The Australian Government has expanded the definition of the Small Business Car Parking exemption. It therefore is important for employers to be aware of the two big changes which will come into effect at the end of the 2021 Fringe Benefits Tax (FBT) year on 31st March 2021.
From 1st April 2021, exemptions will apply to employers with a combined turnover of less than $50 million, where the parking facilities provided to employees are not located at a commercial parking station.
This change was first announced by the Australian Government in October 2020, as part of the 20-21 Federal Budget.
The second major change is that the ATO plans to revise its definition of what constitutes a commercial parking station. This means that a parking facility which does not have the primary purpose of providing all-day parking may now be considered a commercial parking station.
This means employers could be liable for FBT when staff are provided parking within 1km of a shopping centre, airport or hospital which charges for all-day parking.
What is a Car Parking Fringe Benefit?
A car parking fringe benefit can arise when an employee is provided with the use of a car park on business premises or associated premises of a provider. In order for a car parking fringe benefit to be subject to FBT, all the following criteria must be satisfied:
- A car is parked at premises that are owned or leased by, or otherwise under the control of, the employer (this includes, where an employer has an arrangement with the operator of a commercial parking station)
- 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 ($9.15 for the 2021 FBT year)
- 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 the employer
- 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, and
- 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.
FBT exemptions are also available for car parking provided in certain circumstances, such as; disabled parking and parking provided by small or medium business employers.
Small Business Car Parking Exemption
Before the 2020 Federal Budget, a car parking fringe benefit exemption was available for small business entities who had an annual turnover less than $10 million.
During the the Federal Budget on 8 October 2020, the Government announced an expansion of the Small Business Car Parking exemption, to include businesses with an aggregated turnover of less than $50 million.
Importantly, the expanded $50 million threshold refers to an entity’s ‘aggregated turnover’, which is roughly the sum of:
- The entity’s annual turnover for the income year; and
- The annual turnover for the income year of any entity that is connected with the entity at any time during the income year; and
- The annual turnover for the income year of any entity that is an affiliate of the entity at any time during the income year.
Figuring out an employer’s aggregated turnover can be a momentous task, especially when they are part of a large group of entities. We suggest employers seek assistance from their financial advisor on this matter.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800.
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