Virgin Blue Airlines Pty Limited v Commissioner of Taxation

AGREED FACTS 4 As noted, the requirement in s 39A(1)(f) is in dispute. It is agreed that all other conditions specified in the section are satisfied. Insofar as s 39A(1)(f) is concerned the following facts are also agreed: (1) Melbourne Airport covers an area of approximately 23,780,000 square metres (2,378 hectares). (2) The applicant leases part of the Terminal 3 building at Melbourne Airport. This is the primary place of employment of employees of the applicant. (3) The applicant had in place an arrangement with another entity in respect of the Melrose Car Park. By this arrangement the applicant's employees were able to park in the Melrose Car Park. The applicant was charged a monthly fee for each pass card issued which enabled employees to access the Melrose Car Park. The employees did not pay any part of this monthly access fee. (4) The Melrose Car Park is south-east of Terminal 3. The entrance to the Melrose Car Park is across the road from part of Melbourne Airport's long-term car park. A taxi holding bay and bus stop are located adjacent to the Melrose Car Park. (5) The shortest practicable route from the entrance to the Melrose Car Park to Terminal 3 is approximately 1.9 to 2.0 kilometres in length (approximately 1.7 kilometres from the bus stop adjacent to the Melrose Car Park to a bus stop near Terminal 4 and a further 200 to 300 metres from that bus stop to the entrance to Terminal 3). There is also a bus stop outside Terminal 2 which is approximately 100 metres from the entrance to Terminal 3. (6) A shuttle bus operates between the bus stop at the entrance to the Melrose Car Park and the bus stop at Terminal 4 from 4.30 am to 10.30 pm each day and between the bus stop at the entrance to the Melrose Car Park and the bus stop at Terminal 2 from 10.30 pm to 4.30 am each day. The applicant's employees using the Melrose Car Park use these shuttle bus services. These bus services are provided by the entity that owns the Melrose Car Park. The applicant does not pay a separate fee for this service. (7) The Melrose Car Park is 941 metres from a public commercial car park located at 390 Melrose Drive, Tullamarine.

THE APPLICANT'S CASE 5 The applicant's case is that not all employer subsidised car parking is subject to fringe benefits tax. To be taxable all conditions in s 39A(1) must be satisfied including that the car parking facilities at which the car is parked be at or in the vicinity of the primary place of employment (s 39A(1)(f)). Section 39A(1)(f) is thus a further limitation on the liability to fringe benefits tax. This, according to the applicant, reflects the purpose of the legislation as disclosed in the Second Reading Speech to the Taxation Laws Amendment (Car Parking) Bill 1992 to address inequity that some employees, particularly high income earners who receive parking in central business districts, receive car parking benefits in tax exempt form whilst others do not. As the Melrose Car Park is not at the primary place of employment (being common ground between the parties) the question is whether the Melrose Car Park is in the vicinity of that place, being Terminal 3 (also common ground between the parties). The statute does not define "in the vicinity of". The words must thus be given their ordinary meaning, understood in the light of the context of the statute as a whole and the purpose of the provision in which the words appear. The primary meaning of "vicinity" is "nearness in space" or "proximity" (see Oxford English Dictionary and Macquarie Dictionary). This meaning, submitted the applicant, raises the questions of "how near?" or "how proximate?". The degree of nearness or proximity required, according to this submission, is determined by the statutory context, specifically the context of the taxation of car parking used by employees for their journey to and from work. In this context the apparent purpose of the legislature was to subject to fringe benefits tax car parking at or in close physical proximity to the employee's primary place of employment. On this basis, the applicant's case is that car parking is in the vicinity of an employee's primary place of employment if the car parking is "on-site" at that place or "sufficiently proximate to the workplace to be comparable to on-site parking" or within a reasonable walking distance of the workplace. This accords with the legislative purpose of addressing inequity as the employee derives an additional advantage from the provision of the parking over and above the employer subsidy - the convenience of parking at or close to their place of work. 6 According to the applicant this approach to the meaning of "in the vicinity of" is supported by the context of s 39A(1)(f), the 1 kilometre radius rule in s 39A(1)(a)(ii), and the need to avoid ambiguity in the application of the statutory test. 7 As to context, the function of car parking provided by an employer is to facilitate the employee's journey to and from work. This indicates that the facility must be at or within reasonable walking distance of the place of work. The use of the phrase "at, or in the vicinity of" also indicates a legislative intention to capture car parking sufficiently close to be about as convenient as on-site car parking. 