Australian Taxation Law

This article explains the concept of car parking fringe benefit under Australian taxation law, including the criteria for obtaining the benefit, taxable value computation methods, small business exemption, and a case study of Qantas v Federal Commissioner of Taxation case in 2014.

Running head: AUSTRALIAN TAXATION LAW
Australian Taxation Law
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1AUSTRALIAN TAXATION LAW
Introduction:
The Australian taxation office provides that a fringe benefit refers to the benefit that is
offered in respect of the employment. The present fringe benefit rate is 46.5 per cent.
According to the Australian taxation law a car parking fringe benefit arises on the
circumstances when the employer offers the car parking fringe benefit to the employee1. A
car fringe benefit refers to the situation where the employer provides the car owned by them
or lease the available car for the private use of the employee.
The tax benefit concerning the employee arises from the salary sacrifice made by the
employee for the car arrangement. This enables the employer to pay the fringe benefit tax
relating to the vehicle and thereby lowering the total amount of taxable income for the
employee during the given period of time. In the perspective of the employer, the benefit
originates by giving the opportunity to lower down the amount of tax that is withheld on the
part of the employee and thereby enhancing the cash flow of the business2. Additional benefit
originates for both the employer and the employee as well with the reduced rate of fringe
benefit tax that is payable upon making a further usage of the vehicle.
Car parking fringe benefit criteria:
“Section 39 A of the Fringe Benefit Taxation Assessment Act 1986” lay down the
criteria that is necessary in determining the car parking fringe benefit3. There are certain
circumstances that need to be met prior to obtaining the car parking fringe benefit. The
1 Barkoczy, Stephen, Foundations Of Taxation Law 2014
2 Choong, Kwai Fatt, Advanced Malaysian Taxation (Infoworld, 2014)
3 Coleman, Cynthia and Kerrie Sadiq, Principles Of Taxation Law 2013

2AUSTRALIAN TAXATION LAW
employee is required to park the car at the premises that is owned or leased by the employer
or else it is under the control of the provider. The criteria also include that the car should
parked for not less than four hours in a day between the time of 7 a.m. and 7 p.m. during any
day. It is necessary for the employee to own the car or leased the car or otherwise under the
control of the employee.
An important consideration regarding the car parking fringe benefit according to the
Australian taxation office is that the parking should be provided in respect of employment of
the employee4. The car must be parked or near the premises of the employer place of
employment on the day of discharging the employment duties. The Australian taxation office
defines that the car should be used by the employer between the home and his place of
employment for a minimum of once in a day.
The Australian taxation office provides that there should be a commercial parking
station that charges the fees for the entire day inside the one kilometre radius of the premises
on which the car is parked. However, an important criteria regarding the car parking fringe
benefit by the Australian taxation office is that the commercial parking station must be
charging fee for the entire day parking which should be more than the threshold limit of the
car parking5. The Australian taxation office defines that at the beginning of the fringe benefit
year the commercial car parking station fee for the entire day parking should be higher than
the car parking threshold limit.
4 Grange, Janet, Geralyn A Jover-Ledesma and Gary L Maydew, 2014 Principles Of Business
Taxation
5 James, Malcolm, Taxation Of Small Businesses 2014/15

