FBT on car parks provided by employers

We already have FBT on car parks

A lot has been said about the proposed ‘carpark tax’ in recent weeks. I hesitate to comment too formally on the matter because its complex. However, one thing seems to be overlooked in the press coverage so far: There is already FBT on car parks under the current rules. A lot of media reports have been promoting this as a new tax, when in fact its not.

Overview of how it works

Providing a non-cash benefit to an employee is subject to FBT by default. It may then be exempted or valued to zero. Providing a carpark to an employee is an unclassified benefit, meaning it is caught under the catch all rather than specifically. However, there is an exclusion for benefits that are provided on-premises. This includes car parks as long as they are on a business premises.

When is a car park on-premises?

This is where it gets a little weird. If you lease a property, or even just a single car park and have an exclusive right to it, then that is a business premises and the exemption applies. However, if you don’t have an exclusive right to it because you license the right to use one park from many (i.e. a park on a floor shared with other people) then this is not your premises and you have to pay FBT. In summary

  • Leased car parks – Exempt from FBT
  • Licensed car parks – FBT is payable

See IRDs Public Ruling – BR Pub 99/6 for the detail regarding FBT on car parks.

Are the proposed rules fair?

Are the proposal for FBT on all car parks within the Auckland and Wellington CBDs fair? In my opinion, yes and no. FBT on car parks where they are valuable, and clearly part of an employee’s remuneration package seems fair. However, in the real world – there just doesn’t seem to be a practical way to get it right. Making car parks in the Auckland and Wellington CBDs subject to tax is arbitrary and unfair particularly if you are on the wrong side of the road within the boundaries.

Is there a better way? We haven’t come up with one and neither has IRD. Until they have the status quo seems to be the way to go.