Providing car parking fringe benefits

If you are an employer providing any type of car parking facility to an employee for their use, you may be subject to FBT on any such benefits. An employer-provided parking facility, including spaces made available to an employee, will constitute a car parking fringe benefit where all of the following conditions are met:

• the employee parks their car (whether that be a car owned/leased by the employee or their associate, or a car that you provide to them) in a place that:
  • is owned, leased or controlled by the employer (e.g. your business premises)
  • is located in the vicinity of the employee’s primary place of employment, and
  • has an entrance which is within 1km (by the shortest practical route) of the entrance to a ‘commercial parking station’ that charges an all-day parking fee greater than $10.77 (on the first business day of the FBT year, being 1 April 2024 for the 2025 FBT year)
• the car is parked for an aggregated total of more than four hours between 7:00am and 7:00pm for that particular day
• the employee drives the car between their home and primary place of work, or vice versa, at least once on that day, and
• the employer is not exempted in relation to car parking fringe benefits (for example, certain not-for-profit organisations and certain small businesses may be eligible for a specific exemption in respect of car parking). 

Where a car parking fringe benefit has been provided to employees (based on the above criteria being satisfied for a particular day), employers need to calculate their FBT liability.

One of the factors in determining if a car parking fringe benefit arises, is whether the car parking provided is within 1km of a ‘commercial parking station’ that charges an all-day parking fee on the first business day of the FBT year that is greater than the car parking threshold ($10.77 for the 2025 FBT year).

Taxation Ruling TR 2021/2 Fringe benefits tax: car parking benefits expanded the Australian Taxation Office (ATO) view of the definition of ‘commercial car parking facilities' to include facilities operating under a penalty-rate system. This means that ‘special purpose car parks’, which includes most shopping centre, hotel, airport, university or hospital car parks, which were previously excluded as commercial parking stations (per guidance from the ATO in the now-withdrawn TR 96/26W), may now be captured as ‘commercial car parking facilities’, and therefore give rise to an FBT liability.

On 6 February 2025, the Federal Court handed down his decision in Toowoomba Regional Council v Commissioner of Taxation [2025] FCA 161 where His Honour found in favour of the taxpayer, finding a shopping centre parking facility was not a commercial parking station as defined in the FBT law. This was on the basis that the car park was not operated commercially ‘for profit’. 

The Commissioner of Taxation has lodged an appeal to this decision and issued an Interim Decision Impact Statement (IDIS) which explains that the Commissioner does not intend to revise his views or guidance, until such time as the appeal process has been completed. In the meantime, the IDIS encourages employers to continue to apply the guidance within Taxation Ruling TR 2021/2. 

Further details in relation to this most recent decision can be found in our previous article.

The taxable value of a car parking fringe benefit is calculated by, in brief, assessing the value of the FBT car parking space, and multiplying the value by the number of fringe benefits provided during the FBT year. Notably:

• to determine the daily rate for each benefit, employers may choose to apply the commercial parking station method, the market value method or the average cost method, and
• to determine the number of fringe benefits provided in the year, employers can use the ‘actual method’, or alternatively, they can elect to adopt the statutory formula or the 12-week register method.

Employers should consider the most suitable method based on a range of factors, including the car parking location, the nature of your working arrangements and the data available at each car parking location.

Which valuation method?

When assessing the value of the car parking space, employers have the option of electing to use the commercial parking station method, average cost method or the market value method.

• Under average cost method, the value of the car parking fringe benefit is calculated by taking the average of the lowest fee charged by an operator of a commercial parking station within 1km radius of the premises, on the first and last days during the FBT year on which a car parking benefit was provided.
• Under the market valuation method, the value of the car parking fringe benefit is determined by a qualified valuer, and the employer is required to obtain a valuation report from the valuer.

Given the increased record-keeping requirements and costs associated with the market value method (for example, due to the cost to obtain a valuation report from an independent, qualified valuer), employers generally turn to the average cost report when calculating the taxable value of a car parking fringe benefit. However, employers may wish to explore - at least for a test year - whether the market valuation method may result in a more favourable outcome (i.e. a lower value) than the average cost method.