8 As to the 1 kilometre radius rule, Parliament has deemed commercial car parks outside that radius from the employee car parking facility to be irrelevant to the value of any benefit gained by the employee by reason of physical remoteness. This too suggests that Parliament intended that car parking "in the vicinity of" the primary place of employment be close to that place and, at the least, not further away than 1 kilometre. If it were otherwise absurdity could result. For example, the employer-provided car park might be 2 kilometres from the place of employment. The commercial car park might be another kilometre away, a total of 3 kilometres from the place of employment. Although it would take between 45 to 60 minutes to walk from the commercial car park to the place of work, fringe benefits tax could apply by reason of that distant car park. Parliament cannot have intended fringe benefits tax to depend on that distant car park. The commercial car park must be sufficiently close to the place of work that it must be realistic to infer that employees would park there. For these reasons, on the applicant's case, for "the measure in s 39A(1)(f) to itself exceed the 1km test in s 39A(1)(a)(ii) would frustrate the purpose of that test and lead to results that are absurd". However if construed as the applicant contends, there is no inconsistency - the employee parking must be within reasonably close walking distance of the workplace and the relevant commercial parking within 1 kilometre of the employee parking. The 1 kilometre requirement in s 39A(1)(a)(ii) is also a measure of distance supporting the same approach to the meaning of "in the vicinity of". 9 As to ambiguity, liability to tax must be clear from the statutory language. To construe "in the vicinity of" as meaning nothing more than "near", "close" or "proximate" adds little assistance. The concepts remain abstract unless regard is had to the statutory object of s 39A(1)(f) to limit the circumstances in which employer-provided car parking associated with an employee's journey to and from work will be taxable. This point was made by Dixon J in Harrison v The Darling to Glen Waverley Railway Construction Trust (1934) 52 CLR 68 at 82 where his Honour said "'Near' is not a word which can be applied without considering the object with which it is introduced into the description". This approach to the task of statutory construction indicates that the meaning of "in the vicinity of" contemplates close physical proximity for which "within a reasonable walking distance" is an appropriate measure. An approach based on something other than the objective measure of distance (as advocated by the respondent) offends this principle. 10 Having regard to this process of statutory construction, the applicant submitted that the Melrose Car Park is not in the vicinity of Terminal 3. The distance between the two is 2 kilometres by the shortest practicable route (according to evidence from Michael MacDonough, the applicant's operations manager, this takes 20 to 25 minutes walking and 15 to 20 minutes on the shuttle bus including the time it takes to wait for the bus and walk from the Terminal 4 bus stop to the Terminal 3 entrance), which is too far to meet the test of close physical proximity. By way of example, in Sea Swift Pty Ltd v Waterside Workers Federation of Australia (1989) 29 IR 391 it was held that a distance of some 3 kilometres between premises and a wharf meant that the two were not in the vicinity of each other. Further, on the evidence it is not practicable or safe for employees to walk the distance between the Melrose Car Park and Terminal 3. The existence of the shuttle bus service between the two shows the lack of close physical proximity. In any event, as Mr MacDonough's evidence shows the route is not well lit and lacks pedestrian facilities for much of its length (there being no footpaths or crossings and substantial road traffic making it impossible to walk for employees, especially taking into account that the applicant's employees will be carrying bags and uniforms). The commercial parking stations at Melbourne Airport are 100 to 500 metres from Terminal 3. The long term car park is not an indicator of reasonable walking distance. Such a car park, by definition, is not used on a daily basis. 11 The applicant also challenged the validity of the respondent's approach to s 39A(1)(f). According to the applicant the respondent's case may be reduced to two propositions both of which must be rejected. 12 First, the meaning of "in the vicinity of" cannot depend on the character of an area as opposed to the distance between two places. The meaning of a word or phrase depends on its statutory not factual context. The primary meaning of "vicinity" is proximity in space. While the word has a secondary meaning of "neighbourhood" or "character" these are subjective concepts. There is no indication that Parliament intended the word as used in s 39A(1)(f) to take its secondary meaning. The subjective nature of an assessment of "neighbourhood" or "character" would make the distinction between those liable and not liable to pay tax uncertain and arbitrary, contrary to the legislative purpose. Spatial proximity accords with the word's primary meaning and provides a test which is objective, quantitative and certain. In any event, it is likely that the Melrose Car Park (2 kilometres from Terminal 3) does not share the same neighbourhood as Terminal 3. It is not the case that the whole airport comprises the one neighbourhood. The airport has different areas (terminals, tarmac, industrial sites, hotels, car parks and empty spaces). The area around the Melrose Car Park is grassed and open. Terminal 3 is in a built-up area. Thus, there may be no relevant "neighbourhood" making the respondent's approach to the statutory condition unworkable. 13 Second, the fact that the applicant has provided its employees with parking in the Melrose Car Park does not demonstrate that the statutory test is met. Not all employer-provided car parking is taxable. All the statutory conditions, including s 39A(1)(f) which operates as an additional limitation on the application of the provision, must be met. The respondent's second argument thus is circular.

