Linkedin
Facebook
Email
more
On 6 February 2025, Logan J of the Federal Court of Australia delivered his judgment in Toowoomba Regional Council v Commissioner of Taxation [2025] FCA 161 (the Judgment), finding in favour of the taxpayer that a car parking facility attached to a shopping centre did not satisfy the definition of ‘commercial parking station’ that is prescribed by section 136 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).
Subject to the outcome of a notice of appeal that has been filed by the Commissioner of Taxation (Commissioner), the Judgment will save Toowoomba Region ratepayers $3 million over the next ten years , and more broadly present an opportunity for many taxpayers to access cash refunds for historic overpayments, and materially reduce prospective payments, of fringe benefits tax (FBT) referable to car parking.
Context
Relevantly, the provision of car parking for free or at a reduced rate by an employer will only constitute a fringe benefit where a ‘commercial parking station’ that charges more than the prevailing FBT car parking daily rate threshold is located within a one kilometre radius of the relevant car park . Accordingly, the applicable definition of ‘commercial parking station’ bears significance.
Section 136 of the FBTAA defines the term ‘commercial parking station’ to mean
‘ … a permanent commercial car parking facility where any or all of the car parking spaces are available in the ordinary course of business to members of the public for all - day parking on that day on payment of a fee, but does not include a parking facility on a public street, road, lane, thoroughfare or footpath paid for by inserting money in a meter or by obtaining a voucher.’
Although the foregoing definition was subject to judicial consideration by the Full Federal Court in Commissioner of Taxation v Qantas Airways [2014] FCAFC 168 (Qantas), that decision focussed narrowly on the apposite meaning of ‘public’ and did not consider the definition in totality.
Notwithstanding the bounds of the decision in Qantas, it did embolden the Commissioner to issue Taxation Ruling TR 2021/2 Fringe benefits tax: car parking benefits (TR 2021/2), which in effect reversed his hitherto view that car parking facilities that charge penalty rates were not ‘commercial parking stations’. This about turn by the Commissioner materially impacted a number of taxpayers with premises proximate to facilities such as airports, hospitals, and shopping centres.
Facts
The relevant facts were straightforward: the Toowoomba Regional Council (TRC) provided free on-site car parking to its employees, with its premises situated within a one kilometre radius of the Grand Central shopping centre’s car park.
Parking at the Grand Central shopping centre’s car park is free for the first three hours, with escalating penalty rates applied thereafter up to the maximum daily rate of $20. The car park also offers free car parking in certain circumstances – e.g., after 6pm or to cinema patrons, as well as discounted all day parking for shopping centre staff. The maximum daily rate charged by any other car parking facility in the Toowoomba CBD was just $9 (i.e., below the prevailing FBT car parking daily rate threshold)
It followed that TRC would only be liable to FBT on car parking benefits provided to its employees if the Grand Central shopping centre’s car park was regarded as a ‘commercial parking station’.
The Judgment
The Judgment, which followed an unsuccessful private binding ruling application and objection by TRC, was in favour of TRC on the basis that the Grand Central shopping centre’s car park did not constitute a ‘commercial parking station’ for the purposes of the FBTAA.
In arriving at this conclusion, Logan J considered the relevant meaning of ‘commercial’, including the threshold question of whether sufficient ambiguity inhered in the term to warrant recourse to extrinsic material (i.e., having regard to section 15AB of the Acts Interpretation Act 1901).
Ultimately, Logan J held that because the adjective ‘commercial’ could reasonably be construed in multiple ways, it was both appropriate and permissible to have regard to the relevant explanatory memorandum to ascertain the intended meaning of ‘commercial parking station’. Critically, the relevant explanatory memorandum expressly provided as follows:
‘For the purposes of these provisions, short term shopper parking facilities, using penalty rates for all day parking, will not be treated as a “commercial parking station”.’
Logan J therefore concluded that the adjectival word ‘commercial’, considered in its context and having regard to the purpose of the relevant provision, connoted the existence of a profit-making purpose, whereas the Grand Central shopping centre’s car park was being operated to a different end, namely, to complement the operation of the shopping centre.
Implications
In addition to its instruction regarding the task of statutory interpretation, and direct FBT savings for TRC and its ratepayers, the Judgment has potentially significant implications for taxpayers who are subject to FBT on car parking benefits owing to their proximity to a car parking facility or car parking facilities that charges penalty rates (e.g., airports, hospitals, or shopping centres). Specifically, such taxpayers may be eligible for material refunds of past overpayments of FBT, as well as prospective savings on their FBT bills.
Notwithstanding that the Judgment is subject to a notice of appeal that has been filed by the Commissioner, we encourage you to contact your local RSM Advisor for further information or advice on the Judgment’s implications for your organisation. Having directly advised TRC in connection with this matter, we are well-placed to assist your organisation.
FOR MORE INFORMATION
If you would like to learn more about the topics discussed in this article, please contact your local RSM office.
1. Federal Court ruling gives TRC clearer picture of FBT obligations, saves residents millions
2. FBTAA, section 39A.