3AUSTRALIAN TAXATION LAW
“Section 39A of the Fringe Benefit Tax Assessment Act 1986” lay down that the
fringe benefit tax is levied relating to the actual car parking fringe benefit given to the
employees or their business associates given the above stated criteria are met. Preceding from
the above stated criteria, one car parking space may lead to more than one benefit for the
entire day given that more than one car is parked in an area for at least a minimum of four
hours in total. This might take place since the vehicle are coming and going from the car park
during the day where the cars are provided to the employees for the use on the pool basis or
on the circumstances where the employees are working in a shifts6. An important
consideration laid down under the “Taxation ruling of TR 96/26” is that the number of car
parking spaces is not limited to physically marked car parking areas of spaces but also
comprises of the spaces that could reasonably be taken into the consideration relating to the
car in respect of the employer’s car parking facility.
Taxable value computation methods on car parking fringe benefit:
There are five possible methods of computing the car parking fringe benefits. The
Australian taxation office recognizes two methods of calculating the car parking benefit. The
Australian taxation office considers the statutory method of calculating the car parking
method and the operating cost method of computing the car parking fringe benefit7. The
employer may either choose to use the statutory method of car fringe benefit or consider
using the 12 week or the log book method of determining the car fringe benefit relating to the
number of benefits provided. An election of the either of the method or the entire amount of
benefits provided may be considered by the employer.
6 Jover-Ledesma, Geralyn, Principles Of Business Taxation 2015 (Cch Incorporated, 2014)
7 Kenny, Paul, Australian Tax 2013 (LexisNexis Butterworths, 2013)

4AUSTRALIAN TAXATION LAW
On noticing that no method is elected the employer should compute the total number
of benefits offered by maintaining the records of the original usage of car parking space
made8. The employer might undertake the decision to base the total number of taxable
benefits provided based on the records of the actual number of benefits offered during the
fringe benefit taxable year.
Under the statutory method of calculating the car parking fringe benefit the total cost
of the salary packaged car is liable to fringe benefit tax with lowering in the rate with the
additional amount of kilometres travelled by the employee9.
On the other hand, under the operating cost method of car parking fringe benefit all
the operating cost of the salary packaged car along with the expenditure on car, depreciation
on the car, registration and insurance expenditure incurred on the car is recorded in the log
book for a week long10. The recorded expenditure is later divided among the business related
use and the non-business related use. The non-business or in other words the private usage of
the car made by the employee is considered to be the car fringe benefit.
Apart from the above method two methods of determining the car parking fringe
benefit there are other methods which are helpful in computing the taxable amount of the
fringe benefit of the car. These includes the commercial car parking station method, market
value method and average cost method.
8 Krever, Richard E, Australian Taxation Law Cases 2013 (Thomson Reuters, 2013)
9 Morgan, Annette, Colleen Mortimer and Dale Pinto, A Practical Introduction To Australian
Taxation Law (CCH Australia, 2013)
10 Sadiq, Kerrie et al, Principles Of Taxation Law 2014

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Under the commercial car parking station method, the value of the benefit related to
the use of car is computed by using the lowest entire day parking fee of the commercial
parking station inside the radius of one kilometre from the business premises of the
employer11. The amount is then multiplied by the number of benefits given during the year.
Each day parking for each individual with more than four hours in total constitute a benefit.
The other method includes the market value method which uses the reportable value
of the car parking area determined under the arm’s length qualified value. The assessable
value of the fringe benefit tax is computed by multiplying the arm’s length value by the total
number of benefits during the fringe benefit tax year12. According to the requirement of the
Australian taxation office unless the detailed records are kept for the benefits provided, it is
assumed that car parking fringe benefit originates on each business day during a year for the
available amount of car parking space.
The average cost method on the other hand computes the average amount of the
lowest entire day parking fees that is charged by any of the commercial parking station inside
the one kilometre area of the employer’s place of business on the first and the last day of the
fringe benefit tax yea13r.
On around $1.7 billion spend on the car parking fringe benefit during the year 2008-
09 by the federal government, the statutory method of computing the car parking fringe
11 Woellner, R. H, Australian Taxation Law 2012 (CCH Australia, 2013)
12 Woellner, R. H et al, Australian Taxation Law 2014
13 Car Parking Fringe Benefits (2018) Ato.gov.au <https://www.ato.gov.au/General/Fringe-
benefits-tax-(FBT)/Types-of-fringe-benefits/Car-parking-fringe-benefits/>

