Car parking fringe benefits and arm’s length valuation

The ATO has announced that from February it is intending to contact a selection of business taxpayers that provide car parking benefits to their employees, and that use the market value method to arrive at a taxable value, to ensure these values have been calculated correctly.

There are five ways that an employer can calculate car parking benefits (the first three of which require records of the number of car parking fringe benefits provided):

  1. Commercial parking station method.
  2. Market value method.
  3. Average cost method.
  4. 12-week register method – once every five years, you must keep records of the use of car parking spaces for a 12-week period, and value the use as if you had used the commercial parking station method, the market value method or the average cost method.
  5. 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 must be used unless you elect to use one of the alternative methods. Where the market value method is selected however, a suitably qualified valuation is required to substantiate that value.

The issue the ATO is seeking to address, and which it hopes to resolve by, among other compliance measures, contacting relevant employer taxpayers, is where the mere appointment of an arm’s length valuer is viewed as satisfying the requirements of the law. This, says the ATO, is not necessarily the case.

The ATO’s guidance on the matter dictates that a valuation report is also required, and that this must detail:

– the date of the valuation

– the precise description of the location of the car parking facilities valued (either the street address or block and section number)

– the number of car parking spaces valued and the value of the car parking spaces based on a daily rate

– the full name of the valuer and a description of their qualifications as a valuer

– the valuer’s signature

– a declaration stating that the valuer is at arm’s length from the valuation.

You must also be able to produce, when required, details of the basis on which the valuation was determined. This information may be set out in a separate valuer’s report.

Note that the market value method provides the taxable value of a single car parking fringe benefit. You can obtain the exact number of benefits provided only from records of actual use. For this method, the FBT law does not contain a specific rule for determining the actual number of car parking fringe benefits that may arise from each car parking space, nor for determining how many car parking spaces are in a given area.

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