Policy drift in car parking FBT after Toowoomba

Judicial interpretation of what constitutes a ‘commercial parking station’ has expanded over time. While the original policy intent focused on taxing valuable employer-provided parking for highly paid employees, primarily in CBDs, decisions in Commissioner of Taxation v Qantas Airways Limited [2014] FCAFC 168 (Qantas) and Commissioner of Taxation v Toowoomba Regional Council [2026] FCAFC 50 (Toowoomba) have broadened the scope of the provisions.

Prior to the Qantas decision, the commissioner accepted, at paragraph 81 of TR 96/26, that a ‘commercial parking station’ did not include, relevantly:

… car parking facilities, with a primary purpose other than providing all-day parking, that usually charge penalty rates significantly higher than the rates chargeable for all-day parking at commercial all-day parking facilities (such as parking provided for short-term shoppers or hotel guests); …

This aligned with the policy intent set out in the explanatory memorandum accompanying the enabling legislation, which states:

Some parking facilities have a primary purpose of providing short-term shopper parking. To discourage all-day parking, the operators of these facilities charge penalty rates for all-day parking. These rates are significantly higher than those charged by a similar facility that offers all-day parking. For the purposes of these provisions, short-term shopper parking facilities using penalty rates for all-day parking will not be treated as a ‘commercial parking station’.

However, in Qantas, the Full Federal Court found that the car park at Canberra Airport was a commercial parking station, and concluded that there was no ambiguity about the word ‘public’ in the definition of ‘commercial parking station’ in section 136(1) of the Fringe Benefits Tax Assessment Act 1986 (Cth) (FBTAA). Consequently, there was no reason to resort to extrinsic materials (the explanatory memorandum or second reading speech).

Following the Qantas decision, paragraph 56 of Taxation Ruling TR 2021/2 then confirmed that the commissioner no longer accepts the view previously expressed in paragraph 81 of TR 96/26 (see above).

Toowoomba decision

In Toowoomba, the Full Federal Court was required to determine whether a shopping centre car park constituted a ‘commercial parking station’ within the meaning of section 136(1). The outcome turned on whether features such as pricing structure, intended use and profit motive were relevant in determining whether a car parking facility represented a ‘commercial parking station’ for FBT purposes.

Consistent with its earlier approach in Qantas, the court held that the definition of ‘commercial parking station’ is expressed in clear and unambiguous terms and should be applied according to its ordinary meaning. The court emphasised that the statutory test focuses on whether the parking facility is available to the public, operated on a commercial basis and charges fees for parking.

The court also rejected the contention that a facility must be intended to provide all-day parking or be operated with a direct profit-making purpose to fall within the definition.

The court found that the shopping centre car park satisfied the statutory criteria, even though its pricing discouraged long-term parking and its primary function was to support retail activity rather than generate parking revenue. Those factors did not alter the commercial character of the operation or its availability to the public for a fee. In the court’s view, importing limitations based on policy intent or assumed purpose would amount to reading words into the legislation that were not there.

The court also declined to rely on extrinsic materials, such as the explanatory memorandum or second reading speech, because it considered the legislative language sufficiently clear. As a result, earlier assumptions that short-term shopper parking was outside the scope of the car parking provisions were not determinative. Applying the statutory definition as enacted, the court concluded that the shopping centre car park was a commercial parking station, with the consequence that employer-provided parking in the vicinity could give rise to car parking fringe benefits even in regional or non-CBD locations.

One of the biggest concerns with this decision is that it now opens the possibility for employers located near shopping centres, stadiums, hospitals, universities, and regional airports to be subject to FBT on car parking provided to employees. 

This broader application appears inconsistent with the original policy intent of the rules and risks capturing employers in regional centres, small towns, and outer suburban areas that provide on‑site parking to staff.

Reform of car parking rules is clearly overdue

Persistent uncertainty in interpreting and applying the car parking provisions after 40 years is both unsurprising and concerning. The Toowoomba decision highlights the complexities of these rules. This complexity leads to inefficiency, inadvertent errors and unintentional non-compliance.

The outcome in Toowoomba highlights the growing disconnect between the car parking FBT rules and their original policy intent, reinforcing the need for substantive reform to reduce unnecessary compliance burdens on employers.

Low understanding of the rules contributes to low compliance and directly impacts revenue. Notably, FBT represents the largest tax gap measured by the ATO, with gross and net gaps exceeding 30 per cent in recent years on a revenue base of around $6 billion.