6AUSTRALIAN TAXATION LAW
benefit accounted for 91.4 per cent of the expenses. On the other hand, the operating cost
method comprised of the remaining amount of 8.6 per cent. As stated by the federal treasury,
the primary purpose of introducing the statutory method of computing the car fringe benefit
was to lower down the burden of compliance under the operating cost method14. The
decreasing rate the extra a car travelled was reliant on the rationale that the greater distances
was logged all through the year characterized travel made over and beyond the average
personal usage of the car. Therefore, this could be considered as the business use of the car
made by the employee.
Small business car parking exemption:
Small business is considered as the backbone of the economy of Australia which
makes up around 96 per cent of the Australian economy. The small business sector has been
employee more than 4.5 million people and generating a revenue of around $330 billion of
Australia’s economy output each year15. The Australian taxation office has finally
implemented the measure of reducing the red tape burden for the small business by offering
small business with some of kind of concession for those that qualify under the small
business entity.
A business will be considered liable for the car parking fringe benefit tax on the
circumstances where it provides parking for no less than four hour of car parking in its
premises to the employees and it is located inside the one kilometre radius of the commercial
car parking where the minimum entire day cost is higher than the present parking benefit
threshold limit. However, if an individual is carrying a small business client’s car parking
benefits to staff they can avail the exemption from the fringe benefit tax. The small business
14 Fringe Benefits Tax - A Guide For Employers - Chapter 16 - Car Parking Fringe Benefits (2018)
Law.ato.gov.au
15 Legal Database (2018) Ato.gov.au

7AUSTRALIAN TAXATION LAW
car parking fringe benefit tax exemption is considered as the valuable form of exemption for
the smaller business.
According to the Australian taxation office if an individual is carrying a small
business, car parking benefits the employer provide are exempted if certain criteria are met.
The Australian taxation office provides that a small business exemption is provided on
satisfying the condition that the parking is not offered in the commercial car parking16.
Another conditions include if the business is not the governing body or the listed public
company or the subsidiary of the public listed company. Another criteria includes where
either the small business gross total income during the last income year prior to the relevant
fringe benefit tax year was lower than $10 million or an individual carried the small business
for the last income year prior to the relevant fringe benefit taxable year.
There is some business that are located in the large shopping centre which have made
an attempt to subsidize the cost relating to the car parking fees that kick in following the
elapse of certain period of time17. The hazard in this circumstances is that by doing the small
business might have held themselves liable for the fringe benefit tax through the provision of
car parking benefit. This is because even the shopping centre car parks charging fees are
regarded as the commercial car parks.
An important consideration relating to the car parking fringe benefit tax is that the car
parking facility that is administered by the local council will usually be regarded as the
commercial based on the circumstances that the fees are based on the expenditure occurred in
operating facility.
16 TR 96/26 - Fringe Benefits Tax: Car Parking Fringe Benefits (Published On 27 November 1996) (2018)
Law.ato.gov.au
17 Cooper, Rob. "How to tax cellphones in the workplace." Tax Professional 2017.29 (2017):
22-23.

8AUSTRALIAN TAXATION LAW
Qantas v Federal Commissioner of Taxation case in 2014:
The case concerned the issue whether the car parking spaces offered by the Qantas to
some of the members of Qantas staff as the portion of remuneration was the car parking
fringe benefit defined under the fringe benefit tax assessment act 1986 and hence Qantas will
be held liable to pay the fringe benefit tax18.
The federal court of law has terminated the appeal of the Qantas and upheld the
appeal of the commissioner from the decision handed down by the AAT in the Qantas
Airways Limited and Federal Commissioner of Taxation (2014)19. The AAT in its conclusion
stated that the Qantas will be held liable to pay the fringe benefit tax relating to the provision
of the car spaces beside those that are at Canberra airport.
Qantas in its argument stated that the car parking spaces were not considered as the
car parking fringe benefit dependent upon the exception under “section 39 A (1) (a)(II) of
the Fringe Benefit Tax Assessment Act 1986” that there should be a commercial parking
station inside the one kilometre radius of the premises where the car parking spaces is
provided. Qantas did not raise any dispute relating to the matter that there are parking stations
that are commercially operated inside the one kilometre radius of its premises at each
airport20. However, it submitted its argument by stating that these parking stations cannot be
18 Braverman, Daniel, Stephen Marsden, and Kerrie Sadiq. "Assessing Taxpayer Response to
Legislative Changes: A Case Study of In-House Fringe Benefits Rules." J. Austl. Tax'n17
(2015): 1.
19 Hodgson, Helen. "Fringe benefit Tax and Travel to and From Work." Australian Tax Law
Bulletin 2.2 (2015): 1-20.
20 Cooper, Rob. "A brief guide to tax filing." TAXtalk 2017.65 (2017): 42-45.

