FBT on Employer Provided Carparks

Employers are required to pay FBT on non-cash benefits provided to staff. However, like most taxes, there are exemptions.

It is important to be aware of the exemptions to ensure FBT is not overpaid. One such exemption provides that benefits (other than travel, accommodation or clothing) provided and used on the employer’s premises will not be subject to FBT. The provision of carparks fits within this exemption category.

Historically, what qualifies as “premises of the employer” has been uncertain. For example, if an employer is located next door to a carpark building and arranges and pays for six employees to have access to carparks in the building, do these carparks qualify as being provided on the employer’s premises?

The IRD has recently finalised two Public Rulings that include a change to its position on what qualifies as “premises of the employer” in this situation. Previously, the legal form of the car parking arrangement was the determining factor. For instance, carparks were required to be owned or leased by the employer to qualify for the exemption. Licence agreements did not satisfy the  exemption requirements, even if the substance of the agreement was more akin to a lease.

In its Ruling, the IRD has softened its view and allowed a ‘substance over form’ approach. This will increase the number of situations that fall within the exemption by allowing license agreements to be regarded as being “on-premises”, provided that the employer has a “substantially exclusive” right to use the carpark.

For more information on FBT on Employer-provided carparks go to our Latest News page or refer page 1 of the pdf version click here or contact us.