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.

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.

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.

A fringe benefit is a ‘payment’ to an employee, but in a different form to salary or wages.

According to the FBT legislation, a fringe benefit is a benefit provided in respect of employment. This effectively means a benefit is provided to somebody because they are an employee. The employee may even be a former or future employee.

An employee is a person who is, was, or will be entitled, to receive salary or wages, or benefits in lieu of salary and wages. Benefits provided in respect of someone who has died are not fringe benefits as a deceased person does not meet the definition of ’employee’ in the FBT legislation.

The terms ‘benefit’ and ‘fringe benefit’ have broad meanings for FBT purposes. Benefits include rights, privileges or services.

As a guide to whether a benefit is provided in respect of employment, ask yourself whether you would have provided the benefit if the person had not been an employee. When we refer to ‘you’ in this Guide, we are referring to you as an employer.

To simplify the explanations in this Guide, we generally discuss examples where the fringe benefit is provided directly by an employer to an employee. However, a fringe benefit may be provided by an associate of the employer or under an arrangement between a third party and the employer. It may also be provided to an associate of the employee (for example, a relative).

The following checklist will help you work out if you are already providing a fringe benefit to your employees. If any of the following apply, you may have an FBT liability.

• Do you hold any cars or other vehicles that are available to employees for their private use, including a car garaged at the employees’ place of residence?
• Do you provide loans at reduced interest rates to employees?
• Have you released an employee from a debt?
• Have you paid for, or reimbursed, an employee’s non-business expense?
• Do you provide a house or other accommodation to your employees?
• Do you provide employees with living-away-from-home allowances?
• Do you provide entertainment including food, drink or recreation to your employees?
• Do any of your employees have a salary package arrangement in place?
• Have you provided your employees with goods at a lower price than they are normally sold to the public?

Fringe benefits have been categorised into 13 different types so that specific valuation rules can be used. These benefits are dealt with separately in their respective chapters in this Guide.

A number of benefits are exempt from FBT. These include certain benefits provided by religious institutions and benefits provided by some international organisations and public benevolent institutions. In addition, there are some specific types of benefits that are exempt from FBT.

There are also a range of concessions available. Some of these concessions reduce the taxable value of a fringe benefit to nil, whereas others provide only a partial reduction. The concessions relevant to each type of benefit are listed in the respective chapters of this guide.

Salary Packaging as a Remuneration Solution is also considered as a salary sacrifice arrangement. It is a formal arrangement between an employer and an employee, if the employee agrees to receive a lower amount of pay each payday in return for the employer providing them with benefits of a similar value to the reduction in pay.

Effective salary sacrifice

The requirements for an effective salary sacrifice arrangement are:

• The arrangement should be entered into before you perform the work.
• There should be an agreement between you and your employer – the contract is usually in writing, but may be a verbal one.
• There should be no access to the sacrificed salary – the sacrificed salary must be permanently forgone for the period of the arrangement.

If a fringe benefit that has not been provided is cashed out at the end of a salary sacrifice arrangement accounting period, the amount cashed out is treated as salary and is taxed as normal income.

Salary and wages, leave entitlements, bonuses or commissions that accrued before the arrangement was entered into cannot be part of an effective salary sacrifice arrangement.

You cannot include payments you have direct debited from your pay, such as health insurance premiums, loan repayments, union fees or credit card repayments. These payments are made from after-tax or net amounts of salary.

There is no restriction on the types of benefits that can be sacrificed. The important thing is that the benefits form part of your remuneration, replacing what would otherwise be paid as salary.

Salary sacrifice may affect super and some government benefits

It’s important to understand the potential implications of entering into a salary sacrifice arrangement with your employer. The following may apply to you:

• You pay a lesser amount of income tax on the reduced amount of salary or wages you receive.
• Your employer is liable to pay fringe benefits tax (FBT) on the non-cash benefits provided.
• Your salary-sacrificed super contributions are classified by your super fund as employer contributions rather than your own.
• From 1 January 2020, your employer can’t use your salary-sacrificed super contributions to
  • reduce the earnings amount your super guarantee entitlement is calculated on, or
  • satisfy all or part of their super guarantee contribution obligations.

• Your employer is required to report certain benefits on your payment summary. The value of these reported benefits is taken into account in assessing your eligibility for
  • the Medicare levy surcharge
  • some tax offsets
  • child support payments
  • some government benefits.

The Fair Work Commission regulates employment agreements and conditions. To check your conditions contact the Fair Work Commission.