9AUSTRALIAN TAXATION LAW
considered as the parking stations since it does not offer any car spaces to the public during
the ordinary course of the businesses.
The full federal court provided an explanation to the argument bought by the Qantas
airways ltd. The full federal court stated that due to the publicly spoken definition relating to
car parking commercial station under “section 136 (1)”21. The definition included that being
the public along with person that are commuting from their home and the place of work by
using the airport parking station the ordinary business of the airport parking station
constitutes the provision of the provision of the parking spaces to the air passengers.
The argument put forward by the Qantas was rejected based on the three terms which
was later explained by the court. The court stated that the statute does not operate based on
the basis that the commercial parking station should be in a manner that the employee may
use. The court made it clear under “section 148 (1) C of the Assessment Act” that provides
benefit to the employees inside the meaning of the “FBTAA 1986” which would have been
provided whether or not the benefit could be considered extra to the needs of the employee22.
The condition of the court included that the commercial parking station should be
inside the one kilometre range of the employer’s business premises. This would constitute a
parking fringe benefit which would not be the proxy for the value of benefit provided to the
21 Maurer, Ludmilla, et al. "A Brave New Post-BEPS World: New Double Tax Treaty
Between Germany and Australia Implements BEPS Measures." Intertax 45.4 (2017): 310-
321.
22 Pearce, Prafula, and Helen Hodgson. "Promoting smart travel through tax policy." The Tax
Specialist 19 (2015): 2-8.

10AUSTRALIAN TAXATION LAW
employee that are receiving an actual parking space at the business premises of the employer.
However, it includes a proxy for ascertaining the taxable value of the fringe benefit provided
by the employer to the employee on which the tax is imposed on the employer.
The same is confirmed by the full federal court in the definition to any form of car
parking spaces that is available during the ordinary course of business to the members of the
public for the entire car parking on the premises by making a payment of a fee23. Hence it is
understood that the term public must be given in the ordinary sense and does not contain any
rationale for imputing the definition as the requirement that commercial parking station
should be one that the employees use when commuting to work.
The full federal court in its decision upheld the decision of AAT and have dismissed
the appeal of Qantas. In respect of the Canberra airport the car parking of the airport was only
available to the airlines passengers and the visitors of the passengers and did not included
their staff. The AAT in its decision held that parking was not available to the members of the
public as stated under the definition of commercial parking station under “Section 136 (1) of
the FBTAA 1986”.
The full federal court found that the term public under the “FBTAA 1986” must be
understood in its ordinary meaning and it is necessary that the commercial parking station
should be inside the one kilometre area of the employer’s premises that triggered tax
liability24. Having noted the above stated discussion it was not correct on the part of the
23 Shields, John, and Andrea North-Samardzic. "10 Employee benefits." Managing Employee
Performance and Reward: Concepts, Practices, Strategies (2015): 218.
24 Cortis, Natasha, and Christine Eastman. "Salary sacrificing in Australia: are patterns of
uptake and benefit different in the not‐for‐profit sector?." Asia Pacific Journal of Human
Resources 53.3 (2015): 311-330.

