Federal Court rules shopping centre car park was not a ‘commercial car parking station’

On 6 February 2025, the Federal Court in Toowoomba Regional Council v FCT [2025] FCA 161 (Toowoomba Council) held that a Toowoomba shopping centre car park was not a ‘commercial parking station’ for FBT purposes as it was not being operated commercially for a profit. This is welcome news for employers as it means the provision of car parking by employers to employees on business premises within one kilometre of car parks similar to ones in this case may not give rise to a car parking fringe benefit. This decision is contrary to the ATO’s current view in Taxation Ruling TR 2021/2 (TR 2021/2).

TR 2021/2, which applies from 1 April 2022, states that certain shopping centre paid car parks that provide fee free parking for a limited period (usually two to three hours), and other car parks with similar arrangements, would be captured as ‘commercial car parking facilities’ as discussed in our previous BDO Technical Update. In TR 2021/2, the ATO reversed its previous longstanding view in TR 96/26 that certain shopping centre car parks were excluded as commercial parking stations. The ATO view changed because of two Full Federal Court decisions in Virgin Blue Airlines Pty Ltd v FCT [2010] FCAFC 137 and FCT v Qantas Airways Ltd [2014] FCAFC 168. TR 2021/12 extended to virtually all such car parks that charge a fee for all day parking above the car parking threshold (which for the FBT year ending 31 March 2025 is $10.77 per day). This is the ATO view even if the car park has a primary purpose other than providing all-day parking (e.g. hourly parking at a hospital, shopping centre, hotel, university or airport, or long-term parking). This applies even if its fee structure discourages all-day parking through higher fees.

Toowoomba Council provided shopping centre car parking

In the Toowoomba Council case, following the Council’s request for a private ruling, the ATO determined that the Grand Central car park was a ‘commercial parking station’ under Section 39A of the FBT Assessment Act 1986 (FBTAA). This meant that car parking benefits provided by the Council would be subject to FBT.

Parking at the shopping centre was free for the first three hours, $2 for up to three and a half hours, and $3 for up to four hours, $6 for up to five hours, rising to a maximum of $20 for over seven hours. The shopping centre also offered reduced or free parking to its shoppers and staff in various other scenarios, including a flat $7.50 all day rate for the shopping centre’s staff as well as for customers that lived outside Toowoomba CBD (provided they shopped at the centre for more than three hours). The car parking threshold for the 2022-23 FBT year was $9.72 per day.

When is a Car Parking Benefit provided?

A Car Parking Benefit is provided to an employee if:

• the employee’s car is parked at one or more of the employer’s business premises for a combined period of over four hours between 7am and 7pm at or near the employee’s primary place of employment
• a ‘commercial parking station’ is located within a 1 km radius of the business premises car park where the lowest fee charged for all-day parking exceeds the car parking threshold (currently $10.77 per day).

What is a ‘commercial car parking station’?

A ‘commercial parking station’ is defined in Section 136(1) of the FBTAA to mean a ‘commercial car parking facility’ that is:

• permanent (but is not on-street parking); and
• at least one car space is available (in the ordinary course of business) to the public for all-day parking on payment of a fee.

Was the shopping centre car park operated commercially for a profit?

In the Toowoomba Council case, the Federal Court considered the meaning of the adjective ‘commercial’ and said there was "no one natural and ordinary meaning" of the adjective as used in the definition of ‘commercial parking station’ in Section 136(1) of the FBTAA. The Court then considered dictionary definitions of the word ‘commercial’ and concluded that to be a ‘commercial parking station’ for FBT purposes, a car park must be ‘deployed in commerce’ and be operated ‘commercially’, in the sense of being operated for the purpose of making a profit. "That is not to say that a profit must be present, only that there be some profit-making purpose." Logan J found support for this view in the explanatory memorandum to the Taxation Laws Amendment (Car Parking) Bill 1992, which specifically stated that: “short term shopper parking facilities, using penalty rates for all day parking, will not be treated as a commercial parking station”.

Based on the facts and circumstances of the case, Logan J said that the Grand Central car park was being operated "to a different end to a commercial car parking facility". It was obvious from the range of fees that it was being operated as "an attractive force that brings in business to the shopping centre, and more particularly its tenants". As such, although the car park was being operated ‘in trade or commerce’ which the Commissioner submitted was all that was required, the range of free parking was inconsistent with it being operated commercially for profit, which is what the Council submitted was required and with which the Court agreed. Accordingly, the Grand Central car park was not a ‘commercial parking station’ as defined in Section 136 of the FBTAA for the purposes of Section 39A. 

Logan J also distinguished the Qantas Airways and Virgin Blue cases, indicating those cases were “not of any assistance in the resolution of the present controversy”. Those cases do not specifically deal with car parks that offer free short term shopper parking with penalty parking rates for longer parking and the car park itself was not operated to make a profit. Logan J found it important to read the definition of ‘commercial parking station’ in the context in which it is used and said: “It would be an odd proxy for value, if the commercial parking station concerned, were one which, although deployed in commerce, was not operated commercially in the sense of for the purpose of a profit.” 

Although there will be many car parks in shopping centre and other similar situations that allow free short term parking. It does not mean all of them are not ‘commercial car parking facilities’ under the rationale provided by the Federal Court. The analysis of whether a particular car park is run with the intention of making a profit from operating the car park would have to be conducted on a case by case basis. This may be difficult for many employers to determine without assistance. 

What should affected employers do now

With the 2024/25 FBT year about to end on 31 March 2025, affected employers would be wondering what action to take now. Unless the ATO comes out with a comment that it agrees with the case before the lodgement of the 2024/25 FBT returns (not considered likely), employers are faced with deciding whether to continue to follow the ATO, current view in TR 2021/2 or follow the Federal Court view. 

How can BDO help

Given that the Commissioner has now lodged an appeal with the Full Federal Court, the Commissioner continues to regard their view in TR 2021/2 as the correct interpretation of the law.

It is unlikely that this position will be settled prior to the lodgement of 2025 FBT returns, so taxpayers will need to consider what action to take regarding their 2025 FBT returns.

This decision will most likely depend upon an employer’s risk profile, the conservative course of action being that employers continue to apply the position as outlined in TR 2021/2. If the appeal is ultimately decided in favour of the taxpayer, employers could then look to amend/object to the prior year assessments to obtain a refund of FBT not only in respect of the 2025 FBT year but the two earlier FBT years that have been lodged since the adoption of TR 2021/2.

It is recommended that you discuss this with one of the BDO’s employment specialists or your regular BDO contact to determine whether your business is an affected employer and the options for action to take.