Taxation Laws Amendment (FBT Cost of Compliance) Act 1995 (145 of 1995)

Schedule 2 CAR PARKING

Part 2 AMENDMENT OF THE INCOME TAX ASSESSMENT ACT 1936

Division 1 Insertion of new Division dealing with car parking

12 After Division 4 of Part III

Insert:

"Division 4A-Car parking for certain self-employed persons,

partnerships and trusts

"Subdivision A-Key principle, overview and coverage of Division

The key principle

"89A.

No deduction is allowable under this Act to a self-employed person, a

partnership or a trust for certain parking expenditure unless the

amount that would otherwise be deductible is reduced by the amount

calculated using one of the approved valuation methods.

Overview of Division

"89AA. The following table summarises the contents of this Division:

OVERVIEW

Subdivision Coverage

A Key principle, overview and coverage of Division

B The basic requirement that the deduction must be

calculated using an approved valuation method

C The commercial parking station method

D The market value method

E The average cost method

F The statutory formula (spaces) method

G The 12 week record keeping method

H Special provisions-2 anti-avoidance provisions

J Definitions (many terms have the same meaning as in

the Fringe Benefits Tax Assessment Act 1986)

Deductions to which Division applies

"89AB.(1) This Division applies to any deduction that would otherwise

be allowable to a taxpayer who is a natural person (including a person

in the capacity of trustee) or a partnership if all of the conditions

set out in this section are satisfied.

The first condition

"(2) The first condition is that the deduction (the gross deduction)

would, apart from this Division, be allowable to the taxpayer under

this Act in respect of expenditure to the extent to which it is

incurred in respect of the provision of car parking facilities for a

car on a day (the parking day) on or after 1 July 1995.

The second condition

"(3) The second condition is that, on the parking day, the taxpayer

or a partner in the taxpayer (if the taxpayer is a partnership) has a

primary place of self-employment and the car is used in connection with

travel by the taxpayer or partner between his or her place of residence

and that primary place of self-employment.

The third condition

"(4) The third condition is that:

(a) on the parking day, the car is parked on particular premises (the

parking premises) for one or more daylight periods exceeding 4 hours in

total; and

(b) the parking premises are at, or in the vicinity of, the primary

place of self-employment; and

the parking premises; and

(d) the lowest fee charged by the operator of any such commercial

parking station in the ordinary course of business to members of the

public for all-day parking on the first business day of the year of

income is more than $5.00.

Note: An anti-avoidance provision applies to paragraph (4)(d)-see

section 89HA.

The final condition

"(5) The final condition is that the expenditure is in respect of the

provision of the parking facilities to which that parking relates.

Regulations may exclude certain cases

"89AC. This Division does not apply to a deduction if the provision

of parking facilities for the car during the period or periods to which

the deduction relates is taken, under the regulations, to be excluded

from this Division.

"Subdivision B-Deduction to be calculated using an

approved valuation method

Deduction to be calculated using an approved valuation method

"89B.(1) If this Division applies to a gross deduction, the gross

deduction is not allowable to the taxpayer, unless the taxpayer elects

to use an approved valuation method in calculating the amount of the

deduction.

"(2) The following are the approved valuation methods:

(a) the commercial parking station method;

(b) the market value method;

(d) the statutory formula (spaces);

(e) the 12 week record keeping method.

"Subdivision C-The commercial parking station method

What an election to use this method covers

"89C. A taxpayer may elect to use the commercial parking station

method to cover all gross deductions for the taxpayer that relate to:

(a) a particular car; and

(b) particular parking premises; and

Amount of deduction using this method

"89CA.(1) The amount of the deduction worked out using this method

is:

Gross deduction amount - Commercial parking station amount.

"(2) The gross deduction amount is:

(a) if only one gross deduction is covered by the election-the amount

of that gross deduction; or

(b) if more than one gross deduction is covered by the election-the

sum of the amounts of those gross deductions.

"(3) The commercial parking station amount is equal to the lowest fee

charged by any operator of commercial parking stations within a 1 km

radius of the parking premises in the ordinary course of business to

members of the public for all-day parking on the parking day.

"Subdivision D-The market value method

What an election to use this method covers

"89D. A taxpayer may elect to use the market value method to cover

all gross deductions for the taxpayer that relate to:

(a) a particular car; and

(b) particular parking premises; and

Amount of deduction using this method

"89DA.(1) The amount of the deduction worked out using this method

is:

Gross deduction amount - Market value amount.

"(2) The gross deduction amount is:

(a) if only one gross deduction is covered by the election-the amount

of that gross deduction; or

(b) if more than one gross deduction is covered by the election-the

sum of the amounts of those gross deductions.

