Virgin Blue Airlines Pty Ltd v Commissioner of Taxation

JUDGES: EDMONDS, JESSUP & GILMOUR JJ DATE: 30 NOVEMBER 2010 PLACE: SYDNEY

Introduction 1 This appeal turns on the proper construction of s 39A(1)(f) of the Fringe Benefits Tax Assessment Act 1986 (Cth) (FBTAA) and its application to the facts which are not in dispute. The condition in s 39A(1)(f), which must be satisfied in order for the provision of car parking to an employee to constitute a fringe benefit, is that during the relevant period "the car is parked at, or in the vicinity of" the employee's primary place of employment. All other conditions in s 39A were satisfied in this case. 2 During the years ended 31 March 2006, 2007 and 2008 (the relevant period), the appellant provided employees working at Melbourne Airport with access to a car park at Melrose Drive, Tullamarine, Victoria (the Melrose Car Park), approximately 2 km from the employees' primary place of employment at Terminal 3 of Melbourne Airport (Terminal 3).

The Legislative Scheme 3 Fringe benefits tax (FBT) is imposed by s 5 of the Fringe Benefits Tax Act 1986 (Cth) in respect of the "fringe benefits taxable amount" of an employer of a year of tax. The scheme of the legislation is described in Queensland v Commonwealth (1987) 162 CLR 74 at 83; see also The Roads and Traffic Authority of New South Wales v Commissioner of Taxation (1993) 43 FCR 223 and Westpac Banking Corporation v Commissioner of Taxation (1996) 70 FCR 52. The tax is payable by the employer. The "fringe benefits taxable amount" of an employer is calculated by reference to the taxable value of each "fringe benefit" provided: ss 5B and 5C of the FBTAA. The expression "fringe benefit" is defined in s 136(1) of the FBTAA. 4 The amount of FBT payable depends on the taxable value of the fringe benefit. Part III of the FBTAA contains a number of different valuation rules for calculating the taxable value of different kinds of fringe benefit. Car parking fringe benefits are dealt with in Div 10A. 5 The employer pays FBT on the "fringe benefits taxable amount" at a fixed rate which is the top marginal rate plus the Medicare levy. This is designed to ensure that fringe benefits are effectively taxed in the same way as if they had been received as salary of the employee, on the assumption that the employee is taxed at the top marginal rate. In order to avoid double taxation, s 23L of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) exempts the employee from tax on the amount of the fringe benefit provided. 6 At the time of the introduction of the FBTAA (the FBTAA was assented to on 24 June 1986) car parking facilities were either expense payment fringe benefits or residual fringe benefits: ss 20 and 45 FBTAA; Miscellaneous Tax Ruling MT2021. 7 On 29 October 1986 the Treasurer announced that: Car parking benefits are to be exempted from fringe benefits tax, whether provided at an employer's premises or elsewhere. 8 In consequence, s 58G was inserted into the FBTAA, by s 34 of the Taxation Laws Amendment (Fringe Benefits and Substantiation) Act 1987 (Cth) providing that such a benefit was an exempt benefit. This amounted to a "blanket exemption". 9 That exemption was then partly reversed in 1992 when Div 10A of the FBTAA was introduced by Taxation Laws Amendment (Car Parking) Act 1992 (Cth) to render some instances of employer-subsidised car parking a fringe benefit. Section 39A, which is found in Div 10A, brought within the fringe benefits tax net the provision of car parking facilities where "the car is parked at, or in the vicinity of, the employee's primary place of employment": s 39A(1)(f) of the FBTAA. 10 In other words, Div 10A "carved out" of the blanket exemption a limited liability to tax: "where the car is parked at, or in the vicinity of, the employee's primary place of employment". 11 If, instead of a "carve out", the Legislature had intended to remove the blanket exemption, it could have repealed s 58G. In fact this section was amended with the effect described later in these reasons. 