For example, a lower value may result from obtaining a market valuation in certain areas, such as where there are a limited number of commercial car parks or where there is a ‘special purpose car park’. In addition, the market valuation method may be more appropriate in scenarios where car parking operators have had significant increases in pricing at the end of the FBT year.

Regardless of the method elected, employers should ensure that adequate documentation is maintained supporting any valuation that is utilised as this is a key focus area of the ATO.

As a result of work from home arrangements, there has been a substantial decrease in car travel and the utilisation of car parking spaces over the years (with some level of resurgence, over the last year or two).

A car parking fringe benefit only arises on a given day when an employee uses their car to commute between home and work, and parks it in a space provided by the employer in the vicinity of the employee’s place of employment. Under the statutory formula method, an employer is deemed to provide a car parking benefit 228 times during the FBT year, regardless of the number of the times an employee actually uses the car parking space. The statutory formula method was based upon ‘traditional’ work arrangements, however work from home (and hybrid working) arrangements put into question its benefit, with administrative ease often being a key driver for its use.

Therefore, whilst the statutory formula method is the most simple to administer, it may result in additional FBT costs for employers which allow employees to work from home regularly. Where this is a concern, employers may consider the ‘actual’ method in order to ensure the FBT outcome is reflective of actual space usage, although record keeping requirements across the full FBT year will exist.

Where employers do not have access to car parking data for the full FBT year, the 12-week register method could be considered. Under this method, employers are required to keep a record of the actual number of car parking benefits provided to employees for a continuous period of 12 weeks, noting that 12-week period must be representative of expected usage across the FBT year. The number of benefits provided from this register can then be applied for the 2025 FBT year and a future four FBT years (unless the number of car spaces (or number of employees if less than the number of spaces) increases by more than 10%). Employers should therefore consider this option where they have partial car parking usage data for the 2025 FBT year, and where the employee use of car parking is consistent during the FBT year.

As data capabilities of car parking stations increase, we have observed many employers with boom gate or swipe card data now having the capability of analysing whether an employee has parked for more than four hours and whether a parking spot has actually been occupied. For employers with access to such data, there may be an ability to consider and compare different calculation methodologies.

We summarise below some final recommendations for employers reviewing car parking benefits for the 2025 FBT compliance season:

• Keep a register of all business premises (including which of those have parking facilities) and any car parking spaces/arrangements at external car parks, including the number of spaces, types of car parks, dates during which spaces were available and if possible, employee usage records.
• Revisit whether your business changed at all, either through remodelling of physical offices, changing office locations, or different business acquisitions (particularly those that were previously small businesses, etc.), that may result in changes to the dates and/or locations at which car parking benefits were provided.
• Analyse what car parking stations operate nearby to each location (at which car parking is provided), and assess whether they are likely to trigger an FBT liability (i.e. consider whether they are ‘commercial’, etc). Do not forget to take into account ‘special purpose car parks’ such as shopping centres, hospitals and universities. As previously noted, the ATO have advised that employers should continue to follow guidance in TR 2021/2 until the appeal process in the Toowoomba case has been finalised.
• Ensure the rates you intend to use are available to a sufficient section of the general public and monitor any further guidance released by the ATO in this respect.
• Consider the impact of any flexible working arrangements at any of your workplaces and determine whether adopting an alternative approach to the statutory formula method is more appropriate to determine the number of benefits provided during the year, such as tracking usage under the ‘actual method’ or ‘12 week register method’.
• Communicate with your car parking operator to understand whether they store car parking data which you can use to calculate the taxable value of your car parking fringe benefits.
• Investigate the public prices charged by car parking operators nearby to the car parking benefits you provide, particularly to consider whether there have been any reasonable increases that may warrant potentially adopting a different approach to valuing the car parking spaces.

To make a head start on your 2025 FBT return, please don’t hesitate to contact one of our Employment Taxes specialists or refer to the following articles on the PwC employment taxes website: