Decision impact statement

Virgin Blue Airlines Pty Ltd v Commissioner of Taxation

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Court Citation(s):
2010 FCAFC 137
2010 ATC 20-226
81 ATR 85

Venue: Federal Court of Australia
Venue Reference No: NSD 852 of 2010
Judge Name: Edmonds, Jessup and Gilmour JJ
Judgment date: 30 November 2010
Appeals on foot:

Impacted Advice

Relevant Rulings/Determinations:

Subject References:
Fringe benefits tax
Car parking benefit
Interpretation of 'in the vicinity of'


Whether car parking facilities provided to employees at Melbourne Airport were subject to fringe benefits tax because they were at, or in the vicinity of the primary place of employment of those employees.

Decision Outcome:


Brief summary of facts

The case proceeded on the basis of agreed facts. The taxpayer leases part of Terminal 3 at Melbourne Airport (the primary place of employment), and has an arrangement for its employees to be issued passes to access a car park (the Melrose Car Park), owned by a third party. The taxpayer pays the third party a monthly fee for each pass. The Melrose Car Park is within the boundaries of Melbourne Airport but is at a distance of between 1.9 and 2km by road from Terminal 3. A shuttle bus service operates between the Melrose Car Park and Terminals 2 and 4 at the Airport. The shuttle bus trip between the Melrose Car Park and Terminal 3 takes 15 to 20 minutes one way excluding waiting time.

For the years ended 31 March 2006, 2007 and 2008, the Commissioner issued fringe benefits tax assessments to the taxpayer on the basis that the Melrose Car Park was "at, or in the vicinity of" the primary place of employment, within the meaning of paragraph 39A(1)(f) of the Fringe Benefits Tax Assessment Act 1986.

At first instance, Jagot J decided the matter in favour of the Commissioner.

Issues decided by the court

The Full Federal Court held that, while the expression "in the vicinity of" is capable of wide application, its meaning must be considered in the statutory context before application to the facts. The statutory context concerns the imposition of tax upon car parking benefits provided to employees who use their cars to commute to and from work. The criteria for imposition of the tax (including the vicinity requirement) operates as a carve-out from the general FBT exemption for car parking benefits provided by employers to employees.

The expression 'in the vicinity of' refers to places which are near, meaning in close spatial proximity, to each other. In this context, vicinity could not accommodate the concept of "same functional space" or neighbourhood which otherwise might allow the meaning of vicinity to expand or contract according to the circumstances of individual cases. The circumstances of the individual case may be relevant to the application, as opposed to the meaning, of the 'vicinity' test to the extent that physical features or obstacles might render the car park and primary place of employment close to each other as the crow flies but not by the shortest practical route between them.

The Court considered that the application of this meaning of 'vicinity' is ultimately a matter of evaluative judgment, and held that a car park which is approximately 2 kms away from the primary place of employment is not near, proximate or close to that place.

Tax Office view of Decision

The decision clarifies the meaning of the phrase "in the vicinity of" in paragraph 39A (1) (f) of the Fringe Benefits Tax Assessment Act 1986. In its statutory context, the expression refers to places which are near, meaning in close spatial proximity, to each other. It was open to the Court to conclude that a distance of approximately 2 km is too far for a car park to be considered in the vicinity of the primary place of employment in terms of paragraph 39A(1)(f).

The decision also confirms that the application of the vicinity test requires evaluative judgment. The legislation does not specify an absolute measure of distance between a car park and the place of employment as the relevant criterion for liability.

Administrative Treatment

Implications on current Public Rulings & Determinations

The Commissioner's views in respect of car parking fringe benefits are currently contained in Taxation Ruling TR 96/26 Fringe benefits tax: car parking fringe benefits. The ATO has reviewed TR 96/26 following the decision of the Full Federal Court in this matter, which did not espouse any new principle. As such no further amendments were required to be made.

Implications on Law Administration Practice Statements

Not Applicable.

Amendment history

Date of amendment Part Comment
21 May 2014 Administrative treatment Updated to advise TR 96/26 has been reviewed.

Legislative References:
Fringe Benefits Tax Act 1986 (Cth)

Fringe Benefits Tax Assessment Act 1986 (Cth)

Income Tax Assessment Act 1936 (Cth)

Taxation Laws Amendment (Car Parking) Act 1992 (Cth)
The Act

Taxation Laws Amendment (Fringe Benefits and Substantiation) Act 1987 (Cth)

Case References:
Abley v District Council of Yankalilla
(1979) 22 SASR 147

Brutus v Cozens
[1972] UKHL 6
[1973] AC 854

CIC Insurance Ltd v Bankstown Football Club Ltd
[1997] HCATrans 242
(1997) 187 CLR 384

Coleman v Power
[2004] HCA 39
(2004) 220 CLR 1

Harrison v The Darling to Glen Waverley Railway Construction Trust
[1934] HCA 55
(1934) 52 CLR 68

Moyna v Secretary of State for Work and Pensions
[2003] UKHL 44
[2003] 1 WLR 1929

Pollock v Ciccone
(1988) 34 A Crim R 257

Project Blue Sky Inc v Australia Broadcasting Authority
[1998] HCA 28
(1998) 194 CLR 355

Sea Swift Pty Ltd v Waterside Workers Federation of Australia
(1989) 29 IR 391

Virgin Blue Airlines Pty Ltd v Commissioner of Taxation history
  Date: Version:
  9 March 2011 Identified
You are here 21 May 2014 Resolved