Looking into a recent case regarding car parking fringe benefits: Virgin Australia Airlines Pty Ltd v FCT

It is not often there is a court decision involving the interpretation of provisions of the Fringe Benefits Tax Assessment Act 1986. (FBT Act). Strangely though many of the recent cases have involved the interpretation of the car parking fringe benefit provisions.

In the recent case, Virgin Australia Airlines Pty Ltd v FCT [2021] FCA 523 (‘Virgin’) the court was asked to consider whether car parking provided to flight and cabin crews (‘FCC employees’) gave rise to a car parking fringe benefit.

The court found it didn’t and in the process of so doing considered the requirement that, for a car parking fringe benefit to arise, parking must be provided in the vicinity of the employee’s primary place of employment.

Car parking provided by an employer that is not a car parking fringe benefit is exempt from FBT under section 58G of the Fringe Benefits Tax Assessment Act 1986 (‘FBT Act’).

We explore the facts of the case and issues for consideration below. The main take-away from the case though is whether this decision has implications for other employers.

Issue

The case concerned whether the FCC employees’ ‘primary place of employment’ was their home base airport terminal, an aircraft or the employees did not have a primary place of employment.

The issues identified for determination were:

1. whether, on each relevant working day, the FCC employees had a ‘primary place of employment’ for the purposes of s. 39A(1)(e) of the FBTA Act;
2. if so, the location of that ‘primary place of employment’; and
3. whether, on each relevant working day, the FCC employees’ cars were ‘parked at, or in the vicinity of’ that primary place of employment for the purposes of s. 39A(1)(f) of the FBTA Act.

It was accepted there would be no car parking fringe benefit where the FCC employees:

1. did not have a ‘primary place of employment’ on the relevant days; or
2. had a ‘primary place of employment’ which was the aircraft on which they flew on a relevant day.

Facts

The Taxpayers, whose principal business activity was the transportation of passengers on aircraft, had contracted with commercial car park operators at Sydney, Brisbane and Perth airports for the provision of car parking spaces at those airports. The Taxpayers provided the car parking facilities to the FCC employees by giving them access cards to the car park at the airport nearest to the location where the employees lived (‘origin airport’).

Duties of FCC employees

During their rostered shifts, the FCC employees performed their duties at both airport terminals and on the aircraft. The type of duties undertaken prior to departure and following arrival of the aircraft were central to the question of whether the airport terminal was the ‘primary place of employment’ of the FCC employees.

The flight crew employees undertook a number of duties at airport terminals, including:

• signing on at the crew room at least 60 minutes prior to their first scheduled domestic flight (90 minutes for international flights);
• reviewing various pre-flight operational information (a task of approximately 15-20 minutes);
• performing pre-flight procedures once onboard the aircraft (30 minutes);
• completing a post-flight administrative checklist upon arrival;
• remaining onboard for the next flight or changing aircraft if required — there was no evidence before the Court indicating how frequently flight crew needed to change aircraft during the course of a single day, but to the extent they did, the flight crew waited in the terminal;
• after their final rostered flight of the day — performing post-flight checks and signing off at the crew room in the terminal (which may or may not be the terminal at the origin airport).

The duties of cabin crew employees included: attending a pre-flight briefing (approximately eight minutes); boarding passengers (approximately 20 minutes); upon arrival, disembarking passengers from the flight and cleaning the aircraft (approximately 30 minutes); remaining on-board for the next flight or changing aircraft if required (in which case they would wait in the terminal in between). Like the flight crew, the cabin crew employees also signed on and off their shifts at the crew room in the relevant terminal (which may or may not be the origin terminal).

Relevant legislative provisions

As the Taxpayer contracted directly with the car parking facility providers, the expense was not an expense payment benefit under s. 20 and therefore was not an eligible car parking expense payment benefit.  This meant that the provision of car parking facilities to the FCC employees was an exempt benefit under s. 58G(1) of the FBTA Act unless s. 39A (about car parking benefits) applied.

The relevant provisions of the FBT Act are:

Section 39A — Car parking benefits

1. 1. If the following conditions are satisfied in relation to a daylight period, or a combination of daylight periods, on a particular day:

‘…

(e)   on that day, the employee has a primary place of employment;

(f)    during the period or periods, the car is parked at, or in the vicinity of, that primary place of employment;

the provision of parking facilities for the car during the period or periods is taken to constitute a benefit provided by the provider to the employee or the associate of the employee in respect of the employment of the employee.

Section 136 — Interpretation

In this Act, unless the contrary intention appears:

‘primary place of employment’, in relation to an employee in relation to a day, means business premises, or associated premises, of the employer of the employee, or of an associate of the employer, where:

1. if the employee performed duties of his or her employment on that day — on that day; or
2. in any other case — on the most recent day before that day on which the employee performed duties of his or her employment; those premises are or were:
3. the sole or primary place of employment of the employee; or
4. otherwise the sole or primary place from which or at which the employee performs duties of his or her employment.