11AUSTRALIAN TAXATION LAW
tribunal to seek to determine the definition of the term public under the definition of
commercial parking station.
The court of law noticed in this case that while it is true that the operator of the
parking station in Canberra applied restrictions on the car parking that was only provided to
the airline passengers and those that visited to meet the passengers25. The car parking was
nevertheless considered as the public parking in the sense that the space for parking was
made available for any member of the public based on the contractual stipulated terms. It was
not necessarily the point that the employees of the Qantas use the airport car parking nor it is
the point that they prevented the employees from using the parking. The significance relating
to the presence of neighbouring commercial parking represents the existence of value in the
employer’s car spaces and not on the conditions that Qantas provides as the alternative to the
staff.
In the decision that was handed down to the Qantas Airways, the federal court has
held the appeal of the commissioner. Furthermore, the federal court has noticed that the
Qantas Airways was considered liable for the fringe benefit tax in respect to the car parking
that was provided to the employees at the Canberra Airport. On the other hand, the full
federal court dismissed the appeal of the taxpayer in respect to the fringe benefit liabilities in
regard to the car parking given to the employees at the supplementary airport locations.
Recommendations:
There is an over-all chorus for supporting and amending the fringe benefit taxation
legislation to end the disparity created in the transit modes. Fringe benefit tax exemption for
25 Young, William, and Claire Ferres Miles. "A spatial study of parking policy and usage in
Melbourne, Australia." Case Studies on Transport Policy 3.1 (2015): 23-32.

12AUSTRALIAN TAXATION LAW
the salary packaged vehicles and the statutory formula related to work based travel results in
distortion in the tax system of Australia leading to subsidising automotive imports and
assisting the regressive commuter behaviour.
A recommendation can be provided by stating that blanket application of the statutory
formula promotes all the worker to make use of their car irrespective of whether or not a
feasible public transport is available for day to commute26. In regard to this, the fringe benefit
tax is considered both as the leak of the potential tax revenue and the obstacle to the growth
of more sustainable lower impact transit mode.
Recommendations can be provided by stating that lowering the tax rate to 20 per cent
would better help in portraying a current average usage of car and keeping with the needs of
minimising the burden of compliance under the operating cost method for determining the car
fringe benefit tax. Another recommendation that can be provided by stating that the statutory
method of computing the fringe benefit tax must be removed. This option would help in
discouraging the usage of car benefits as the means of reducing the taxable income with the
added benefit of private vehicle. This can be done by increasing the burden of compliance to
derive the benefit under the operating cost method only27. Since the system is already in place
to manage this method from the Australian taxation office, it may not have the additional cost
of entirely undertaking a new scheme. Yet, it fails to remove the horizontal inequalities
created among the public and the private transport.
26 Seymour, Elen. "Taxation: strategies for financial planners." Financial Planning in
Australia (2017): 383-416.
27 McCormack, Chris. "Our clinging to the fringe is stultifying development." News
Weekly 3010 (2017): 7.

13AUSTRALIAN TAXATION LAW
Another recommendation can be provided by stating that the requirements for the
salary packaging must be made available only emission and domestically manufactured
vehicles. Most arguably this mode will help in reducing the gap between the practical
application of the fringe benefit tax regime to the date and the regimes of the original
objectives. This method would be potentially considered as the cost neutral since it only takes
into the consideration the types of vehicles that are eligible under the scheme without directly
creating an impact on the number of person using the car.
Conclusion:
On a conclusive the essay can be concluded by outlining that primary purpose of
adopting the outlined recommendations is to create or take the steps towards the even
creation for the private and the public transport. The present regime provides a mixed
message to the community where the government vigorously endorses the economic
prudence at the same time since it administers the fringe benefit tax regime which encourages
the opposite.
The federal tax system should be such that it works to attain the main policy objective
of the Australian governments. If the government is genuinely interested in attaining its goals
it would amend the fringe benefit tax regime to take into the consideration most of the
incentives for the Australians to reduce the habit of car dependency.

