New case redefines car parking outside CBDs
The Fringe Benefits Tax (FBT) decision of the Federal Court on car parking in Toowoomba Regional Council v Commissioner of Taxation [2025] FCA 161 is great news for employers with businesses outside the CBD. Justice Logan also provides some pithy reminders that are relevant to tax interpretation and disputes more generally. Here’s a summary of both the FBT impact and broader considerations, and a look at what to do next if this affects you.
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.”
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.
Logan J’s comments indicate the ATO itself wasn’t altogether happy with responding negatively to the Council’s private ruling request but felt bound to do so by the Qantas decision. This highlights the reality that the ATO’s consultation process could have led to a different result, particularly in the context of the EM making the intent of the law so clear. At no time was Qantas a constraint on taking a different approach for qualifying car parks at shopping centres and hotels, in line with the original comments in TR 92/26.
The importance of complete facts in an application for private ruling was highlighted, as it has been many times before. In this instance, Logan J was able to sufficiently infer a factual conclusion, as permitted to do by the Full Court decision in Eichmann. But in other circumstances, omissions of this nature can be the difference between success and failure.
Where to from here?
Many commentators are waiting for the ATO to shed further light but hold little hope that such a statement would be made in time for the coming 2025 lodgement deadline. The decision is a well-reasoned statement of the law as it was always intended to operate. It seems an appeal from the ATO would be counterproductive, when the decision merely restores their own initial view and the intended application of the law per the explanatory memoranda. Time will tell!
Employers who paid FBT on car parking in the vicinity of a penalty car park that can reasonably be demonstrated to be operated on a different basis to commercial parking stations in the vicinity (not just because they are more expensive, like an airport car park, but because it serves a different purpose, as evidenced by free periods and differential rates), should be in a position to lodge an objection and recovery the FBT paid and the sooner the ATO confirms its position, the better for business.
At a minimum, when preparing 2025 FBT returns, based on the law as it stands, taxpayers in the vicinity of a car park with a similar profile to Toowoomba should be able to demonstrate taking reasonable care based on the Toowoomba decision, and should thereby be in a position to overcome penalties if the decision is later overturned.