Car parking benefit rules are just too complex

Employers must first apply one of three methods to determine the number of benefits provided (with more than one benefit potentially arising per car space per day) and then apply one of three valuation methods.

An employer can elect to value the total number of benefits provided using either the ‘register method’ (12-week register) or the ‘spaces method’ (applying a statutory formula for 228 days), or they can use the ‘actual method’. To value the benefits provided, the employer can elect to use the ‘commercial parking station method’, the ‘market value method’ or the ‘average cost method’.

In practice, this requires employers to consider a wide range of technical questions, including whether:

• Parking was provided during the relevant hours and in respect of employment.

• The vehicle is a ‘car’ and travel between home and work occurred.

• The parking is located at or in the vicinity of the employee’s primary place of employment.

• A commercial car parking station exists within a one-kilometre radius of where the car was actually parked.

• The lowest all-day fee exceeds the relevant threshold.

In addition, employers must navigate elections, record-keeping requirements, valuation rules, exemptions (including for small business employers), and the interpretation of key concepts such as ‘primary place of employment’, ‘business premises’, and, as was recently subject to judicial review, the concept of a ‘commercial parking station’.

As acknowledged in the second reading of the enabling legislation, the tax bears little relationship to the value of the benefit received by the employee and instead depends on nearby commercial parking stations. The ability of a single car space to yield multiple benefits in a single day adds further complexity.

Reform options

NTAA recently proposed four reform options to the Board of Taxation, each of which would require legislative amendment.

Option 1: Definition of commercial parking station

Narrow the definition to exclude parking at shopping centres, stadiums, hospitals, universities and regional airports where pricing is designed to discourage all-day parking (which is consistent with the explanatory memorandum accompanying the enabling legislation for the car parking rules).

Option 2: Indexation and fixed rate valuation

Introduce an option for employers to establish a daily car parking rate in an ‘initial year’, which may then be indexed annually using an ATO-published factor. Employers could choose each FBT year to apply the indexed rate or reset the rate by reference to actual all-day parking costs within a one-kilometre radius of where the car was actually parked. 

Where actual costs are used, employers could revert to the indexed rate in a subsequent year, thereby resetting the rate for a further three to five years.

This approach would remove the need to annually re-establish car parking rates and significantly reduce compliance costs and disruption to business operations.

Option 3: One benefit per car space per day

Limit FBT to one benefit per car space per day. The revenue impact is expected to be minimal, as parking that exceeds the four-hour minimum parking period during standard working hours (7:00am to 7:00pm) generally involves only one car per space per day. 

The current integrity rule adds complexity for limited practical benefit and is poorly understood by most employers, even large entities. 

Option 4: Small business car parking exemption

Extend the small business car parking exemption (for businesses with an aggregated turnover of less than $50 million) so that it applies regardless of whether parking is provided on the employer’s premises or via payment at a commercial parking station. Currently, the exemption is not available if the car is parked at a commercial parking station.

Low awareness of the current limitation is contributing to non-compliance. Extending the exemption would better align with the policy intent.

Closing comments

While Chapter 16 of the ATO’s Fringe Benefits Tax – a guide for employers provides useful and practical guidance on determining whether a car parking benefit has been provided on a particular day and how that benefit is to be valued, the overall compliance burden remains excessive.

The Toowoomba decision reinforces that the car parking FBT provisions are now being applied well beyond their original focus on high-value parking in CBD workplaces. While judicial clarity has increased, it has come at the cost of expanding the regime’s reach into regional and suburban settings where the benefits provided bear little relationship to the tax outcomes imposed.

The resulting compliance burden is disproportionate, poorly understood and increasingly disconnected from policy intent. Against this backdrop, meaningful legislative reform is required to restore certainty, improve fairness and simplify one of the most complex areas of the FBT system.

About the author

Robyn Jacobson is the senior advocate at the National Tax & Accountants’ Association Ltd (NTAA). She is a fellow of NTAA, CA ANZ and CPA Australia, and is a chartered tax adviser of The Tax Institute.

About NTAA

NTAA is a prominent not-for-profit association, established in 1992 to support tax agents, accountants and tax advisers. For more than 30 years, NTAA has advocated on behalf of its members and supported them through its highly regarded tax seminars, products and hotline service. NTAA is a major representative voice for the tax community, representing more than 45,000 practitioners.

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