- What is FBT?
- Car Parking Fringe Benefits Explained
- Legislation Changes To Car Parking Fringe Benefits
- How To Calculate Car Parking Fringe Benefits
- Commercial Parking Station Method Example
What is FBT?
FBT or Fringe Benefits Tax is a tax employers pay on certain non-cash benefits provided to employees, employee’s families or associates. These benefits can include motor vehicles, car parking, meals, entertainment and payment of, or reimbursement for, certain employee expenses such as gym memberships or school fees. FBT is levied at the top marginal tax rate (47% for the 2020 FBT year) so it’s important to ensure these benefits are treated correctly and minimised where possible.
The FBT year ends on 31 March and the statutory due date for lodging FBT returns is 21 May 2021. However if your FBT returns are processed by a tax agent under the practitioner lodgment service (PLS) the due date extends to the 25 June 2021.
Car Parking Fringe Benefits Explained
If an employer provides a parking space for the use of an employee, car parking fringe benefits may apply for each day it is provided. There are specific conditions that need to be satisfied to confirm that a car parking fringe benefit has actually been provided, as follows:
- a car is parked at a premises that is owned or leased by, or otherwise under the control of, the provider (usually you as the employer)
- 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 ($8.95 for the year ending 31 March 2020).
- 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 you
- 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
- 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.
Legislation Changes To Car Parking Fringe Benefits
The first key change is to the exemption from car parking fringe benefits if you (the employer) are a small business and the parking space is not provided in a commercial car park. Under the Economic Recovery Act (received royal assent 14 October 2020), this trigger point has been lifted from businesses with a gross total turnover of $10 million in the last income year to $50 million. This change applies from 1 April 2021, allowing many more small businesses to be exempt from car parking FBT reporting.
The second is a proposed change to what the ATO defines as commercial car parking stations. Under the previous ruling, an exclusion applied for car parks that provide higher rates for all-day parking to discourage parking for extended periods (usually relating to shopping centres, hospitals and airports). Under the new ruling, the ATO proposes to treat all car parks as commercial parking facilities where they are run to make a profit.
This change is from draft Taxation Ruling TR 2019/D5, slated to come into effect from 1 April 2022 however not finalised at the time of publication.
This could have a significant impact on businesses where their premises is within range of a car parking station that will be deemed a commercial car park under the new ruling, especially in circumstances where there is no other commercial car park in a 1km radius. Where this is the case, Car Parking Fringe Benefits and the resulting FBT could be substantial. As a result, if your business is based at, or within, 1km of a shopping centre, hospital or airport carpark and you don’t satisfy the small business exemption, we recommend reviewing your current parking arrangements. Confirm if the car park is run for profit and if so seek advice regarding what your options may be.
How To Calculate Car Parking Fringe Benefits
If you have worked through the above and determined car parking fringe benefits were provided, there are 5 ways you can calculate the taxable value:
- 1. Commercial parking station method
2. Market value method
3. Average cost method
4. 12-week register method
5. Statutory formula method
The commercial parking station method must be used unless one of the other methods is elected. Given the complexity of each method, only the commercial parking station method has been explained below. We suggest you talk with us or a trusted business adviser should you have car parking fringe benefits to ensure the best possible outcome can be achieved for your business.
The commercial parking station method involves using the lowest all-day parking fee charged on each day the space was available by any commercial parking station within a one kilometer radius of the premises on which the car is parked to determine the taxable value.
If there are no commercial car parks that have all day rates over the car parking threshold, no fringe benefit is supplied. If a commercial car park has all day rates over the car parking threshold, then the lowest all day rate can be applied (even if the lowest all day rate is below the car parking threshold).
This is best explained in the following example.
Commercial Parking Station Method Example
An employee is allowed to park her car on the company premises for 5 weeks (5 days a week). A car parking fringe benefit is determined as being provided as all criteria are met and there are two commercial car parking stations within one kilometer of the employer’s building.
During the time the employee is provided the space, the commercial car parks charge $10 and $5 respectively for all day parking. As one commercial car park is over the car parking threshold ($8.95 for the 2020 year) there is a fringe benefit. The company can therefore use the lowest rate of $5 to calculate the taxable value on the provided benefit.
The car parking fringe benefit taxable value is 25 days (5 weeks) x $5 = $125
The FBT payable on the benefit: $125 x 2.0802 x 47% = $122.21
If you aren’t sure how to navigate Fringe Benefits Tax or need some questions answered please talk with our team to get the right advice immediately.