The ATO has started contacting certain employers that provide car parking fringe benefits to their employees to ensure that all fringe benefits tax (FBT) obligations are being met. Generally, car parking fringe benefits arise where the car is:
- parked on the business premises of the entity providing the benefit;
- used by the employee to travel between home and their primary place of employment and is parked in the vicinity of that employment;
- parked for periods totaling more than four hours between 7 am and 7 pm; and
- a commercial parking station located within 1 km of the premises charges more than the car parking threshold amount.
Employers that meet these conditions are providing parking benefits and have a choice of three methods to calculate the taxable value of the benefits: the commercial parking station method, the average cost method and the market value method.
The method currently under ATO scrutiny is the market value method, which states that the taxable value of a car parking benefit is the amount that the recipient could reasonably be expected to have to pay if the provider and the recipient were dealing with each other under arm’s length conditions. When using this method, the employer must obtain a valuation report from an independent valuer who has expertise in the valuation of car parking facilities and is at arm’s length from the employer.
TIP: Specifically, the ATO is looking at employers that have engaged an arm’s length valuer as required under the market value method. According to the ATO, it has information that valuers in some instances have prepared reports using a daily rate that doesn’t reflect the market value and as such, the taxable value of the benefits is significantly discounted or even reduced to nil.
The ATO notes that just engaging an arm’s length valuer does not mean you’ve met all the requirements for working out the taxable value of the car parking fringe benefits. It is the employer’s responsibility to confirm the basis on which the valuation is prepared and examine any valuation that is suspected to be incorrect or considerably reduces FBT liability.
At a minimum, the ATO requires a valuation report to be in English and to detail the following:
- the date of valuation;
- a precise description of the location of the car parking facilities valued;
- the number of car parking spaces valued;
- the value of the car parking spaces based on a daily rate;
- the full name of the valuer and their qualifications;
- the valuer’s signature; and
- a declaration stating the valuer is at arm’s length from the valuation.
In addition to the valuation report, an employer also needs a declaration relating to each FBT year that includes the number of car parking spaces available to be used by employees, the number of business days, and the daily value of the car parking spaces.