12 Section 39A, at the relevant time for the purpose of the assessments, provided as follows: (1) If the following conditions are satisfied in relation to a daylight period, or a combination of daylight periods, on a particular day: (a) during the period or periods, a car is parked on one or more premises of a person (the provider), where: (i) the premises, or each of the premises, on which the car is parked are business premises, or associated premises, of the provider; and (ii) a commercial parking station is located within a 1 km radius of the premises, on which the car is parked; and (iii) the lowest fee charged by the operator of any such commercial parking station in the ordinary course of business to members of the public for all-day parking on the first business day of the FBT year is more than the car parking threshold; (b) the total duration of the period or periods exceeds 4 hours; (c) any of the following applies: (i) a car benefit relating to the car is provided on that day to an employee or an associate of an employee in respect of the employment of the employee; (ii) the car is owned by, or leased to, an employee or an associate of an employee at any time during the period or periods; (iii) the car is made available to an employee or an associate of an employee at any time during the period or periods by another person, where: (A) the other person is neither the employer of the employee nor an associate of the employer of the employee; and (B) the other person did not make the car available under an arrangement to which the employer of the employee, or an associate of the employer of the employee, is a party; (d) The provision of parking facilities for the car during the period or periods is in respect of the employment of the employee; (e) on that day, the employee has a primary place of employment; (f) during the period or periods, the car is parked at, or in the vicinity of, that primary place of employment; (g) on that day, 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; (h) the provision of parking facilities for the car during the period or periods is not taken, under the regulations, to be excluded from this section; (i) the day is on or after 1 July 1993; the provision of parking facilities for the car during the period or periods is taken to constitute a benefit provided by the provider to the employee or the associate of the employee in respect of the employment of the employee. 13 Section 39A(1) of the FBTAA prescribes the "conditions" which must be satisfied in order for the provision of car parking facilities to an employee to be a fringe benefit. The relevant "condition" for present purposes is found in s 39A(1)(f) which applies where: (f) during the period or periods, the car is parked at, or in the vicinity of, that primary place of employment... 14 If the condition in s 39A(1)(f) is satisfied, the provision of parking facilities at Melrose Car Park will be treated as a benefit provided by an arranger to the employees in respect of their employment with the appellant, and there will be a "fringe benefit" as defined in s 136(1). 15 At the same time that Div 10A was introduced, s 58G(1) was amended to read as follows: Each of the following benefits is an exempt benefit: (a) an expense payment benefit, where: (i) the recipient's expenditure is in respect of the provision of motor vehicle parking facilities; and (ii) the benefit is not an eligible car parking expense payment benefit; (b) a residual benefit where the recipient's benefit consists of motor vehicle parking facilities. 16 The expression "motor vehicle parking facilities" is not defined in the FBTAA. The expression "eligible car parking expense payment benefit" is defined in s 136(1), the conditions of which mirror the conditions in s 39A(1). Thus, where an employer provides a car parking benefit which does not satisfy s 39A(1)(f) (or any of the other conditions in s 39A(1)) the benefit will not be an "eligible car parking expense payment benefit". It will be exempt from FBT, and will not be assessable as ordinary income of the employee: s 23L(1A) of the Income Tax Assessment Act 1936 (Cth). Section 39A(1)(f) thus operates to restrict the extent to which the provision of parking facilities by an employer or an associate to an employee is subject to FBT. 17 In summary, where the employer either pays the cost of the parking or reimburses the employee for that cost: (a) if the car parking facilities are at, or in the vicinity of, the primary place of employment and the other conditions of s 39A(1) are satisfied, FBT is payable by the employer at effectively the same rate as if the employee simply received a higher salary to compensate the employee for having to pay the cost of the parking, on the assumption that the employee is taxed at the highest marginal rate; (b) but where the car parking facilities are not at or in the vicinity of the primary place of employment, the employer is not subject to FBT and the employee is not taxed on the benefit received.

