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Car Parking Valuation

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Many employers have mobile employees. This can be as simple as having employees undertaking regular business travel, or can be more extensive with employees relocating temporarily or permanently, employees on Living Away From Home arrangements, employees living and working in Remote Areas or on FIFO in to Remote and Non Remote areas, and international assignments.

Did you know that Relocations are the most popular topic for seeking ATO advice by way of Private Binding Rulings? So why is this…

Relocations is an FBT area that is not necessarily specific to a benefit category but is analysed based on an individual employee’s circumstances. Depending on the employee’s circumstances, there are a number of scenarios (and FBT exemptions and concessions) that may apply, as follows:

  • Business Travel
  • Personal Travel
  • Mix of Business and Personal Travel
  • Temporary Relocation
  • Permanent Relocation
  • Fly in Fly Out
  • Remote Area residence
  • Temporary Resident (Expatriate)

For each of the above scenarios (employee’s), it is necessary to understand what financial assistance has been / will be provided?

  1. Reimbursement of employee expenses
  2. Paid direct to supplier
  3. Provided directly by employer or related employer
  4. Allowance, whether taxed or tax free
  5. Reimbursed or paid and Salary Packaged
  6. Paid by a related employer (local or offshore)

It is important to understand ATO guidance. Recently the ATO has released three draft public rulings in relation to Employee Travel expenses and Employee work expenses – these rulings whilst subject to finalisation, provide a degree of uncertainty.

In the table below, we summarise the rulings. For each of these draft rulings we are not aware of the intended finalisation date by the ATO, noting that TR2017/D6 has been in draft format for nearly 3 years.

Draft ruling Issue date Notes
TR 2017/D6 – Income tax and fringe benefits tax: when are deductions allowed for employees’ travel expenses 28 June 2017 Comments closed: 11 August 2017 TR 2017/D6 replaces MT2030 Fringe Benefits Tax: living-away-from-home allowance benefits withdrawn effective 28 June 2017
TR 2019/D4 – Income tax: employees: deductions for work expenses undersection 8-1 of the Income Tax Assessment Act 1997 6 November 2019 Comments closed: 6 December 2019 Draft ruling contains a listing of all past related taxation rulings, ATOID’s, practice statements and tax determinations
TR 2019/D7 – Income tax: when are deductions allowed for employees’ transport expenses 13 December 2019 Comments by: 28 February 2020 Where TR 2019/D7 overlaps or has differing views from TR 2017 /D6, then TR 2019/D7 is current ATO view
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Minor benefits are exempt benefits. A minor benefit is a benefit which is both:

  • less than $300 in value (before 1 April 2007 the amount was less than $100), and
  • unreasonable to treat as a fringe benefit.

Less than $300 in value

A minor benefit is a benefit which has a ‘notional taxable value’ of less than $300. The notional taxable value of a minor benefit is, broadly, the amount that would be the taxable value if the benefit was a fringe benefit.

Where you provide an employee with separate benefits that are in connection with each other (for example, a meal, a night’s accommodation and taxi travel) you need to look at each individual benefit provided to the employee to see if the notional taxable value of each benefit is less than $300.

When determining if the notional taxable value of the benefit is less than $300, benefits provided to associates are not included.

If the notional taxable value of a benefit is less than $300, you then need to determine if it would be unreasonable to treat the benefit as a fringe benefit.

Special rules that apply to car benefits

There are different rules for car benefits. The notional taxable value of a car benefit is determined by applying the residual fringe benefit rules – that is, to determine whether a car benefit is less than $300, you may either:

  • apportion the operating costs of the vehicle, or
  • apply the cents per kilometre method.

