ATO wins latest round of car parking battle
The Full Federal Court in Toowoomba Regional Council v Commissioner of Taxation [2025] FCA 161 has reversed the decision of Logan J. Here’s a summary of the FBT impact and broader considerations, and a look at what to do next if this affects you.
Background and initial decision (2025)
Whether car parks such as shopping centres and hotels are commercial parking stations for FBT purposes has been a vexed question since 2014. The issue is that such car parks, while often charging high daily rates to discourage parking by patrons other than their target audience (shoppers or hotel guests respectively), don’t charge these rates with a view to maximising profit as a car parking operator. The rates are essentially to discourage other all-day parkers from taking up spaces that should be available to the target audience.
In 2014, Qantas objected to assessments of prior years in which it had paid FBT. For context, businesses in the vicinity of airports were clear on the concept that airport parking was a commercial parking station that exceeded the relevant threshold. Most obtained market valuations to reflect a more reasonable value. Qantas tried to eliminate FBT on its employee parking, based on an argument that a commercial parking station has a connotation of being a parking station that could be used by the employees in question, and the public car parks were not available to employees. This notion was dismissed by the Full Federal Court.
In response, the Commissioner updating its public taxation rulings, replacing TR 96/26 with TR 2021/2.
TR 96/26 said a car parking facility that has a primary purpose other than providing all-day parking, that is, one that usually charges significantly higher rates than those charged by commercial all-day parking facilities, was not a commercial parking station. Shopping centre and hotel parking were provided as examples.
This echoed the explanatory memorandum that accompanied the law when it was introduced. But in withdrawing TR 96/26, the ATO said “This view will no longer apply in recognition of the Qantas decisions of the Administrative Appeals Tribunal and the Federal Court.”
Shopping centre car parks were included as a specific example of something that is a commercial parking station under the new interpretation. In the example included, the first two hours of parking were free and it was still now considered a commercial car park.
The distinction between airport parking (which is essentially priced at a premium due to there being a captive audience) and penalty rate parking at shopping centres which is designed to discourage all-day parking that would reduce the bays available to shoppers was pointed out to the ATO in many submissions, and acknowledged in the compendium TR 2021/2EC. In the original draft ruling, the ATO stated: “A facility is 'commercial' if it is run to make a profit which may include a facility operated by a not-for-profit organisation. In determining whether a car parking facility is commercial, you will need to consider all of the surrounding circumstances and the general nature of the operation of the car parking facility. No one factor will be determinative.”
In the first instance, Logan J turned to underlying facts to assess the question of profit-making intent, there being no statement as to whether the car park is operated for the purpose of making a profit.
The initial 3 hour free period was crucial, as was the significant escalation beyond for and a half hours, and the contrast to other clearly commercial parking stations in the vicinity, also operated by the Toowoomba Council.
Full Federal Court Decision (2026)
McElwaine And Wheatley JJ favoured a broad meaning of “commercial”, being in the ordinary course of business. Significantly, they did not consider the text of the FBT legislation sufficiently unclear to allow reference to extrinsic material, being the Explanatory Memorandum example that indicated the intent to exclude “penalty” car parks from triggering an FBT liability for employers nearby. It was sufficient that the car park in question provided all-day parking in the ordinary course of business. They stressed it would not be reasonable to expect employers to know or assess whether a nearby car park was “commercial” if a different approach was taken.
In contrast, Feutrill J looked more closely at the composite provisions of the FBT car parking legislation and the role of the term “commercial” in these provisions. This approach more closely aligned with the approach taken by Logan J in the first instance, requiring some consideration of the specific facts and circumstances in which the car park operated and how its fees were charged.
However, Feutrill J reached a different conclusion on the commerciality of the car park, on the basis that a fee began being charged after a significant redevelopment and expansion of the car park. In his view, it could not reasonably be concluded that the rate charged by the operator was a “penalty” rate.
This suggests there remains a possibility that a true penalty rate car park, not operated to encourage all-day parking, could be excluded. However, as this point was reiterated in the minority judgement, it may be problematic to rely on this.
Where to from here?
The approach applying market value to determine the FBT consequences of employer-provided parking in the vicinity of a shopping centre, hotel or similar facility remains the best pragmatic solution. In very specific circumstances, it may be possible to demonstrate that a certain car park that triggers FBT consequences for employers in the vicinity is not a “commercial parking station”, but this will require a detailed and fact-specific analysis.