FBT on car parks provided by employers
Recent discussions around the proposed “carpark tax” have generated considerable interest. It’s a great opportunity to review how Fringe Benefit Tax (FBT) already applies to employer-provided car parks and to explore the nuances of the current system.
How it works
When an employer offers a non-cash benefit, such as a car park, to an employee, it is by default subject to FBT. Many benefits can then be fully exempted or valued at zero. In the case of a car park, it is treated as an unclassified benefit that falls under a general category. However, there is an important exception: if the car park is provided on business premises, it qualifies for an FBT exemption.
What constitutes “on-premises”?
The classification of a car park as “on-premises” centers on the nature of the right to use the space:
- Leased car parks: When a property or a specific car park is leased with an exclusive right, it generally forms part of the business premises and benefits from the FBT exemption.
- Licensed car parks: If the arrangement is based on a license that permits the use of one car park among several—such as a shared parking area—then the exemption does not apply and FBT is payable.
For further details, refer to IRD’s Public Ruling – BR Pub 99/6.
Proposed changes
There has been lively discussion about extending FBT to all car parks within the Auckland and Wellington CBDs. This proposal is aimed at ensuring that the value of car parks—as a component of an employee’s remuneration—is recognised as a fringe benefit. While the proposal is designed with fairness in mind, it is hard to see a practical way to get it right in real-world settings.
Making car parks in the Auckland and Wellington CBDs subject to tax can feel arbitrary and unfair, especially when a slight difference in location within the boundaries determines whether FBT applies.
In summary
While recent media coverage may suggest a “new” tax, FBT on car parks and related exemptions has long been part of our tax system. As for alternatives, neither we nor the IRD have identified a more practical solution. Until a clearer approach emerges, maintaining the status quo remains the most viable option.