Criteria for determining whether it would be unreasonable to treat the minor benefit as a fringe benefit

The following five criteria need to be considered when deciding if it would be unreasonable to treat the minor benefit as a fringe benefit:

1 The infrequency and irregularity with which associated benefits, being benefits that are identical or similar to the minor benefit and benefits given in connection with the minor benefit, are provided. The more frequently and regularly associated benefits are provided, the less likely that the minor benefit will qualify as an exempt benefit.
2 The total of the notional taxable values of the minor benefit and identical or similar benefits to the minor benefit. The greater the total value of the minor benefit and identical or similar benefits, the less likely it is the minor benefit will qualify as an exempt benefit.
3 The likely total of the notional taxable values of other associated benefits – that is, those provided in connection with the minor benefit. For example, where a meal, which is a minor benefit, is provided in connection with a night’s accommodation and taxi travel, which themselves may or may not be a minor benefit, the total of their taxable values must be considered. The greater the total value of other associated benefits, in this case being the accommodation and the taxi travel, the less likely it is that the minor benefit will qualify as an exempt benefit.
4 The practical difficulty in determining what would be the notional taxable value of the minor benefit and any associated benefits. This would include consideration of the difficulty for you in keeping the necessary records in relation to the benefits.
5 The circumstances in which the minor benefit and any associated benefits were provided. This would include consideration as to whether the benefit was provided as a result of an unexpected event, and whether or not it could be considered principally as being in the nature of remuneration.

If, after considering the five criteria, you conclude that it would be unreasonable to treat the benefit as a fringe benefit, the benefit will be an exempt benefit.

In determining if the minor benefit exemption applies, you need to examine the nature of the benefit provided and consider each of the various criteria – value, frequency and regularity of provision, and recording and valuation difficulties – before concluding whether the exemption should apply to a minor benefit.

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Very broadly, a car parking fringe benefit may arise for each day on which you (the employer) provide a car parking space for the use of an employee.

Specifically, a car parking fringe benefit arises during a FBT year only if all of the following conditions are satisfied:

  • a car is parked at premises that are 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
  • 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, $8.95 for the 2020 FBT year.
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The one-kilometre distance is measured not by radius but by the shortest practicable direct route (by whatever means this route is travelled, for example, by foot, car or boat). The distance is not a straight line or “as the crow flies”, but a practicable route that can easily be accessible at all times.

Importantly the distance is not measured from the employers street address.

The distance begins at the entry point where the employer provides the car parking, and ends at the entry point to the commercial car parking station. Any route mapped, must have permanent access way and cannot be closed off after working hours or business hours.

Where an employer provides parking at multiple facilities at any one location, then it is necessary to measure from the entry point of each of those parking facilities.

It is important to remember that the measuring is generally most important on:

  1. The first day of the FBT year, to determine if a FBT liability exists;
  2. The first day of the FBT year, to determine the lowest daily rate, if using average cost method;
  3. The last day of the FBT year, to determine the lowest daily rate, if using average cost method;

Records must be maintained to support the measurements and assessment of whether a FBT liability exists. If a FBT liability does exist, then records must be maintained to support the measurements and assessment of the lowest daily rate at beginning and end of the FBT year.

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Motor vehicles often comprises a significant percentage of an organisations FBT liability, hence the desire to reduce the FBT liability. The FBT technical rules in relation to Motor vehicles are complex, and often practically difficult, when seeking to reduce the taxable value, whether by:

  • One third reduction
  • Employee contribution
  • Claiming days unavailable
  • Logbook records; or
  • Claiming exemption

When reducing the taxable value (for any benefit category) the reduction must be fully supported and documented.

More recently the ATO have released concessional Practical Compliance Guidelines (PCG) in relation to Logbook and claiming exemption for Tool of Trade and Work related vehicles. These PCG’s themselves contain a level of complexity and strict requirements to avail the concession and associated reductions.

Motor vehicles remain a key focus area by the ATO through scrutiny of claiming Motor Vehicle expenses, double dipping on Novated Lease car expenses, GST & Depreciation on luxury cars, Logbooks, claiming Exemption, correct Valuation choice or correctly reporting Employee Contributions for FBT, GST and Income Tax purposes.

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