Ambiguity for employers surrounding their FBT car parking obligations

On 6 February 2025, the Federal Court handed down his decision in Toowoomba Regional Council v Commissioner of Taxation [2025] FCA 161. His Honour found in favour of the taxpayer, finding that a car park facility was not a commercial parking station as defined in the fringe benefits tax (FBT) law on the basis that the car park was not operated commercially ‘for profit’.

The Commissioner of Taxation has lodged an appeal to this decision and issued an Interim Decision Impact Statement (IDIS). The IDIS explains that the Commissioner does not intend to revise his views or guidance – which (as currently drafted) reflects a different interpretation of the term 'commercial parking station’ to that concluded in this latest decision, until such time as the appeal process has been completed. In the meantime, the IDIS encourages employers to continue to apply the guidance within Taxation Ruling TR 2021/2 Fringe benefits tax: car parking benefits.  

We set out further detail about the decision and the Commissioner's views below.

The taxpayer had sought a Private Binding Ruling (PBR) from the Commissioner to ascertain whether car parking provided to its employees at the Grand Central Shopping Centre parking facility created an FBT liability. Central to the PBR was the question of whether that car park was a commercial parking station, as defined in the FBT law. 

In the appeal to the Federal Court, in establishing a baseline for his analysis, Logan J reasoned that he was limited to the facts set out within the PBR, meaning that, with limited exception, he could not have regard to other information appended to the PBR even where such information might be relevant to the Council’s position – or indeed, to the Commissioner’s decision. Consequently, ‘accepted’ facts before the Court included a fee structure for the car park which involved free parking for visitors for up to three hours, with charges escalating for longer stays, up to a maximum daily rate of $20 for parking over seven hours. It also offered free or reduced parking fees for various categories of shoppers and staff along with all day parking at a flat rate of $7.50 for the centre’s staff.

The two specific questions posed in the ruling application were:

1. Was the Grand Central Shopping Centre parking facility a 'commercial parking station' under s 39A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
2. Notwithstanding whether Grand Central’s car parking facility was a 'commercial parking station', would the lowest representative fee charged with reference to s39A(1)(a)(iii) and s39AB of the FBTAA Act be $7.50?

The Commissioner responded 'yes' to both questions in the ruling and maintained that position on objection. 

The taxpayer subsequently appealed to the Federal Court, arguing that the facility was not a commercial parking station, because it was not operated with a view to making a profit from car parking. Rather, it was run to complement the shopping centre. The appeal was allowed, with His Honour finding that the car park was not a commercial parking station. 

Pivotal to the decision was Logan J’s approach to defining ‘commercial parking station’ in the context of the FBTAA, which involved a focus on the meaning of ‘commercial’, which was used (in this case) in adjective form. The meaning of the term as set out in section 136 of the FBTAA, was not considered to meaningfully advance the meaning of the word ‘commercial’, and consequently, His Honour turned to the ordinary meaning of the word (having regard to available dictionary definitions of the adjective form of ‘commercial), observing that there was no one natural and ordinary meaning.

His Honour, therefore, considered that he had basis, as a matter of statutory construction, to have regard to the Explanatory Memorandum (EM) to the Taxation Laws Amendment (Car Parking) Bill 1992. Pertinently, the EM included commentary indicating that a car park which is not run with a profit-making purpose would not be commercial, and that some car parking facilities for short term shoppers, which use penalty rates for all day parking, would not be commercial. 

Having regard to this, His Honour viewed the meaning of the adjective ‘commercial’, in the context of a permanent commercial parking facility, should be read as a permanent car parking facility that 'is intended to make, or aimed at having the potential for financial success intended to make a profit'.

Applying this meaning to the accepted facts, His Honour found that the car park was not ‘commercial', reasoning the following:

• There was a stark contrast between the fees charged by the Grand Central Shopping Centre parking facility and council facilities, with various council facilities offering all day parking fees up to a maximum of a range between $6 and $9 per day. 

• There were a range of scenarios in which free parking was available at the Grand Central Shopping Centre parking facility. 

• It was obvious that the Grand Central Shopping Centre parking facility was being operated to a different end to a commercial car parking facility, noting from the range of fees (including free parking) that it was being operated to complement the operation of the shopping centre. It was being operated to the end of being an attractive force that brings in business to the shopping centre and, more particularly, its tenants.

Following on from answering 'No' to the first question of the ruling, His Honour held the second question under consideration was 'unnecessary to answer'.