"(3) The market value amount is the amount that the taxpayer could

reasonably be expected to have been required to pay in respect of the

provision of the parking facilities for the car on the parking day if:

(a) those facilities had been provided by another person; and

(b) the parties to the transaction were dealing with each other at

arm's length.

Valuer's report needed if method is used

"89DB. An election to use the market value method in relation to one

or more days in a year of income has no effect unless:

(a) a suitably qualified valuer gives to the taxpayer a report, in a

form approved by the Commissioner, about the valuation of the provision

of the car parking facilities; and

(b) the valuer is at arm's length in relation to the valuation; and

relates to the market value method, is based on the report.

"Subdivision E-The average cost method

What an election to use this method covers

"89E. A taxpayer may elect to use the average cost method to cover

all gross deductions for the taxpayer that relate to:

(a) a particular car; and

(b) particular parking premises; and

Amount of deduction using this method

"89EA.(1) The amount of the deduction worked out using this method

is:

Gross deduction amount - Average cost amount.

"(2) The gross deduction amount is:

(a) if only one gross deduction is covered by the election-the amount

of that gross deduction; or

(b) if more than one gross deduction is covered by the election-the

sum of the amounts of those gross deductions.

"(3) The average cost amount is equal to:

A + B

where:

A is the lowest fee charged in the ordinary course of business to

members of the public for all-day parking by any operator of a

commercial parking station located within a 1 km radius of the parking

premises on the first parking day for the taxpayer or the partner (as

the case requires) for those premises in that year of income.

B is the lowest fee charged in the ordinary course of business to

members of the public for all-day parking by any operator of a

commercial parking station located within a 1 km radius of any of the

parking premises on the last parking day for the taxpayer or the

partner (as the case requires) for those premises in that year of

income.

Fees must be representative if method is used

"89EB. An election to use the average cost method is of no effect if

the fees referred to in subsection 89EA(3) are not representative.

"Subdivision F-Statutory formula (spaces) method

The key principle

"89F. Under this Subdivision, a taxpayer may elect to reduce the

amount of certain deductions by an amount calculated using a statutory

formula based on the number and value of spaces available to the

taxpayer, or, if the taxpayer is a partnership, to partners in the

taxpayer who are covered by the election.

Spaces method of calculating total deduction for car parking expenses

Election

"89FA.(1) A taxpayer, other than a partnership, may elect to use the

statutory formula (spaces) method to cover all of the gross deductions

for the taxpayer for a year of income.

Election-partnerships

"(2) A partnership may elect to use the statutory formula (spaces)

method to cover all of the gross deductions for the taxpayer for a year

of income that relate to one or more partners in the taxpayer.

Partnership must specify partners covered by election

"(3) The partnership must specify that the election covers gross

deductions that relate to:

(a) all the partners; or

(b) all partners of a particular class; or

Total value of deductions

"(4) Despite any other provision of this Act (other than section

89FB) the total amount of deductions covered by the election for the

year of income is the amount worked out using the spaces method under

subsection (5).

Note: Section 89FB covers the situation where the number of spaces

available to partners exceeds the number of partners.

Method

"(5) The spaces method is:

Step 1: Work out an amount using the following formula, for each space

for which there is, in the year of income, at least one gross deduction

for the taxpayer, or for a partner covered by the election (as the case

requires):

Number of days in

availability periods in

Daily rate amount X relation to space X 240

366

Step 2: Work out the total of all the amounts calculated under Step 1

(the total statutory deduction).

Step 3: Subtract the total statutory deduction from the gross deduction

amount.

Note 1: Section 89FC defines daily rate amount.

Note 2: Section 89FD defines availability period.

Note 3: Subsection (6) defines gross deduction amount.

"(6) The gross deduction amount is:

(a) if only one gross deduction is covered by the election-the amount

of that gross deduction; or

(b) if more than one gross deduction is covered by the election-the

sum of the amounts of those gross deductions.

"(7) The election is of no effect if, in working out the daily rate

for a space, the fees referred to in subsection 89EA(3) are not

representative (see section 89JB).

Number of spaces exceeds number of partners

"89FB.(1) This section applies if the taxpayer is a partnership and,

throughout the parking period (see subsection (5)), the average number

of partners covered by the election is less than the average number of

spaces (eligible spaces) for which there is an availability period.

