In a decision with potential implications for employers with business premises in suburban areas, the Federal Court of Australia held that a shopping centre car park was not a commercial parking station for fringe benefits tax (“FBT”) purposes. This decision challenges the view of car parking benefits presented by the Commissioner of Taxation (“the Commissioner”) in Taxation Ruling TR 2021/2 (“TR 2021/2”).
What was this case about?
In Toowoomba Regional Council v Commissioner of Taxation [2025] FCA 161, the taxpayer, Toowoomba Regional Council (“TRC”), submitted a Private Binding Ruling (“PBR”) application to the Commissioner which primarily focused on whether a shopping centre car park that was located within one (1) kilometre of Council premises could be a “commercial parking station” for FBT purposes.
The shopping centre car park in question was located in Toowoomba’s town centre, and offered free parking for up to three hours before escalating fees (up to the daily maximum rate) were imposed to discourage all day parking. Promotional offers were also available based on the extent of the shoppers’ activities at the shopping centre.
In his response to the PBR application, the Commissioner affirmed that the shopping centre car park was a “commercial parking station” for FBT purposes, which led to the matter being brought to the Federal Court.
The decision
The Federal Court overturned the Australian Taxation Office’s (“ATO’s”) previously settled view that any car parking facility that offers all day parking should be treated as a commercial car parking facility. Based on the fee structure imposed on those parking at the shopping centre car park, the Court found that it was operating as “an attractive force that brings in business to the shopping centre, and more particularly its tenants,” rather than being operated to profit as a standalone car parking facility.
The comments are in direct contradiction to the ATO’s view in TR 2021/21. In that Ruling the Commissioner’s view was even if a parking facility’s fee structure encouraged short term parking, and discouraged all day parking, all day parking could still comprise part of the regular business of the car park operator.
ATO’s reaction
Perhaps unsurprisingly, the ATO have filed notice to appeal the decision to the Full Federal Court. Given the timing of the appeal, it is unlikely that there would be any further clarity prior to the lodgement of the 2025 FBT returns.
It is also important to note that TR 2021/2, and by extension the Commissioner’s view, has not been withdrawn, nor has the ATO issued any interim Decision Impact Statement as at the date of this article.
Potential impact on employers and next steps
This decision remains of particular interest to employers with premises located in suburban areas as many may have been recognising car parking fringe benefits in accordance with TR 2021/2. Applying the decision more broadly, it could be argued that car parking facilities which are complementary to premises such as airports, hospitals, hotels or educational institutions may not be considered “commercial” when they are operated to attract customers, visitors or patrons rather than generate a profit solely as a car parking facility. As it stands, the decision has the potential to assist employers in reducing their FBT liability with respect to car parking provided to their employees and the associated compliance burden.
In reality, a nuanced approach should be adopted by taxpayers given that the commercial arrangements for car parking facilities could vary from those in Toowoomba’s case, (e.g. there may be outsourcing of car park management to a specialist provider). Moreover, it is important to note that the ATO has chosen to appeal the Federal Court decision. To that end, we recommend careful consideration of your particular facts and circumstances to ensure that the facts of the Toowoomba case are not distinguishable when seeking to determine whether car parking benefits exist. Given the complexity involved, employers may wish to contact their Pitcher Partners representative should they wish to understand how this decision could impact their businesses.
