• The impact of this case on ATO policy is discussed in Decision Impact Statement: Commissioner of Taxation v Qantas Airways Ltd (VID 333 of 2014 VID 334 of 2014).

FC of T v QANTAS AIRWAYS LTD

Judges:
Perram J
Robertson J
Davies J

Court:
Federal Court of Australia, Melbourne

MEDIA NEUTRAL CITATION: [2014] FCAFC 168

Judgment date: 09 December 2014

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Perram, Robertson and Davies JJ

THE COURT:

Introduction

1. This is a case about car parking spaces provided to some members of Qantas' staff as part of their remuneration. The staff work at various airports around the country including those at many of the State capitals and a number of regional centres too. The car spaces are provided on Qantas' own premises at these airports and they are either at, or in the vicinity of, the premises at which the staff work. The first question in this case is whether the provision of those car parking spaces is a 'car parking fringe benefit' as defined in the Fringe Benefits Tax Assessment Act 1986 (Cth) ('the Assessment Act'). The second question is whether a different situation exists in the case of Canberra Airport. The Administrative Appeals Tribunal ('the Tribunal') thought the answer to both questions was 'yes' and concluded that Qantas was liable to pay fringe benefits tax in respect of the provision of the car spaces, apart from those at Canberra Airport. Qantas has appealed the first determination and the Commissioner the second.

2. On appeal we conclude that the Tribunal was correct in relation to the first question but incorrect in relation to Canberra Airport. We therefore dismiss Qantas' appeal but allow the Commissioner's.

The first question: are the car parking facilities provided by Qantas car parking fringe benefits?

Fringe benefits tax on car spaces

3. Car parking facilities provided by an employer to an employee may be the provision

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of a fringe benefit in respect of which fringe benefits tax can be payable by the employer: s 39A of the Assessment Act. The taxable value of a car parking fringe benefit may be assessed, at the election of the employer, either using a valuation of what the staff member would have been required to pay for the car space on the assumption that it was provided on an arm's length basis (Assessment Act, s 39D) or by reference to the lowest rate charged for all-day parking at a commercial parking station located within a kilometre of the employer's premises (Assessment Act, ss 39C and 39DA). This latter figure may be calculated either on a day-by-day basis (Assessment Act, s 39C) or by an averaging mechanism (Assessment Act, s 39DA). Where there is more than one such parking station the least expensive is to be selected.

When is a commercial parking station not a commercial parking station?

4. Not every car space provided to an employee is liable to be subject to fringe benefits tax. Those which are not at, or in the vicinity of, the workplace are not subject to the tax (s 39A(1)(f)); nor are those which are used for fewer than 4 hours per day (s 39A(1)(b)). Other requirements are set out in the balance of s 39A(1) but, with one exception, none is presently relevant and all were satisfied in this case. Qantas' argument is concerned with that single exception which turns on the requirement of s 39A(1)(a)(ii) that there should be a 'commercial parking station' within a kilometre of the premises at which the car spaces are provided. By s 136(1) a 'commercial parking station' is defined this way:

in relation to a particular day, means a permanent commercial car parking facility where any or all of the car parking spaces are available in the ordinary course of business to members of the public for all-day parking on that day on payment of a fee, but does not include a parking facility on a public street, road, lane, thoroughfare or footpath paid for by inserting money in a meter or by obtaining a voucher.

(Emphasis added)

5. Qantas does not dispute that there are commercially operated parking stations within a kilometre of its premises at each airport but submits that these parking stations are not 'commercial parking stations' because they do not provide car spaces to the public in the ordinary course of their businesses. Why? Because the public spoken of in the emphasised portions above is to be understood as being the public including persons commuting between their homes and their ordinary places of work and not some broader public constituted by anyone using an airport parking station; and, because, correspondingly, the ordinary business of airport parking stations is the provision of parking spaces to air passengers and those who might deposit or collect such wayfarers at or from airports.

6. Thus it was, so the submission went, that what appeared, at first glance, to be commercial parking stations turned out to be something else entirely. Qantas did not seek to be drawn on what the airport parking stations were if they were not 'commercial parking stations'. Presumably they were commercial parking facilities not open to the public as Qantas sought to confine that term. Why was the word 'public' to be read in this curious way? Here the answer lay in the operation of the tax. Before the tax would become exigible on the provision of a car space it was necessary that the member of staff to whom it was provided should use it not just for parking a car but - and this was critical - a car which had been used to commute between home and work. So much flowed from s 39A(1)(g) which made clear that the parking space provided to an employee had to be for the purpose of the employee commuting to and from work. The section specified as one of the qualifying elements necessary to attract the tax that:

… the car is used in connection with travel by the employee between:

• (i) the place of residence of the employee; and
• (ii) that primary place of employment;

7. The concept that the car spaces were to be used for commuting by workers was, therefore, to be seen as lying close to the heart of the tax. This mattered because the word 'public' in the statutory definition of 'commercial parking station' was to be interpreted in light of its legislative purpose which, in turn, was to be divined with an appreciation that

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the tax was about benefits conferred upon employees moving between home and work. So viewed, it was submitted, the purpose of the 'commercial parking test' was to ensure that the tax was only imposed where the provision to staff of car spaces was of some benefit to them. The presence of a commercial parking station within a kilometre of the work premises at which a staff member parked his or her car was an indication that something of value had been conferred but, it was said, it made no sense to include parking stations in this calculus which the staff would or could not use.

8. This view of the matter was buttressed, it was submitted, by this Court's decision
Virgin Blue Airlines Pty Ltd v Commissioner of Taxation (2010) 190 FCR 150 where the centrality of the commuter relationship was said to have been recognised. The question in that case was whether a staff car park two kilometres away from an airport terminal was 'at, or in the vicinity of' that terminal. As mentioned above, car spaces which are not 'at, or in the vicinity of' the place of work are not subject to the tax: s 39A(1)(f). The Court resolved the ambiguity in the word 'vicinity' in part by observing that when regard is had to the statutory context, concerning the imposition of a tax upon a car parking benefit provided to employees who use their cars to commute to and from work, it made sense to read the word as meaning 'near': [36] per Edmonds and Gilmour JJ, Jessup J agreeing.

9. Qantas also submitted that its view of the word 'public' derived support from some comments made on the second reading of the Bill which introduced the legislation largely in its current form (the Taxation Laws Amendment (Car Parking) Bill 1992 (Cth)). The relevant passage was as follows:

This Bill will give effect to the Budget measure announced on 18 August 1992 to tax certain car parking benefits. The Government finds it inequitable that some employees receive these car parking benefits in a tax exempt form while other employees, most of whom will not get a tax deduction for their car parking costs, must pay for equivalent facilities out of their after tax income.

10. It is not necessary to dwell upon the history of the tax on the provision of parking spaces to understand the point being made here - the history is set out in Virgin Blue at [3]-[17] and [30]-[35]. Qantas' submission is that the rationale underlying the tax is the equal taxation treatment of staff in relation to car spaces. Those who receive car spaces as part of their remuneration should not be treated any more favourably, from a tax perspective, than those who use post-tax income to pay for a car space which they acquire themselves from a third party parking operator. Thus, so Qantas submitted, it was relevant in the case of airport parking stations that this inequality would not arise. It would not arise because the airport parking stations were not used by commuting employees and hence no question of their using their post-tax income to acquire parking in these stations existed. Since the inequality did not exist, the policy exhibited in the second reading speech was, at least, consistent with its argument that the word 'public' had to be given a constrained reading.

11. Finally, Qantas submitted that the explanatory memorandum accompanying the same Bill contained an indication that the words 'permanent' and 'commercial' were to have their ordinary dictionary meaning but the same memorandum had said nothing about what the word 'public' meant. Although only faintly advanced in reply, the submission was that this silence on the meaning of 'public' in the explanatory memorandum supported its contention that it should be construed in other than perhaps its ordinary meaning.

12. These arguments should be rejected for three reasons. First, the subject matter of the tax is the 'taxable value' of the car parking facilities provided by the employer to employees, not the value to an employee of the provision of car parking by the employer:
Queensland v Commonwealth (1987) 162 CLR 74 at 83 per Gibbs CJ and 102 per Dawson J. The statute does not operate on the basis that the commercial parking station has to be something which the employee might or could use. This is made clear by s 148(1)(c) of the Assessment Act, which provides that a benefit to the employee within the meaning of the Assessment Act will have been provided, whether or not the benefit is surplus to the

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needs or wants of that employee. The condition that there be a commercial car parking station within a one kilometre radius of the employer's business premises to constitute a car parking fringe benefit is not a proxy for the value of the benefit to the employee of receiving an actual parking space at the employer's business premises, but a proxy for determining the taxable value of a benefit provided by the employer to an employee on which tax on the employer is imposed. This is confirmed in the reference in the definition to any of the car parking spaces being available in the ordinary course of business to members of the public for all-day parking on that day on payment of a fee. So understood, it is apparent that the word 'public' should be given its ordinary meaning and there is no rationale for imputing into the definition a requirement that the commercial parking station be one that employees of the employer commuting to work by car would or could in fact use. It made sense in Virgin Blue to seek to ascertain which car spaces were 'in the vicinity' of Terminal 3 by reference to the fact that the car spaces were being used by people who were driving to work from home. However, it makes no sense in assessing whether a parking station is proffered to the public to ask, on the other hand, whether that parking station is used by commuters because the tax which is imposed on the employer is on the value of the car parking that the employer has made available to employees at or in the vicinity of its business premises.

13. Secondly, the necessity that there be a commercial parking station within a kilometre of the employer's premises is therefore a trigger for liability to the tax but it is not the concept which is taxed. Rather, it is the statute's way of working out which car spaces are likely to be sufficiently valuable to bother either the taxpayer (or the Commissioner) in going down the path of assessment. If there is a commercial parking station within a kilometre then assessing the value of a car space provided by an employer to an employee is likely to be worthwhile, but not otherwise.

14. Thirdly, there is therefore no ambiguity about the word 'public', which means what it says. Consequently there is no reason to resort either to the second reading speech or the explanatory memorandum:
Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252 at 265 [33]. The current case may be contrasted with Virgin Blue where the words 'in the vicinity of' were ambiguous and the second reading speech was useful extrinsic material in resolving that ambiguity. Here the meaning of 'commercial parking station' is, with respect, quite clear.

15. The Commissioner advanced an alternative argument in the event that Qantas was correct in confining the word 'public' to the commuting public. The argument was that Qantas had failed to prove that the commuting public did not use the airport parking stations. The Tribunal made no finding that the commuting public did not use the parking stations. This was because, however, the Tribunal rejected Qantas' construction argument and had no need to make this finding. It should be noted that the construction argument pursued in the Tribunal was not identical with the one which was ultimately pursued before this Court but the factual inquiry it would have triggered was not materially different to the one for which Qantas' present argument calls. If the issue had arisen, it would have been appropriate to remit the matter to the Tribunal for further consideration. The absence of relevant factual findings arose from the way the Tribunal conducted the review and not from a deficiency in the way in which Qantas approached what needed to be proved. In any event, the question does not arise.

Question 2: is the position at Canberra Airport any different?

16. The terms and conditions of parking at the Canberra Airport car parks contained the following clause: 'This Car Park is available only to airline passengers and meeters & greeters of airline passengers.' This is a contractual restriction imposed by the parking station operator.

17. Qantas submitted to the Tribunal, and it accepted, that this limitation on who could enter the Canberra Airport parking stations meant that they were not available to the public as the definition of 'commercial parking station' required. The Tribunal recognised, correctly with respect, that the issue at hand involved the meaning to be attributed to the word 'public' in that definition. It considered

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a number of authorities on the meaning of that word in a revenue context which suggested that something might be available to the public if it were provided to people on a basis, which whilst not necessarily universal, was at least general. Further, the Tribunal thought that the question of how large a section of the public needed to be involved was a matter which depended upon the statutory context. Both of these propositions are certainly correct:
Lee v Evans (1964) 112 CLR 276 at 285-286 per Barwick CJ;
Australand Investments Ltd v Commissioner of State Revenue (Vic) [2009] VSC 453; (2009) 77 ATR 683 at [97]; aff'd
Commissioner of State Revenue (Vic) v Australand Investments Pty Ltd [2012] VSCA 152; (2012) 89 ATR 329 at [67] per Hansen JA and Almond AJA.

18. The Tribunal then reasoned that the purpose of the tax was to ensure that the tax treatment of employees who received car parking spaces as part of the terms of their employment was the same as those who did not and who had to pay for their parking elsewhere with after-tax dollars. This view was supported by the second reading speech set out above. As already noted, this Court accepted the relevance of that speech in construing the words 'in the vicinity of' in Virgin Blue. This mattered in the present context because the Tribunal concluded from it that in the case of Canberra Airport parking stations the tax inequality could not arise and hence the purpose of the statute required 'public' to be read as including commuting employees. The logic of the argument was that since persons commuting by car to and from the airport for the purposes of working could not use the Canberra Airport parking stations, there would be no tax inequality if car spaces provided by Qantas to its employees at the airport were not brought to tax; that is to say, there would be no employees who were having to pay for parking in the parking stations with after-tax dollars because there would be no such employees parking in the stations at all.

19. This is, in substance, the same question which was resolved above. Qantas' contention that airport parking stations were not commercial parking stations turned on the proposition that the ordinary course of the parking stations' businesses did not include providing parking to commuting employees. The argument was that it would be pointless to allow parking stations of that kind to operate as the criterion on which the application of the tax turned because commuting employees would not be able to use them. That argument was rejected because the presence or otherwise of a qualifying parking station is not directed to the issue of whether employees might be able to find alternative parking but, instead, to whether the parking spaces which were given to them were valuable.

20. Whilst Qantas' argument was that the other airport parking stations should be disregarded because employees did not in fact use them, its argument in the case of Canberra Airport was that it should be disregarded because the employees could not use them. The same difficulty afflicts this argument. The relevance of the presence of commercial parking stations within a kilometre of the place of work is not to test whether employees might otherwise be able to find parking in it. Its relevance is to indicate that the car spaces which have in fact been provided have a value which ought to be assessed under the Assessment Act.

21. It was, therefore, incorrect for the Tribunal to seek to ascertain the meaning of the word 'public' in the definition of 'commercial parking station' by asking whether employees could, in fact, use the posited parking stations. It was not to the point that employees do not, in fact, use airport car parks nor is it to the point that they are prevented from doing so. The significance of the existence of a nearby commercial parking station is that it signifies the presence of value in the employer's car spaces and not that it provides an alternative to the staff.

22. That is sufficient to justify the conclusion that the Tribunal's decision on this aspect of the matter should be set aside. However, it leaves unresolved what the correct approach to the meaning of 'public' is in the context of Canberra Airport parking stations. As already mentioned, the role of the commercial parking station requirement is as a criterion which indicates whether a car space given to an employee is sufficiently valuable to warrant submitting the car space to

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the process of assessment. In considering the criterion in the definition of 'commercial parking station' that car spaces be available in the ordinary course of business to members of the public, it is that metric which should be kept in mind. In this case, whilst it is true that the operator of the parking stations imposed the restriction that the car parks were available only to airline passengers and meeters and greeters of airline passengers, the car parks nonetheless are public car parks in the sense that in the ordinary course of the business the car spaces are available to any member of the public on the contractual terms stipulated. The contractual terms do not mean that the car park spaces are not available to members of the public but, rather, that conditions are imposed on the use of the car park by members of the public:
Lee v Evans (1964) 112 CLR 276.

Orders

23. Qantas' appeal should be dismissed. The Commissioner's appeal should be allowed and the decision of the Tribunal set aside insofar as it allowed Qantas' objection to its assessment of fringe benefits tax in relation to fringe benefits tax liabilities associated with parking provided to employees at Canberra Airport. Qantas' application for review in the Tribunal should be dismissed. In accordance with the agreement of the parties, the Commissioner should be ordered to pay Qantas' costs in both matters in this Court as taxed or agreed (both appeals being funded under the Commissioner's Test Case Litigation Program).