Formula to reduce total statutory benefits

"(2) If this section applies, the total statutory deduction (see Step

2 in subsection 89FA(5)) is multiplied by the following fraction:

Average number of partners

Average number of eligible spaces

"(3) The average number of partners is:

Number of partners covered Number of partners

by election at the beginning + covered by election at the

of the parking period end of the parking period

"(4) The average number of eligible spaces is:

Number of eligible spaces at Number of eligible spaces at

the beginning of the parking + the end of the parking

period period

"(5) The parking period is the period:

(a) beginning on the first day in the year of income on which the

parking of a car in any space referred to in subsection 89FA(5) gives

rise to a gross deduction of the taxpayer that relates to a partner

covered by the election; and

(b) ending on the last day in the year of income on which the parking

of a car in any space referred to in subsection 89FA(5) gives rise to a

such a gross deduction.

Number of partners and number of spaces must be representative

"(6) This section does not apply if the number of partners or the

number of eligible spaces referred to in subsections (3) and (4) are

not representative (see subsection (7)).

Meaning of not representative

"(7) A number of partners, or a number of eligible spaces, as the

case requires, is not representative if the number of partners, or

eligible spaces, as the case requires, is substantially greater or less

than the average number throughout whichever of the following periods

is chosen by the employer:

(a) the 4 week period ending on the first day of the parking period;

(b) the 4 week period beginning on the last day of the parking

period.

Meaning of daily rate amount

"89FC. The daily rate amount for a space is the amount that would be

worked out under section 89EA as the gross deduction amount for the

space.

Meaning of availability period

"89FD. An availability period for a space:

(a) begins:

(i) in the case of a taxpayer other than a partnership-on the first

day in the year of income on which the parking of a car in the space

gives rise to a gross deduction of the taxpayer; or

(ii) in the case of a partnership-on the first day in the year of

income on which the parking of a car in the space gives rise to a gross

deduction of the taxpayer that relates to a partner covered by the

election; and

(b) ends on the last day in the year of income on which the parking

of a car in the space gives rise to such a gross deduction.

"Subdivision G-The 12 week record keeping method

The key principle

"89G.

Under this Subdivision, a taxpayer may keep a 12 week register of car

parking. A taxpayer who keeps such a register may elect that the total

amount of gross deductions for years of income for which the register

is valid is to be determined in accordance with the register.

What an election to use this method covers

"89GA.(1) A taxpayer may elect to use the 12 week record keeping

method to cover all gross deductions for the taxpayer for a year of

income.

"(2) A partnership may, alternatively, elect to use the 12 week

record keeping method to cover all gross deductions for the partnership

that relate to a particular partner, or particular partners, for a year

of income.

Amount of deduction using this method

"89GB. The total amount of the deductions covered by the election is:

( Allowable ) Number of days in

(deductions (register) X 52) X car parking

( 12) availability periods

366

Meaning of allowable deductions (register)

"89GC.(1) The allowable deductions (register), in relation to a year

of income, means the amount that would be the total allowable

deductions for the taxpayer for the 12 week period for which a register

is kept, assuming that:

(a) the register had been kept in that year of income; and

(b) the amount of the deductions were calculated in accordance with

the information in the register; and

following methods that the taxpayer chooses:

(i) the commercial parking station method;

(ii) the market value method;

(iii) the average cost method.

"(2) In working out the allowable deductions (register) for a

partnership, only those deductions that are attributable to the

partners covered by the election are to be taken into account.

Meaning of car parking availability period

"89GD. The car parking availability period is the period:

(a) beginning on the first parking day for the taxpayer or a partner

covered by the election (as the case requires) in that year of income;

and

(b) ending on the last parking day for the taxpayer or a partner

covered by the election (as the case requires) in that year of income.

Choosing the 12 week period for a register

"89GE.(1) The register must be kept for a continuous period of at

least 12 weeks.

"(2) The period over which the register is kept must be

representative of usage for the first year of income for which it is

valid.

"(3) If subsection (1) or (2) is not satisfied, the register is not

valid.

Years of income for which register is valid

12 week period in one year of income

"89GF.(1) If the 12 week period begins and ends in the one year of

income, the register is valid for that year of income and, subject to

subsections (3), (4) and (5), for each of the 4 years of income

immediately following that year.

12 week period over two years of income

"(2) If the 12 week period begins in one year of income and ends in

another year of income, the register is only valid for the second year

of income and, subject to subsections (3), (4) and (5), for each of the

4 years of income immediately following that year.

When register ceases to be valid

"(3) A register that is valid for a year of income ceases to be valid

at the end of that year if before the end of that year of income, the

Commissioner gives the taxpayer a notice advising the taxpayer that the

Note: This means that if the Commissioner notifies the taxpayer, the

taxpayer will have to keep a new register in the following year of

income if the taxpayer wants to use this method.

