ATO wins appeal in FBT dispute with Toowoomba council

The council argued in its private ruling application that the car parking facility provided at the Grand Central Toowoomba Shopping Centre was not a commercial parking station under section 39A of the FBTA Act. The council said that the car parking benefits provided by the Council were therefore not subject to FBT.

The Commissioner of Taxation disagreed in its response to the private ruling. The commissioner determined that the Grand Central Car Park was a commercial parking station essentially because of the facts set out in the scheme ruling application. The ATO noted that it was a purpose-built permanent complex designed for car parking where customers are charged more than a nominal fee for parking at variable rates, determined by the time a vehicle is parked, which is not on-street parking.

The council lodged a notice of objection with the commissioner, which was disallowed. The council then filed a taxation appeal to the Federal Court.

The primary judge ruled in favour of the Toowoomba Council in the previous decision, setting aside the commissioner's objection decision.

Justice Logan determined that the car park in the Grand Central Toowoomba Shopping Centre was not a commercial parking station under section 39A of the FBTA Act.

He said it was obvious from the range of fees that the car park was being operated to the end of "complementing the operation of the shopping centre".

"It is being operated to the end of being an attractive force that brings in business to the shopping centre, and more particularly its tenants," Justice Logan said. 

"It is certainly, for those reasons, being operated in trade or commerce, but considered as a car parking facility alone, the range of free parking is inconsistent with it being operated commercially for profit, as opposed to commercially in the context of a shopping centre, not a standalone car parking facility."

However, the Full Court has now overturned this decision, concluding that car parking facility was a commercial parking station for the purposes of fringe benefits tax.

Justices McElwaine and Wheatley determined that the primary judge had erred in the construction of commercial parking station.

"It does not require an intention to make, or to be aimed at, a profit-making purpose," said McElwaine and Wheatley.

"The meaning of 'commercial' is being engaged in or in the nature of commerce."

Justices McElwaine and Wheatley said the matters relating to the commercial character of the car parking facility, from the statutory definition, support a general commercial undertaking, but do not require the level of specificity that the facility be operated to make or be aimed at making a profit.

"Parliament did not in the choice of language confine a commercial car parking station to that definition of commercial," they said.

Justice Feutrill said that in his view, the proper construction of the phrase ‘permanent commercial car parking facility’ in context meant "a permanent car parking facility at which fees are paid in exchange for licenses to use car parking spaces in amounts agreed between a licensor and a licensee dealing with each other at arm’s length".

"It is a facility where it can be presumed that the licensor and licensee has each made the best possible bargain in the circumstances for the provision and use of car parking spaces," said Feutrill.

"That is, the fees charged for car parking spaces can be presumed to be representative of the market value for a licence to use a car parking space at the location of the car parking facility."