Virgin Blue Airlines Pty Ltd v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (NSD 852 of 2010)
Judgment date: 30 November 2010
Date published: 21 May 2014
Decision outcome: Adverse

Summary of decision:
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.

Overview 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.

Issues decided:
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.

ATO 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.

Legislative references: Fringe Benefits Tax Act 1986 (Cth) 5 Fringe Benefits Tax Assessment Act 1986 (Cth) 5B 5C 39A(1)(a)(ii) 39A(1)(f) 58G 136(1) Income Tax Assessment Act 1936 (Cth) 23L Taxation Laws Amendment (Car Parking) Act 1992 (Cth) The Act Taxation Laws Amendment (Fringe Benefits and Substantiation) Act 1987 (Cth) 34
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
Subject references: Fringe benefits tax Car parking benefit Interpretation of 'in the vicinity of'