"(4) A register kept by a taxpayer other than a partnership that is

valid for a year of income ceases to be valid if there is a later valid

"(5) A register kept by a taxpayer that is a partnership that is

valid for a year of income ceases to be valid if there is a later valid

Matters to be included in register

"89GG.(1) The register must include the following details:

(a) the date on which each car covered by subsection (4) was parked;

(b) whether the car was parked for a total that exceeds 4 hours;

between his or her place of residence and his or her primary place of

self-employment on that day;

(d) the place where the car was parked.

"(2) The person responsible for making entries in the register must

make the entry as soon as practicable after he or she knows the details

required by subsection (1).

"(3) If subsection (1) or (2) is not satisfied, the register is not

valid.

"(4) A car is covered by this subsection if the car was used in

connection with travel by the taxpayer, or a partner covered by the

election, between his or her place of residence and his or her primary

place of self-employment on any day in the 12 week period.

Fraudulent entries invalidate register

"89GH. For the purposes of this Act, a register is not valid if the

particular.

"Subdivision H-Special provisions

Anti-avoidance-commercial parking stations

"89H. If either or both of the following apply:

(a) a transaction between the operator of a commercial parking

station and a customer is not at arm's length;

(b) the operator of a commercial parking station sets the level of a

fee for the sole or dominant purpose of enabling one or more taxpayers

to avoid, in whole or in part, the application of this Division;

then, for the purposes of this Division:

the fee that would have been payable if the operator and the customer

had been dealing with each other at arm's length in relation to the

transaction; and

(d) if only paragraph (b) applies-it is to be assumed that the fee is

the fee that would have been payable if it had been set without that

purpose in mind; and

(e) if both paragraphs (a) and (b) apply-it is to be assumed that the

fee is the fee that would have been payable if:

(i) the operator and the customer had been dealing with each other

at arm's length in relation to the transaction; and

(ii) it had been set without that purpose in mind.

Anti-avoidance-fee on first business day after 31 March not

representative

"89HA. For the purposes of paragraph 89AB(4)(d), any fee on the first

business day after 31 March in a year that is not representative is

taken to be more than $5.00.

"Subdivision J-Interpretation

When a commercial parking station is within 1 km

"89J. A commercial parking station is taken to be located within a 1

km radius of particular parking premises if, and only if, a car

entrance to the commercial parking station is situated less than 1 km,

by the shortest practicable route, from a car entrance to those

premises.

Daily rate equivalent for periodic parking arrangements

"89JA. If the operator of a commercial parking station provides

all-day parking in the ordinary course of business to members of the

public on a weekly, monthly, yearly or other periodic basis, the

operator is taken to charge a fee for all-day parking on a particular

day during the period equal to the amount worked out using the formula:

Total fee

Number of business days in period

where:

Total fee is the total fee charged by the operator in respect of

all-day parking on days in that period.

When fees are not representative

"89JB. A fee charged by an operator of a commercial parking station

on a particular day is not representative if the fee is substantially

greater or less than the average of the lowest fee charged by the

operator in the ordinary course of business to members of the public

for all-day parking on each of the days in whichever of the following

periods is chosen by the taxpayer:

(a) the 4 week period beginning on the day; or

(b) the 4 week period ending on the day.

Definitions

"89JC. In this Division:

all-day parking has the same meaning as in the Fringe Benefits Tax

Assessment Act 1986.

business day has the same meaning as in the Fringe Benefits Tax

Assessment Act 1986.

car has the same meaning as in the Fringe Benefits Tax Assessment Act

1986.

commercial parking station has the same meaning as in the Fringe

Benefits Tax Assessment Act 1986.

daylight period has the same meaning as in the Fringe Benefits Tax

Assessment Act 1986.

expenditure does not include expenditure of a capital nature.

income-producing activity, for a person, means an activity (including

an investment activity) carried on for the purpose, or purposes that

include the purpose, of producing:

(a) in any case-assessable income (other than salary or wages) of the

person of any year of income; or

(b) if the person is a partner in a partnership-assessable income of

the partnership of any year of income; or

of the trust estate of any year of income.

place of residence has the same meaning as in the Fringe Benefits Tax

Assessment Act 1986.

primary place of self-employment, for a person on a day, means premises

where:

(a) if the person carried on income-producing activities on that day-

on that day; or

(b) in any other case-on the most recent day before that day on which

the person carried on income-producing activities;

those premises are or were the sole or primary place from which, or at

which, the person carried on income-producing activities.

salary or wages has the same meaning as in section 221A.".

Division 2-Consequential amendments

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