DISCUSSION 14 The applicant's arguments do not do justice to the respondent's case. Properly analysed the respondent's submissions involve an orthodox approach to the task of statutory construction. 15 As the respondent submitted, the legislation does not define the words "in the vicinity of". The words thus must be given their ordinary English meaning, having regard to the purpose and context of the provision. The purpose of the provision is to ensure that, in the circumstances specified in the statute but not otherwise, car parking provided by an employer is liable to the tax. Insofar as inequity is concerned the relevant comparison is between employees provided with car parking by their employer and employees not so provided who generally must pay for car parking with after tax dollars. The statutory context of the provision shows Parliament has identified a specific distance requirement for one relevant factor (the commercial parking station must be within a 1 km radius of the premises on which the car is parked under s 39A(1)(a)(ii)) but has not for another (the car is parked at, or in the vicinity of, the primary place of employment under s 39A(1)(f)). If Parliament had intended to specify a distance between the place where the car is parked and the workplace it would have done so. Instead Parliament chose different criteria - parking at or in the vicinity of the workplace. In this context, there is no basis for giving "in the vicinity of" any of the meanings for which the applicant contends (be it "sufficiently proximate to the workplace to be comparable to on-site parking", within reasonable walking distance of the primary place of employment, or less than the 1 kilometre radius rule established by s 39A(1)(a)(ii)). 16 The applicant's submissions start with the same conventional approach to statutory construction as the respondent by seeking to identify the ordinary meaning of the words "in the vicinity of". Various dictionary meanings of the word "vicinity" are available such as "near in space", "propinquity", "proximity", "near or close (to)", "in the neighbourhood (of)" (Oxford English Dictionary), "region near or about a place", "neighbourhood", "near in place", "proximity", "propinquity" (Macquarie Dictionary). Accordingly, it may be accepted that the phrase "in the vicinity of" means "near", "proximate" or "close". This is consistent with the authorities to which the parties referred concerning the phrase "in the vicinity of", as it appears in different statutory contexts, including Adler v George [1964] 2 QB 7 at 9 ("near in space"), Sea Swift at 396 ("near", "close at hand", "not distant"), Pollock v Ciccone (1988) 34 A Crim R 257 at 265 (not only "physical proximity" but also requiring, in that context, a functional relationship). The questions "how proximate?" or "how near?" were posed by Jacobs J in Abley v District Council of Yankalilla (1979) 22 SASR 147 at 152 in this way "…merely to pose 'proximity' or 'nearness in space' as the test only prompts the further questions 'how proximate?' or 'how near?', the answer to which must depend on the circumstances of each case". Jacobs J then gave an example of parcels of land close to each other but physically inaccessible due, for example, to separation by a river or deep gully. In other words, at least on the approach of Jacobs J, the questions of "how proximate?" or "how near?" depended on the application of the statutory test to the facts of the case. The approach in Sea Swift is similar. In that case the Commissioner was found to have erred by applying conclusions that had been reached in one case (Co-operative Bulk Handling Ltd v Australian Workers' Union, West Australian Branch, Industrial Union of Workers (1980) 32 ALR 541 (the CBH case) concerning the Kwinana Grain Terminal) to the facts of the case before the Commissioner in circumstances where the factual context was different. As explained in Sea Swift (at 396), the Court in the CBH case had considered the terminal at Kwinana to be in the vicinity of the wharf having regard to the integrated nature of that complex. That, however, provided little assistance to the resolution of the Sea Swift case where goods were loaded at the premises and transported 3 kilometres by road to the wharf. In other words, in both the CBH case and the Sea Swift case the actual physical context of the two locations in issue was considered to be relevant. 17 The cases thus support the respondent's approach to construction. The respondent submitted that Parliament's choice of the words "in the vicinity of", in contrast to the specification of a measurement of distance, must be recognised. "Vicinity" embraces the actual physical context of the objects in issue. By using the words "in the vicinity of" Parliament must be taken to have intended that the question of the sufficiency of the nearness, closeness or proximity will require an assessment of the distance between the two places (where the employee's car is parked and the primary place of employment) in the particular factual context within which those places are located. The respondent acknowledged that this means that the statutory condition could not be reduced to some absolute measure of distance. According to the respondent this was a result of the need to give effect to the statutory language. In any event, submitted the respondent, each of the applicant's alternatives, when analysed, involved the imposition of a subjective measure inconsistent with the statutory language. 