“The difficulty here and the essence of what divides the parties is that there is no one natural and ordinary meaning in respect of the adjective “commercial” as used in the definition of “commercial parking station” in s 136(1) of the FBTAA”.
And with those words setting the scene, the decision of Logan J in Toowoomba Regional Council v FCT [2025] FCA 161 challenges the current ATO guidance causing uncertainty (and hope) for employers who provide car parking to employees.
The issue in question was whether a car park operated at the Grand Central shopping centre in Toowoomba was a “commercial parking station” for the purposes of section 39A of the Fringe Benefits Tax Assessment Act 1986 (FBT Act).
The decision held the car park should not be treated as a commercial parking station.
As with many tax cases there are various nuances at play and this matter is certainly one of those.
The ATO has since lodged an appeal.
As the appeal will not be determined before employers lodge their 2024/25 FBT return, a compliance ‘position’ will be required.
Under section 39A a car parking benefit arises (inter alia) where a car is parked at:
The FBT Act does not define ‘commercial’ and the phrase ‘commercial parking station’ is defined in section 136(1) using the wording ‘permanent commercial car parking facility’ which adds a complexity to the matter.
The Federal Court considered the word commercial should be interpreted in an adjectival sense but noted, before settling on a meaning:
“A choice does exist having regard to ordinary meaning of the adjective “commercial””.
Ambiguity as to the meaning of commercial arises from a possible meaning of deployed in commerce or one of operated “commercially” with the implication of a purpose of making a profit. While no profit has to actually be made, the intent to make a profit would need to exist.
Given the ambiguity, the decision proceeded on understood principles of statutory construction such that it was permissible to refer to the explanatory memorandum accompanying the introduction of the relevant provisions.
As reproduced from the decision:
“That being so, it is permissible, as a matter of statutory construction, to have regard to the explanatory memorandum. That is the explanatory memorandum circulated by the then Treasurer, the Honourable John Dawkins MP, in respect of the Taxation Laws Amendment (Car Parking) Bill 1992, where at p 6 and p 7, the following explanation is offered in respect of the definition in the bill of “car parking station”:
In relation to the definition of “commercial parking station”, the words “permanent and commercial” have been normal dictionary meanings. For example, a car park set up, for a short period to cater for a special function (like an Easter show) would not be permanent. A car park which was not run with a view to making a profit (usually reflected in significantly lower car parking rates charged, compared with the normal market value for that facility) would not be commercial.
Some car parking facilities have a primary purpose to provide short-term shopper parking. To discourage all-day parking, the operators of these facilities charge penalty rates for all-day parking. These rates are significantly greater than the rates that would be charged by a similar facility which encouraged all-day parking. 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”.
Accordingly, the interpretation afforded the word ‘commercial’ preferred the operated commercially meaning.
It is here the broader implications of the decision are impacted by the nuances of the litigation. The car park operator was not involved in the case and the facts (originating from a private ruling application) did not lead evidence as to whether the car park was in fact operated to make a profit (or did make a profit).
Instead the decision had to wrestle with limitations of the private ruling system and the defined “Facts and Circumstances” ruled upon in the context of later litigation there-of.
The Grand Central car park offered a range of car parking fees, including free parking for up to 3 hours, and was in Logan J’s view being operated as “an attractive force that brings in business to the shopping centre, and more particularly its tenants“. When being considered as a commercial car parking facility alone, as opposed to in the context of the operation of the shopping centre, “…the range of free parking is inconsistent with it being operated commercially for profit”.
This decision is in contrast to the ATO’s ruling TR 2021/2 which confirms:
35. “…A parking facility may still qualify as a commercial parking station even if some of its car spaces are available for other purposes. Such purposes include:
• short-term parking, such as hourly parking at a hospital, shopping centre, hotel, university or an airport, or
• long-term parking; that is, parking over a period exceeding one day.
36. All-day parking may still be provided in the ordinary course of business, even if a parking facility’s fee structure appears to encourage short-term parking and discourage all-day parking. The fact that all-day parking charges are expensive will not, on its own, mean all-day parking is outside the ordinary course of business”.
The ATO’s position in TR 2021/2 differed from the view adopted in TR 1996/26 (now withdrawn) which took the view a car park operated for a purpose of other than all day parking was not a commercial parking station.
Recognising the implications of the change the ATO took a prospective only approach and ruled the new interpretation applied effective 1 April 2022. TaxEd members can review previous coverage of this issue -click here.
Based on the changed ATO view many employers have become subject to FBT on car parking due to the proximity of the employer provided parking to a parking facility such as a shopping centre car park.
The decision cannot be used as a proxy for a view that any shopping centre car park that also offers free parking is not a commercial parking station.
Ultimately, it will depend on the operation of the particular car parking facility.
The decision does however place an emphasis on whether the parking facility (viewed in isolation) is run with the intention of making profit meaning the greater the extent of free/low rate parking the better the prospects the outcome may be similar.
As noted previously, the Commissioner has since appealed and continues to regard TR 2021/2 as correct.
We do not expect the appeal will be finalised prior to the lodgement of the 2025 FBT return meaning taxpayers must consider their approach to completing the 2025 FBT return.
Taxpayers could continue to apply the ATO view pending the outcome of the appeal knowing that it should be possible to seek amendments/refunds if the decision is upheld.
Given the ATO view only changed effective the 2022/23 FBT year (meaning FBT assessments circa Mary 2023) later corrective action should be within amendment/refund time limits.
In applying the current ATO view taxpayers can then also reasonably consider shopping centre style car parking both in terms of whether it triggers a car parking fringe benefit liability and to set taxable value. The existence of a commercial parking facility within the 1km radius that exceeds the car parking threshold may trigger an FBT liability but does not necessarily set the taxable value of same. An employer can use the lowest all day rate at any commercial parking station within a 1km radius when applying two of three of the taxable value methods (with the 3rd method being a taxable value determined by a valuer which can often produce the most advantageous taxable value).
Taxpayers may instead choose to apply the decision when lodging 2024/25 FBT returns. For many taxpayers, where the only commercial car parking station(s) within the 1km radius benefit from the decision this may eliminate any FBT liability.
Whether it is appropriate now to seek amendments/refunds for prior years also needs to be considered.
Another consideration is that if shopping centre style car parks are not relevant when determining whether a car parking fringe benefit exists, logically, where a liability otherwise exists they can not be used to determine taxable value.
If the decision is overturned the hard line approach raises the prospects of interest being imposed (and possibly penalties).
A reminder here, there are a number of existing exemptions for car parking frnge benefits, including:
Join us for the 2025 FBT Roadshow, covering key issues for Governments and NFPs | Brisbane, Darwin, Melbourne & Online | 18 March – 3 April 2025 | Click here for more information and to register >
If you would like to know more about membership or become a member, please visit our website for more information.
Subscribe to our newsletter for more updates and articles.
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.