely by the existence of some or a causal relationship, and, in particular, that it is not established by nothing more that the fact that the employee has been able to cause the benefit to be provided to him by reason of his or her office as a director of the employer. There must be a "sufficient" or "material" relationship between the employment and the provision of the benefit. In the situation being considered, you have obligations that require you to respond to call outs in a timely manner 24 hours a day/ 7 days per week. To meet these obligations you garage the response cars at your premises during the day and at the residence of the on-call employee at night and on weekends. Employees are rostered on-call for seven consecutive days. On the first day of the roster the employee collects the car from the car park and drives it home so as to be able to respond to a call out. In applying the decisions in Knowles and Starrim , there is not the necessary connection with the employment for the provision of the parking facilities on this first day to be considered as being provided in respect of the employment of the employee as at the time the car is parked in the car parking facility the employee does not have: • control or use of the car; or • an ongoing entitlement to use the parking facility. Similarly, on the last day of the roster, at the time the car is parked in the parking facility the necessary connection does not exist between the provision of the parking facilities and the employment of the employee. On the second to sixth days of the roster period, the employee has a restricted use of the car as the car can only be used for home to work travel and for responding to a call out. No other private use is permitted. Although the employee can be said to have control or use of the car during this period and a car fringe benefit will arise from the home to work travel and the home garaging, these factors by themselves do not provide the necessary connection between the parking facility and the employee's employment. In reaching this conclusion, it is relevant to note that the employees do not have an ongoing entitlement to use the parking facilities and the cars are certain vehicles fitted out with equipment needed for the call out. Given the necessity for the rostered employees to be able to respond in a timely manner, it is necessary for the cars to be parked in close proximity to the employee. This requirement indicates the parking facility is provided because of the nature of the car and to enable the employer's obligations to be fulfilled, rather than because of the employee's employment. Therefore, a car parking benefit will not arise from the provision of the parking facilities for the cars.