fACTS 18 The case, in the Court below, proceeded on a Statement of Agreed Facts. The facts relevant to this appeal as found in the reasons of the primary judge are as follows. 19 Melbourne Airport covers an area of approximately 23,780,000 square metres (2,378 hectares). At Melbourne Airport, the appellant leases part of Terminal 3. The primary place of employment of the appellant's employees who use the Melrose Car Park is Terminal 3. 20 In the years ended 31 March 2006, 2007 and 2008 (Relevant Period): (a) the appellant arranged for the employees to be issued with passes allowing them to access the Melrose Car Park; (b) the Melrose Car Park was owned by a third party; and (c) the appellant paid the third party a monthly fee for each pass to access the Melrose Car Park; the employees did not pay any part of this fee. 21 The shortest practicable route between the entrance to the Melrose Car Park and Terminal 3 is approximately 1.9 to 2 km by road. The distance would take 20 to 25 minutes to traverse by foot. 22 A shuttle bus service operated between the Melrose Car Park and Terminal 4 or Terminal 2 at Melbourne Airport. The journey from an employee's car space at Melrose Car Park to Terminal 3 via the shuttle bus takes an Employee about 15 to 20 minutes, one way, without counting time waiting for the shuttle bus.

The judgment appealed from 23 The primary judge observed that 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)). Further, 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. Then her Honour held that, in this context, there was no basis for giving "in the vicinity of" any of the meanings for which the applicant contended, 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)." 24 The primary judge accepted that the phrase "in the vicinity of" in s 39A(1)(f) means "near", "proximate" or "close", these being consistent with the authorities to which the parties referred concerning that phrase, as it appears in different statutory contexts. 25 Her Honour observed that Parliament's choice of the words "in the vicinity of", in contrast to the specification of a measurement of distance, must be recognised, and that "vicinity" embraces the actual physical context of the objects in issue. Put another way, her Honour concluded that 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 required 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. A consequence of this was that the statutory condition could not be reduced to some absolute measure of distance. 26 Accordingly, in applying that test to different factual situations, the primary judge found that 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: in applying the actual location of both the place where the car is parked and the primary place of employment, what is located between and around those two places is also relevant. This approach, her Honour found, gave effect to the language of the statute, insofar as it expressly identifies a criterion involving a qualitative, rather than a purely quantitative, component. 27 Against that background the primary judge rejected a construction of "in the vicinity of" as meaning sufficiently close to be comparable to on-site parking; within a reasonable walking distance; or within a 1 kilometre radius as the present appellant had contended. Rather, her Honour concluded that the phrase means "near", "proximate" or "close" having regard to the actual location of the Melrose Car Park, Terminal 3, the distance between those two places and what is located between them. Her Honour went on to conclude that the distance between the two locations which was 2 kilometres, was not necessarily a disqualifying factor. Her Honour took into account that 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. The primary judge regarded it as important that the two locations were part of the same functional space, namely Melbourne Airport, and that while that space was large the two locations in question were both within a relatively small part of that space, with the land between the two locations being generally flat and physically accessible by vehicle and on foot. 28 Given that context, the primary judge concluded that the Melrose Car Park was "in the vicinity of", in the sense of near, proximate or close to Terminal 3. Her Honour regarded the fact that a shuttle bus service operated between the two locations as irrelevant other than to the extent it showed the locations were 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, did not suggest that the locations were other than in the vicinity of each other. The fact that pedestrian facilities along the way (including footpaths, shelter and lighting) were not ideal, if relevant at all, was not of substantial weight given that the two locations were physically accessible to each other both on foot and by vehicle. The fact that the applicant's employees were likely to be carrying luggage was also not regarded as material. The fact that Melrose Drive carried substantial vehicle traffic, particularly taxis, was also beside the point. In short, her Honour concluded that 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 were immaterial.

Grounds of appeal 1. The trial judge erred in concluding that the determination of the sufficiency of the nearness, closeness or proximity contemplated by the phrase "in the vicinity of" in s 39A(1)(f) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) in a particular case 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. 2. The trial judge erred in concluding that the Melrose Car Park and the primary place of employment of the appellant's employees (Terminal 3 at Melbourne Airport) were in the vicinity of each other for the purposes of s 39A(1)(f) of the FBTAA because while they were 2km apart, that distance could be traversed relatively easily and the two places were within the same "functional space". 3. The trial judge erred in failing to conclude that the degree of nearness, closeness or proximity contemplated by the phrase "in the vicinity of" in s 39A(1)(f) of the FBTAA should be determined by reference to the statutory context before regard is had to the factual context of the particular case. 4. The trial judge ought to have concluded that the phrase "in the vicinity of" in s 39A(1)(f) of the FBTAA, construed in light of its statutory context, requires a close proximity between the two places (where the employee's car is parked and the primary place of employment). 5. The trial judge ought to have concluded that the Melrose Car Park and the primary place of employment of the Appellant's employees (Terminal 3 at Melbourne Airport) were not in the vicinity of each other for the purposes of s 39A(1)(f) of the FBTAA because they are not in close proximity to each other. 29 Each of these grounds is but a particular aspect of the appellant's contentions as to the meaning and effect of s 39A(1)(f) of the FBTAA and its application to the facts of this case. It is convenient then to treat these collectively in disposing of this appeal.

