Tax Snapshot: Big FBT changes may be coming from 1 April 2020 for employers who provide car parking to their employees

Roelof van der Merwe
Are you an employer providing car parking spaces to your staff? Read our Tax Snapshot to find out how new developments may affect your FBT situation.

1. What is the proposed change?

More employers providing car parking benefits to employees may become subject to FBT from 1 April 2020.

Employers providing car parking spaces for employees in the employers’ work car parks will only be subject to FBT (i.e. there will be a car parking fringe benefit provided by the employer) if there is a commercial car parking station located within a one kilometre radius of the work car park.

Seems like a simple rule: No commercial car parking station within a one kilometre radius of the office car park, no FBT.

But what is a commercial car parking station?

Currently, a more than 20 year old tax ruling [1] defines a commercial car parking station to be a car parking facility that provides all-day parking (i.e. for at least six hours between 7am and 7pm) and charges more than a threshold amount for all-day parking.

However, a recent draft tax ruling [2] proposes to extend the meaning of a commercial car parking station from 1 April 2020 to also include car parks in facilities whose main purpose is not to provide all-day parking. Examples include car parking spaces adjacent to hospitals, shopping centres, hotels, universities and airports.

Furthermore, car parks that allow all-day parking, but have expensive fees that discourage all-day car parking (e.g. airport car parks), can also be considered commercial car parking stations.

2. What does this car parking FBT change mean for you?

Currently, shopping centre car parks (and other similar facilities such as hospital car parks) are generally not considered to be commercial car parking stations for FBT purposes. Therefore, even if there is a shopping centre car park within a one kilometre radius of the work car park, there will be no FBT payable on the taxable value of the employees’ car spaces in the work car park.

Therefore, the proposed change in definition of a commercial parking station may have significant impacts for businesses that provide car parking spaces for their employees, where FBT has historically not been paid.

3. How can Crowe help you?

We are closely monitoring the status of the draft ruling, and note the proposals are still in draft form. Once the ruling is finalised, we will take immediate action to notify you of the progress.

If you have any concerns about these proposed changes, or would like an FBT Health Check conducted for your business, please contact your local adviser or our Employment Taxes Team.

[1] TR96/26: Fringe benefits tax: car parking fringe benefits

[2] TR2019/D5: Fringe benefits tax: car parking benefits