Fringe Benefits Tax – or FBT – is a tax employers are obligated to pay on non-cash payments given to employees where the benefit is considered to be part of income earned. These payments could be made to employees or their close associates, and are often in the form of entertainment, meals, gym memberships, payment of school fees – and car parking perks.
Whether you, as an employer intended these payments as a thank you for great work done, the Australian Taxation Office (ATO) deems these ‘thank-you’s’ as income. FBT is levied at the top marginal rate of 47%, which makes it extremely important to ensure these benefits are calculated correctly and minimised.
The due date for FBT payments is the 21 May, however the FBT year ends on the 31 March. If your business uses a tax agent, the date for payment can be extended to the 25 June.
What Is A Car Parking Fringe Benefit?
Cars, as well as car parking spaces given to employees may incur FBT, and is calculated daily. Specific conditions must be met in order for a car parking space to be considered a fringe benefit. All conditions below must be satisfied:
- The parking space must be owned, leased or under control of the employer
- The parking space must be within one kilometre of your employees place of employment and a fee is charged that is more than the car parking threshold
- Your employees car must be parked for more than four hours between 7.00am and 7.00pm in a day
- You provide the parking spot as a part of your employees employment
- The car is used by your employee to drive to and from home at least once on that day
The commercial parking station must charge a representative fee for all-day parking that is more than the car parking threshold
Recent changes to car parking fringe benefits under the Economic Recovery Act means that the company threshold for incurring FBT has risen from businesses with a gross turnover of $10 million to $50 million. This change was brought in from 1 April 2021, allowing many businesses to be exempt from paying FBT.
The ATO has also changed its definition of commercial car parking stations. An exclusion applied to car parks that provide higher rates for all-day parking to discourage long term parking periods, such as spaces in shopping centres, hospitals or airports. Under new ruling the ATO treats all car parks as commercial parking facilities where they are run to make a profit. This means that if your business is based within a 1 km radius of a shopping centre, hospital or airport (and parking is run for a profit) and you don’t satisfy the small business exemption, reviewing your current car parking arrangements is recommended.
If FBT needs to be paid, there are 5 ways to calculate the taxable value:
- Commercial Parking Station – records must be kept of the actual number of car parking fringe benefits provided
- Market Value Method – records must be kept of the actual number of car parking fringe benefits provided
- Average Cost Method – records must be kept of the actual number of car parking fringe benefits provided
- 12-week Register Method – records must be kept for use of the car parking space over a 12 week consecutive period once every 5 years. Use the commercial parking station method, the market value method or the average cost method to calculate totals.
- Statutory Formula Method – 228 car parking fringe benefits are deemed to arise from the use of each car parking space during the course of the FBT year and are valued in a way similar to the commercial parking station method, the market value method or the average cost method.
The Commercial Parking Station Method should be used unless one of the other methods is elected. The Commercial method uses the lowest all-day parking fee charged on each day by any commercial parking station within a one kilometre radius of the working premises. If there are no commercial car parks that have all day rates over the parking threshold, no FBT is applied. If the rate is over the threshold, the lowest FBT rate can be applied. You can switch methods from year to year, but not during an FBT year. It’s recommended to seek the advice of a professional before choosing a method, as they can become quite complex.
Car Parking Threshold
|FBT Year Ending||Car Parking Threshold Per Day|
|31 March 2022||$9.25|
|31 March 2021||$9.15|
|31 March 2020||$8.95|
|31 March 2019||$8.83|
|31 March 2018||$8.66|
Some staff are exempt from attracting FBT for car parking spaces. If the parking is not a commercial car park; if you’re not a government body, listed public company or a subsidiary; and you are a small business entity before the relevant FBT year and if your total gross income is less than $50 million. Further, scientific institutions, religious institutions, charitable institutions, public educational intuitions are exempt.
Parking an employer provides for a disabled person is exempt if the disabled employee is legally entitled to use a disabled person’s parking space and has a valid disabled person’s car parking permit displayed on the car.
If you’re not sure how to calculate Fringe Benefits Tax your business is obligated to pay, a chat with a friendly professional can help guide you in the right direction. Phone 1800 367 487 and chat with an ITP Tax Agent, or book online today.