Consideration 30 The legislative history of the liability, and the exemption from liability, of car parking benefits to fringe benefits tax, set out at [6]-[11] above, provides a platform from which to construe the words "at or in the vicinity of" in s 39A(1)(f) of the FBTAA. As there noted, s 39A operated as a "carve out" from an existing exemption from tax so that, as observed in [17] above, not all car parking benefits were subjected to tax, only those which are provided "at or in the vicinity of" the primary place of employment. So understood, the benefit to be taxed may be seen not as a car parking benefit per se, although that no doubt may be a benefit, but the additional benefit of having it provided "at or in the vicinity of" the employee's principal place of employment. Identifying the benefit to be taxed in this way informs one as to the proper construction of the phrase "in the vicinity of" in the wider phrase "at or in the vicinity of" in its statutory context, which includes s 58G; and that is important when dealing with a protean phrase such as "in the vicinity of". It is important because it is more likely than not to lead to a conclusion which accords with the policy underlying the introduction of Div 10A into the FBTAA and at the same time preserving the exemption, albeit in a modified form, contained in s 58G. We are here concerned with a statute imposing tax on persons providing certain benefits which have hitherto been exempt from tax; while at the same time preserving the exemption in respect of the provision of the same benefits not "in the vicinity of" the employee's principal place of employment; we are not concerned with tax avoidance nor with the concealment of the substance of a transaction by artificialities of form; the ambit of the application of the tax should extend no further than that which can be taken from the clear words of the statute: Anderson v Commissioner of Taxes (Vic) (1937) 57 CLR 233 at 243 per Rich and Dixon JJ; Western Australian Trustee Executor and Agency Co Ltd v Commissioner of State Taxation (WA) (1980) 147 CLR 119 at 126; Hepples v Commissioner of Taxation (1992) 173 CLR 492 at 510 - 511 per Deane J. 31 The phrase "in the vicinity of" in s 39A(1)(f) of the FBTAA refers to a relationship between two places. It is an expression capable of wide application. However, its reach requires consideration in its statutory context before its application to the facts. We refer to "context" in the broad sense referred to in CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; Project Blue Sky Inc v Australia Broadcasting Authority (1998) 194 CLR 355 at [69]; Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592 at [50]. 32 It is common ground in the parties written submissions that the primary judge was correct in concluding that the meaning of the words "in the vicinity of" meant "near", "proximate" or "close". Each of those meanings is apt as is the observation of the primary judge that in the context of s 39A(1)(f) the meaning of the phrase "in the vicinity of" does not change. It always means "near", "proximate" or "close". Despite this, senior counsel for the respondent in oral submissions sought to argue that expressions such as "neighbourhood" or "region" are capable of coming within her Honour's conclusion as to the meaning of the expression "in the vicinity of". There is no warrant for this and there is no notice of contention asserting any such different meaning. 33 However, "near" is a relative term which invites the question "how near?" This is to be answered by reference to the statutory context without regard to the facts of the instant case. 34 The Second Reading Speech to the Taxation Laws Amendment (Car Parking) Bill 1992 (Cth) described the purpose of the introduction of FBT on car parking benefits which fall within the new Div 10A 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. Accordingly, the Bill will amend the Fringe Benefits Tax Assessment Act 1986 to impose fringe benefits tax on certain car parking benefits received by employees. However, a benefit will only arise where a car used to commute from home to work is parked at or near the employee's main workplace for more than 4 hours between the hours of 7.00am and 7.00pm. (Emphasis added) 35 The Explanatory Memorandum to the Bill gave five examples of the intended operation of s 39A. In the first four, the car parking facility was in the basement of the building in which the employee worked. In the fifth example, which illustrated the "in the vicinity" alternative in s 39A(1)(f), the car parking facility was a car park across the street from the employee's office. 