May 5, 2022

Car Parking Benefit changes FBT liability for employers

Fringe benefits tax (FBT) returns and payments are due on the 21 May.  Before you complete your lodgement, it’s important to understand changes to one employee benefit that may impact the FBT liability of your business. 

A refresher on FBT liabilities

A fringe benefit is a ‘payment’ to an employee in respect of their employment, but in a form other than their salary or wages. Where an employer provides taxable fringe benefits to employees, you must calculate the businesses FBT liability.

Car Parking Benefit defined

Car parking as an FBT benefit is provided on a particular day when, between 7.00am and 7.00pm:

  • a car is parked at a work car park for the minimum parking period
  • an employee uses the car in connection with travel between their place of residence and primary place of employment at least once
  • the work car park is located at or in the vicinity of the primary place of employment
  • a commercial parking station is located within a one-kilometre radius of the work car park used by the employee
  • the lowest representative fee charged by any commercial parking station for all-day parking within a one-kilometre radius of the work car park exceeds the car parking threshold
  • the parking is provided to the employee in respect of their employment
  • the parking is not excluded by the regulations

However, a car parking benefit provided in respect of an employee is exempt where:

  • the car is not parked at a commercial parking station
  • the employer is not a public company or a subsidiary of a public company
  • the employer is not a government body
  • for the income year ending before the start of the FBT year, the employer’s assessable income is less than $10 million or alternatively, it is considered a ‘small business entity’ (SBE)

Implications of the redefinition for employers 

Previously, car parks that charged penalty rates for all-day parking to encourage shorter stays were seen to not represent genuine alternative parking arrangements for commuters. It was therefore understood that they should not trigger FBT liabilities. A recent ruling has however overturned this by redefining a ‘commercial parking station’, meaning that any alternative paid parking would trigger the liability. This ruling came into effect on 1 April 2022.

This recent ruling on how car parking is treated as an FBT liability should assist in reducing the potential FBT burden on some employers. It will also support employers in incentivising employees back into the workplace by making the perks of coming into the office a little more appealing.

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In conclusion 

The Car Parking Benefit discussed is just one of the many FBT benefits that employers may be able to claim back on in their FBT return. Others could include COVID-19 related benefits such as office equipment or technology, company cars, meals, entertainment, living away from home allowances, and more. If you are feeling a little overwhelmed and need assistance with preparing your FBT return, get in touch with our team of experts so that we can assist you!

Filed Under: Business Advisory, Small Business Tax

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