…

‘business premises’, in relation to a person, means premises, or a part of premises, of the person used, in whole or in part, for the purposes of business operations of the person, but does not include:

                                …

c. boats or planes used primarily for the purpose of providing entertainment unless the boat or plane is used in the person’s business of providing entertainment; or

…”

In the definition of ‘business premises’ in subsection (1), premises includes a ship, vessel, floating structure, aircraft or train.

Reasons for decision

Whether the FCC employees had a ‘primary place of employment’ as defined in s. 136(1) and if so, what was that ‘primary place of employment’

The FCC employees did not have a ‘sole’ place of employment but performed their duties of employment in several places, namely:

• the airport terminal where they commenced duty and attended to matters relating to signing on and other related pre-flight duties;
• the one or more aircraft on which they were located for the particular day;
• the destination airport terminal or terminals where the aircraft landed;
• the airport terminal where they finished their duty (which was not necessarily their origin airport or the terminal where they commenced duty).

The question was which of those locations was the ‘primary’ place of their employment.

The ordinary meaning of the word ‘primary’ — which is defined in the Macquarie Dictionary as ‘first or highest in rank or importance; chief; principal’ — required a determination as to which place of employment was the first or highest in rank or importance. This required undertaking a qualitative and quantitative exercise to compare the duties which were performed by the relevant employees at their different places of employment during a particular day.

• In the case of domestic flights where the FCC employees operated on only one aircraft during the particular day, their primary place of employment on that day was that aircraft — in such a case, most of the relevant employees’ time was spent performing their duties on-board the aircraft and while it was in flight. They also performed some duties on the aircraft while it was not in flight but was connected to a gate at a terminal, whether at the beginning of the flight or after it arrived at its destination.
• The position was even stronger for international flights, where the time spent onboard the aircraft was likely to be longer and where similar duties were performed by relevant employees on the aircraft both before take-off, during flight, and after the aircraft reached its destination.
• In both cases, the duties performed by the FCC employees at airport terminals were ancillary to the principal duties which were performed on-board the aircraft. In a quantitative sense, such duties were of a short duration and while important in a qualitative sense, they were still ancillary to the on-board duties.

In relation to domestic rosters requiring FCC employees to service multiple sectors using different aircraft on a particular day, the fact that different aircraft were used did not mean that the ‘home base’ airport, nor the terminal where the FCC employees signed on for a shift, was the primary place of employment. The amount of time spent performing duties at those terminals (or any other terminal visited by the employees on a particular day) was far outweighed by the time spent performing duties on the aircraft or aircrafts during a daily roster. To the extent such rosters were utilised, there was no primary place of employment.

Griffith J rejected the Commissioner’s contention that the Taxpayers’ approach gave too little attention to the expression ‘from which’ in the phrase ‘sole or primary place from which or at which the employee performs duties of his or her employment’ in the definition of ‘primary place of employment’ in s. 136(1)(d).

• The definition did not direct attention to the place from which the relevant employee went out, nor the place at which they signed on or reported for duty. Rather, it directed attention at the sole or, in this case, primary business premises from which or at which the employee performed his or her duties and, by virtue of s. 136(2), those business premises can include an aircraft.
• Many of the duties of the FCC employees were performed on the aircraft, but other duties were also performed ‘from’ the aircraft. In the case of the flight crew, such duties included communicating with air traffic control or ordering fuel from the aerodrome controller. Similarly, when an aircraft was docked at a terminal gate, cabin crew interacted with ground staff and accordingly also performed some duties from the aircraft.

Whether on each working day an employee’s car was ‘parked at, or in the vicinity of’ the employee’s primary place of employment for the purposes of s. 39A(1)(f)

Given the Court’s findings in relation to the primary location of the FCC employees’ place of employment, Griffiths J found that this issue should also be answered favourably to the Taxpayers.

• Where the FCC employees operated on only one aircraft throughout a particular day, that was their primary place of employment, which was plainly not within the vicinity of any of the car parks.
• Where more than one aircraft was involved on a particular day, there was no primary place of employment and s. 39A(1)(f) did not arise.

Take-aways?

As with a lot of cases, ultimately the Virgin decision turns more on the facts of the case than any particular interpretational issue. The Virgin decision provides a timely reminder that, more than just providing a car park for an employee, the car park must be in the vicinity of the employee’s primary place of employment before a car parking fringe benefit exists.

All employers should consider whether this latter requirement opens up any opportunities to reconsider where the employer is providing car parking fringe benefits given the characteristics of the employer’s workforce/working arrangements.

In an earlier decision involving a member of the Virgin Airlines group – Virgin Blue Airlines Pty Ltd v FCT [2010] FCAFC 137 – a car park located a distance of 2 kilometres away from Melbourne Airport Terminal 3 was considered ‘not in the vicinity’ of the primary place of employment of Melbourne Airport, Terminal 3 based staff.

Is it therefore possible, particularly in Australia’s larger capital cities, for an employer to arrange staff parking that is not in the vicinity of the primary place of employment but still within a 2 km commute that could allow car parking to be provided outside of the FBT net.

As Rob Power is prone to saying, what does the room think?

This article provides a general summary of the subject covered as at the date it is published. It cannot be relied upon in relation to any specific instance. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.