As explained above, the crucial question in this case was the meaning of ‘commercial’ in the context of the FBT provisions and the term ‘commercial parking station’.  

It is notable that the Commissioner’s view of the meaning of ‘commercial parking station’ was previously addressed in the former Taxation Ruling TR 96/26 Fringe benefits tax: car parking fringe benefits, which broadly reflected the commentary in the EM, as observed by Logan J. Notably, the former TR 96/26 specifically excluded short-term shopper parking facilities using penalty rates for all-day parking from the meaning of commercial parking station and consequently, car parks that charged penalty rates for all-day parking, such as those attached to shopping centres, hotels, or hospitals, typically did not trigger FBT liabilities.

However, following the Full Federal Court decision in Commissioner of Taxation v Qantas Airways (2014) 227 FCR 554 (Qantas), the former TR 96/26 was withdrawn. This led to revised guidance issued in the form of TR 2021/2, which adopted a revised meaning of ‘commercial parking station’ - notably, the Commissioner’s view was that, in light of the decision in Qantas, any paid parking facility was capable of being commercial and, thus, a broader meaning of ‘commercial parking station’ was adopted. This, in turn, led to a broader spectrum of car parks being capable of triggering an FBT liability – including many that charged penalty rates for all-day parking (which would previously have been viewed as not constituting a commercial parking station).  

In the Toowoomba case, Logan J evaluated the Full Court’s decision in Qantas, but did not consider it to bind him to a particular decision in the matter at hand. He reasoned firstly that the Full Court (in Qantas) was asked to consider the meaning of the word ‘commercial’ against the contested meaning of the word ‘public’; the meaning of ‘public’ (and any implication for the word ‘commercial’) was not in question in the Toowoomba case. Secondly, His Honour observed that the Full Court in Qantas did not have occasion to address the particular question(s) on the particular facts before him. 

Interestingly, His Honour in fact cited the Full Court’s finding in Qantas that, in relation to the word ‘commercial’, '...the proxy role played, as the Full Court indicated in Qantas Airways, may be very important in any choice of meanings' (in relation to the word ‘commercial’). In accepting the word ‘commercial’ as serving as a proxy, His Honour expressed the view that 'the role of a proxy for value suggests that the proxy is meant to have a market-based role: commercial parking station, as opposed to a parking station that might be deployed in commerce but be completely uncommercial if viewed as a parking station alone in its operation'.

This, coupled with what was referred to as a ‘choice’ between different ordinary meanings, was key to His Honour’s reliance on the EM to define ‘commercial’ – which, as may be evident to some at this point, led to a meaning of ‘commercial’ which resembled that described in the former TR 96/26.

While it may be viewed as obvious that the Commissioner’s appeal reflects disagreement with the decision in the Toowoomba case, what will be interesting in the upcoming appeal is whether it will focus on the approach taken by Logan J in interpreting the meaning of commercial – or whether an argument will be tabled that the ‘facts’ did not need to be limited to those set out in the PBR (or of course, both). In relation to the former, remember - the Commissioner considered the meaning of ‘commercial’ to have been addressed in Qantas, whereas the Court in the Toowoomba case took the view that Qantas addressed a more nuanced question.

We conclude with a summary of the Commissioner’s response (through the IDIS) to the Toowoomba case, which can be summarised as follows:

• Until the appeal process is finalised, the ATO does not intend to revise the current ATO view relating to car parking fringe benefits and the meaning of commercial parking station, as set out in TR 2021/2 and Chapter 16 of Fringe benefits tax – a guide for employers (the FBT guide). 

• Taxpayers should continue to lodge their FBT returns in accordance with the ATO view as set out in TR 2021/2 and Chapter 16 of the FBT guide. 

• If a taxpayer lodges an application for a private ruling before the appeal process in the case is finalised, the ATO will make the private ruling in accordance with the ATO view as set out in TR 2021/2 and Chapter 16 of the FBT guide. 

• The ATO does not propose to finalise objection decisions in relation to whether a car parking facility is a commercial parking station until the appeal process in this case is finalised.

Time will tell as to what will unfold in the appeal – but for now, the IDIS would suggest employers should ‘park’ (pun intended) this particular development, follow current guidance and stay tuned for the appeal. 

If you have any questions regarding the recent decision, how this may impact you, or FBT more broadly, please reach out to your PwC Employment Taxes specialist for assistance.