14AUSTRALIAN TAXATION LAW
References
Barkoczy, Stephen, Foundations Of Taxation Law 2014
Braverman, Daniel, Stephen Marsden, and Kerrie Sadiq. "Assessing Taxpayer Response to
Legislative Changes: A Case Study of In-House Fringe Benefits Rules." J. Austl. Tax'n17
(2015): 1.
Car Parking Fringe Benefits (2018) Ato.gov.au <https://www.ato.gov.au/General/Fringe-
benefits-tax-(FBT)/Types-of-fringe-benefits/Car-parking-fringe-benefits/>
Choong, Kwai Fatt, Advanced Malaysian Taxation (Infoworld, 2014)
Coleman, Cynthia and Kerrie Sadiq, Principles Of Taxation Law 2013
Cooper, Rob. "A brief guide to tax filing." TAXtalk 2017.65 (2017): 42-45.
Cooper, Rob. "How to tax cellphones in the workplace." Tax Professional 2017.29 (2017):
22-23.
Cortis, Natasha, and Christine Eastman. "Salary sacrificing in Australia: are patterns of
uptake and benefit different in the not‐for‐profit sector?." Asia Pacific Journal of Human
Resources 53.3 (2015): 311-330.
Fringe Benefits Tax - A Guide For Employers - Chapter 16 - Car Parking Fringe
Benefits (2018) Law.ato.gov.au <http://law.ato.gov.au/atolaw/view.htm?DocID=SAV
%2FFBTGEMP%2F00017>
Grange, Janet, Geralyn A Jover-Ledesma and Gary L Maydew, 2014 Principles Of Business
Taxation
Hodgson, Helen. "Fringe benefit Tax and Travel to and From Work." Australian Tax Law
Bulletin 2.2 (2015): 1-20.

15AUSTRALIAN TAXATION LAW
James, Malcolm, Taxation Of Small Businesses 2014/15
Jover-Ledesma, Geralyn, Principles Of Business Taxation 2015 (Cch Incorporated, 2014)
Kenny, Paul, Australian Tax 2013 (LexisNexis Butterworths, 2013)
Krever, Richard E, Australian Taxation Law Cases 2013 (Thomson Reuters, 2013)
Legal Database (2018) Ato.gov.au <https://www.ato.gov.au/law/view/document?
DocID=SAV%2FFBTGEMP%2F00008>
Maurer, Ludmilla, et al. "A Brave New Post-BEPS World: New Double Tax Treaty Between
Germany and Australia Implements BEPS Measures." Intertax 45.4 (2017): 310-321.
McCormack, Chris. "Our clinging to the fringe is stultifying development." News
Weekly 3010 (2017): 7.
Morgan, Annette, Colleen Mortimer and Dale Pinto, A Practical Introduction To Australian
Taxation Law (CCH Australia, 2013)
Pearce, Prafula, and Helen Hodgson. "Promoting smart travel through tax policy." The Tax
Specialist 19 (2015): 2-8.
Sadiq, Kerrie et al, Principles Of Taxation Law 2014
Seymour, Elen. "Taxation: strategies for financial planners." Financial Planning in
Australia (2017): 383-416.
Shields, John, and Andrea North-Samardzic. "10 Employee benefits." Managing Employee
Performance and Reward: Concepts, Practices, Strategies (2015): 218.
TR 96/26 - Fringe Benefits Tax: Car Parking Fringe Benefits (Published On 27 November
1996) (2018) Law.ato.gov.au

16AUSTRALIAN TAXATION LAW
http://law.ato.gov.au/atolaw/view.htm?DocID=TXR/TR9626/NAT/ATO/00001&PiT=99991
231235958
Woellner, R. H et al, Australian Taxation Law 2014
Woellner, R. H, Australian Taxation Law 2012 (CCH Australia, 2013)
Young, William, and Claire Ferres Miles. "A spatial study of parking policy and usage in
Melbourne, Australia." Case Studies on Transport Policy 3.1 (2015): 23-32.