18 I accept the respondent's submissions. The applicant's approach placed a series of glosses on the statutory language (that is, "sufficiently proximate to the workplace to be comparable to on-site parking", within reasonable walking distance of the primary place of employment, or less than the 1 kilometre radius rule established by s 39A(1)(a)(ii)). These glosses are not supported by the language of the statute, the context of the statute as a whole or any inferred legislative purpose. This is because Parliament has identified a test ("in the vicinity of" meaning "near", "proximate" or "close") which does not lay down any specific prescription about "how near", "how proximate", or "how close" the two places must be to each other. As the respondent's submissions recognised, the facts must answer the description of "in the vicinity of" meaning "near", "proximate" or "close", which necessarily involves consideration of the distance between the two places in their actual physical context. 19 Contrary to the applicant's submissions this does not conflate the statutory and factual context. The statutory context exposes Parliament's choice not to identify any maximum distance between the place where the car is parked and the primary place of employment (in contrast to its choice to specify a 1 kilometre radius in s 39A(1)(a)(ii)). The meaning of the phrase "in the vicinity of" does not change. It always means "near", "proximate" or "close". Further, in applying that test to different factual situations the distance between the place where the car is parked and the primary place of employment is a necessary and important, but not exclusive, consideration. As the respondent's submissions recognised, in applying the statutory test, the actual location of both the place where the car is parked and the primary place of employment, as well as what is located between and around those two places, are also relevant. This does not involve acceptance of any inappropriate ambiguity or vagueness in the distinction between a person liable and not liable to the tax. It gives effect to the language of the statute insofar as it expressly identifies a criterion involving a qualitative, rather than a purely quantitative, component. Given the geographical reach of the statutory provision, and the innumerable different factual situations which it must regulate, that choice by Parliament cannot be characterised as leading to unreasonable or absurd results. 20 Given these conclusions it cannot be said that, in s 39A(1)(f) of the Fringe Benefits Tax Assessment Act, "in the vicinity of" means sufficiently close to be comparable to on-site parking, within a reasonable walking distance or within a 1 kilometre radius. The phrase means "near", "proximate" or "close" having regard to the actual locations of the Melrose Car Park, Terminal 3, the distance between those two places and what is located between them. On the facts of this case the distance between the two locations (2 kilometres) is not necessarily a disqualifying factor. The locations are about 20 to 25 minutes apart if traversed on foot and 15 to 20 minutes apart if traversed by vehicle (including the time it takes to walk from the Terminal 4 bus stop to the Terminal 3 entrance and excluding any waiting time for the shuttle bus service which operates between the two locations). Importantly, the two locations are part of the same functional space - Melbourne Airport. While that space is large the two locations in question are both within a relatively small part of that space. According to photographic evidence the land between the two locations is generally flat and physically accessible by vehicle and on foot. 21 Given this context the Melrose Car Park is in the vicinity of (in the sense of near, proximate or close to) Terminal 3. The matters on which the applicant relies do not indicate to the contrary. The fact that a shuttle bus service operates between the two locations is irrelevant other than to the extent it shows the locations are physically connected by road links. The fact that the distance involves a 20 to 25 minute walk, in the actual physical context of the airport, does not suggest that the locations are other than in the vicinity of (in the sense of near, proximate or close to) each other. The fact that pedestrian facilities along the way (including footpaths, shelter and lighting) are not ideal, if relevant at all, is not of substantial weight given that, in this case, the two locations are physically accessible to each other both on foot and by vehicle. The fact that the applicant's employees are likely to be carrying luggage is also not material. The fact that Melrose Drive carries substantial vehicle traffic, particularly taxis, is also beside the point. If anything the traffic shows that the Melrose Car Park is located on an important feeder route to the terminal buildings including Terminal 3. For the purposes of s 39A(1)(f) one location either is or is not in the vicinity of another; policy and operational decisions such as the provision of a shuttle bus, the adequacy of pedestrian facilities and the need to carry luggage are immaterial. 22 The applicant bears the onus of establishing that the assessments are excessive. To do so the applicant must establish that the Melrose Car Park (being where its employees' cars are parked) is not in the vicinity of Terminal 3 (being its employees' primary place of employment). I am not satisfied that the applicant has discharged that onus. It follows that the appeal must be dismissed. The usual costs order should be made. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.