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01 Dec 10 Car park was not "in the vicinity of" a place of employment - Virgin Blue

The Full Federal Court (Edmonds, Jessup and Gilmour JJ) has upheld the taxpayer's appeal from the decision of Jagot J, who had held that the Melrose Car Park was "in the vicinity of" Melbourne Airport's Terminal 3 within the meaning of s 39A(1)(f) of the Fringe Benefits Tax Assessment Act 1986 (Cth), such that the provision of car parking to the taxpayer's employees constituted a taxable fringe benefit.

The distance in this case between the car park and Terminal 3 (the primary place of employment of the taxpayer’s employees) was some 1.9 to 2 kilometres by the shortest practicable route. Employees of the taxpayer parked their cars at the car park at the taxpayer's expense and caught a shuttle bus to a bus stop located near the terminals. The taxpayer argued that the distance between the two places and the existence of the shuttle bus service between the two locations demonstrated the lack of close physical proximity. Jagot J disagreed, in particular, on the basis that the two locations were part of the same functional space – Melbourne Airport.

On appeal, it was common ground that Jagot J was correct in concluding that the meaning of the words "in the vicinity of" meant "near", "proximate" or "close". However, the taxpayer argued that the Jagot J erred in concluding that the Melrose Car Park and Terminal 3 were in the vicinity of each other, because while they were 2 kilometres apart, that distance could be traversed relatively easily and the two places were within the same "functional space". The Full Court agreed.

Edmonds and Gilmour JJ (with whom Jessup J agreed) said, at para 52:

"In our opinion, such considerations are irrelevant to the meaning of "in the vicinity of" in its statutory context in this case. A consequence of the primary Judge’s construction and the respondent’s submissions is that where employees who work within a large "functional space" such as an airport or hospital, park in employer-provided parking located, for example, 2km from their primary place of employment, this parking is prima facie subject to FBT, whereas employer-provided parking for CBD workers 2km away from the CBD workers’ primary place of employment is FBT-free, on the basis that the functional space of a CBD office is much narrower than 2km. The use of a concept such as "functional space" is an unwarranted layer of meaning which goes beyond the ordinary meaning of the expression "in the vicinity of" having regard to the object and context of the statutory provision."

The taxpayer's appeal was allowed: Virgin Blue Airlines Pty Ltd v FCT [2010] FCAFC 137 (Full Federal Court; Edmonds, Jessup and Gilmour JJ; 30 November 2010).


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