The result of the 2022 Australian federal election could potentially spell bad news for employers who provide car parking to their employees.
The Australian Labor Party (ALP) is yet to announce whether it will progress public consultation announced by the Morrison Government on remediating the adverse Fringe Benefits Tax (FBT) implications for employers of juridical developments recently affirmed by the Australian Taxation Office (ATO).
The presence of commercial parking arrangements (referenced in the legislation as a ‘commercial parking station’) within a 1km radius of an employer-provided car park is a pre-condition to the existence of a ‘car parking benefit’ and imposition of FBT.
Prior to the judgment in FC of T v Qantas Airways Ltd  FCAFC 168 (the “Qantas Case”), there was a general understanding that only car parking facilities genuinely used in comparable circumstances (i.e., by commuting employees) would satisfy this pre-condition. That general understanding was rebuffed in the Qantas Case, wherein it was held that parking stations at Canberra Airport are ‘commercial parking stations’, notwithstanding applicable restrictions, including their exclusive availability to airline passengers and ‘meeters and greeters’.
A period of uncertainty succeeded the Qantas Case, which ended upon the ATO’s withdrawal of the erstwhile Taxation Ruling TR 96/26 Fringe benefits tax: car parking fringe benefits (“TR 96/26”) in November 2019 and its replacement by Taxation Ruling TR 2021/2 Fringe benefits tax car parking benefits (“TR 2021/2”) in June 2021.
In TR 2021/2, the ATO reversed the view it had earlier expressed in TR 96/26 that car parking facilities with a primary purpose other than the provision of all-day parking such as shopping centre car parking facilities do not constitute ‘commercial parking stations’, even specifically citing shopping centre (and hospital) car parking facilities as examples of ‘commercial parking stations’.
The view enunciated by the ATO in TR 2021/2 (derived from the Qantas Case) has applied since 1 April 2022 and will continue to apply absent legislative change (or a High Court decision). Whereas the Morrison Government had promised to introduce such legislative change effective 1 April 2022, the ALP’s position is not presently known.
Pending positive action from the ALP, employers could be facing an FBT liability on ‘car parking fringe benefits’ for the first time this FBT year, despite their arrangements with employees remaining unchanged. Potential means of mitigating the impact of this include:
- Applying the ‘market value basis’ to determine the taxable value of ‘car parking fringe benefits’ provided – i.e., to remove the impact of inflated or penalising rates designed to deter all-day parking at hospitals or shopping centres, for example;
- In the current environment where many employees are working from home, consider applying the ‘actual’ or ‘12-week record keeping’ methods to calculate the number of ‘car parking benefits’ provided, as this may produce a more favourable outcome than the ‘statutory’ method; and
- Consider whether your business is eligible for the exemption for ‘car parking benefits’ provided by small businesses (e.g., ‘small business entities’ or those whose total income in the preceding FBT year was less than $10 million).