Parking, FBT, and the ATO’s Problem with Shopping Centres

By NextGen iQ

In what might be one of the most relatable FBT issues for suburban and regional employers, the Federal Court has handed down its decision in Toowoomba Regional Council v Commissioner of Taxation [2025] FCA 161. The question? Is a shopping centre car park a “commercial parking station” for fringe benefits tax purposes?

The answer — no, it isn’t. And yes, the ATO is appealing.

The backstory

Many employers are aware that providing free or subsidised parking to employees can attract FBT under the car parking benefit provisions. But the rules only apply where a commercial parking station exists within a 1 km radius that charges more than the statutory daily threshold.

The ATO has long argued that shopping centre car parks count — even if they offer three free hours and only charge a few dollars after that.

In Toowoomba, the regional council disagreed, and the Court sided with them.

What the Court said

The Federal Court looked closely at the definition of a “commercial parking station” under the FBT Assessment Act, and ruled that:

The car park in question wasn’t operated with a view to profit, but rather as a convenience for customers of nearby shops.
The parking structure didn’t meet the standard commercial profile — it had free hours, low fees, and wasn’t competing with other parking providers.
The purpose of the car park was to support retail activity, not to run a separate commercial car park business.

As such, it didn’t meet the FBT definition, and therefore, no FBT was payable on the council’s staff parking arrangements.

Why this matters

This decision cuts across the ATO’s long-held position, particularly outlined in TR 2021/2, where it treated many shopping centre and mixed-use car parks as “commercial” for FBT purposes.

If the judgment stands, it could:

Exempt thousands of small and medium employers — especially in regional areas — from car parking FBT obligations.

Create uncertainty for businesses relying on ATO rulings that now contradict the Court’s view.

Trigger a rethink of parking benefit assessments going forward, especially where the “comparator” parking facility is part of a retail complex.

Where things stand now

The ATO has confirmed it will appeal the decision, so there’s no change to the law just yet. TR 2021/2 remains active, and assessments will likely continue to apply the ATO’s current interpretation — at least until the appeal is heard.

But in practice, firms should be:

Reviewing current FBT positions for clients who provide employee parking near shopping centres.
Flagging the risk or opportunity of reduced FBT exposure if the appeal fails.
Documenting how nearby parking is used and priced, especially where fees are low, capped, or structured around shopping hours.

Practical reminder

Remember: small business entity employers (turnover < $50m) remain exempt from car parking FBT altogether, regardless of location — a fact often overlooked.

In Conclusion

Toowoomba is more than a parking spat — it’s a serious test of how the FBT rules apply in the real world, where car parks serve mixed purposes and commercial intent is not always clear-cut.

Until the appeal is resolved, practitioners should stay alert — and make sure clients aren’t overpaying FBT on parking benefits that might not legally exist.