The Full Federal Court has unanimously held that car parking provided by Virgin Blue Airlines (VBA) to its employees was not "in the vicinity of" their primary place of employment and was therefore exempt from fringe benefits tax (FBT) (Virgin Blue Airlines Pty Ltd v Commissioner of Taxation [2010] FCAFC 137). The decision has implications for employers with large premises and subsidised car parking.
Staff car parking at Melbourne Airport
VBA's employees at Melbourne Airport mostly work in Terminal 3. However, the car parking facility provided by VBA to those employees is approximately 2kms away by road, so a shuttle bus transports the employees from the car park to either Terminal 2 or Terminal 4. The employees must then walk to Terminal 3. The total journey takes about 15 to 20 minutes in each direction.
The key question here is whether the car park is in the vicinity of the employees' primary place of employment. If it is, VBA would be liable for FBT on the provision of car parking to its employees.
In the Federal Court at first instance Justice Jagot had said that the answer to this was "yes". While the distance between the car park and the primary place of employment is a relevant factor, so is what is situated between them. She held that the car park and the primary place of employment were part of the same "functional space" (being Melbourne Airport), and so the car park is in the vicinity.
Why the Full Federal Court found in VBA's favour
This decision was however overturned on appeal by the Full Federal Court.
In interpreting the meaning of "in the vicinity of", the Full Court considered the statutory purpose of the relevant provision: to limit the size of the area around the primary place of employment in which a parking space will give rise to FBT. The policy was not to impose tax on all employer-subsidised parking.
The finding that the car park was not "in the vicinity of" Terminal 3 was also strengthened by the fact that the bus trip was taken twice a day, between the car park provided and the primary place of employment, and the total journey took 15-20 minutes each way.
To determine otherwise, and adopt Justice Jagot's interpretation, would mean employees who work within large "functional spaces" like a hospital would have their car parking subject to FBT, but city workers would not – even though the distance between the car park and the employee's primary place of employee was the same in both case.
Other implications?
This decision has implications for employees who work within large "functional spaces" such as hospitals or universities and have subsidised car parking within that area. In such cases, there may be an opportunity for the employers that have paid FBT on the provision of car parking to claim refunds for those amounts.
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