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  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
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
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.
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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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