36 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 is apparent that the word "vicinity" in the phrase "at, or in the vicinity of" is a reference to places which are near meaning in close spatial proximity to each other. The word "near" when used to denote spatial proximity according to the Oxford English Dictionary (Second Edition) means "[t]o, within, or at, a short distance; to, or in, close proximity". Such a conclusion is not affected by the fact that the expression "at or near" is employed in other provisions of the FBTAA: s 7(2)(b); s 47(7)(b); s 58L(1)(e); s 61C(1)(c); s 142(2E)(b)(ii); s 143(1)(j); s 143C(1)(f). 37 A number of cases, in their particular contexts, refer to the ordinary meaning although the last of these does not employ it: Adler v George [1964] 2 QB 7 at 9; Sea Swift Pty Ltd v Waterside Workers Federation of Australia (1989) 29 IR 391 at 396; Pollock v Ciccone (1988) 34 A Crim R 257 at 265. 38 The case of Pollock emphasises the need to construe the expression "in the vicinity of" in its statutory context. 39 One issue in that case concerned the construction of s 17(4) of the Gaming and Betting Act 1912 (NSW). The question was whether card games being played were "unlawful games". Games of a private domestic nature by s 17(3) did not constitute unlawful games. The prosecution relied on the unlawful game described in s 17(1)(f). 40 Section 17(4) created a rebuttable presumption concerning proceedings in relation to a game as referred to in s 17(1)(f), that the game is not of a private domestic nature as provided for in s 17(3), if not less than nine persons (including participants in the game) were "in the vicinity of the playing of the game". 41 Giles J at p 265 said: The ordinary English meaning of the word "vicinity" connotes physical proximity: see Macquarie Dictionary, "the state or fact of being near in place; proximity; propinquity". . In Adler v George [1964] 2 QB 7 at 10 it was said that the natural meaning was the state of being near in space. However, it was there held that the purpose of the provision in which the word appeared meant that parliament did not intend the grammatical meaning to apply, so that the phrase "in the vicinity" meant "in or in the vicinity": see also Kingston v Keprose Pty Ltd (1987) 11 NSWLR 404 at 422. I do not think that in s 17(4) of the Act the word is used to express the simple concept of physical proximity. Assume that a game is being played in a room at a table close to an outer wall, with onlookers and would-be players in the room standing three metres away from the table. On the footpath on the other side of the outer wall is a stranger waiting for a bus, standing as a matter of physical proximity two metres from the table. The purpose of s 17(4) would in my view mean that the onlookers and would-be players may be in the vicinity of the game where the stranger would not, although the stranger is physically closer to the game than many of the onlookers or would-be players. It is necessary to add to the simple concept of physical proximity something additional to reflect a relationship between the person whose physical proximity is in question and the playing of the game. Although in a different context, a similar view was taken by Jacobs J in Abley v Yankalilla District Council (1979) 22 SASR 147 at 152, where it was said that in determining whether certain land was "in the vicinity" of other land for planning purposes factors other than mere proximity may well be relevant. (Emphasis added). 42 Abley to which Giles J referred was a planning case. There, application was made pursuant to Pt VI of the Planning and Development Act, 1966-1978, for approval of a plan of subdivision of an area of lightly timbered rural land, situated near Cape Jervis. It was proposed to divide the land into urban-type allotments. Approval to the plan was refused by the Director of Planning and by the District Council concerned, and an appeal to the Planning Appeal Board against the refusal was dismissed by the Board. The main ground of refusal was that the development of the land would be premature having regard to the amount of land in the vicinity which was already divided into allotments and the extent to which such allotments had not been used for the purposes for which they were so divided (Planning and Development Act, 1966-1978, s 52(1)(d)(iii)). 43 As to the meaning of "in the vicinity" in Abley, Jacobs J said at 152: … it is undesirable to give any too rigid meaning to the word "vicinity" in the context in which it is now used in s 52(1)(d)(iii). In Forster's case the Board said that "The word, in our view, imports nothing more than the literal meaning which is 'quite generally the state of being near in space.'" When that case was decided, however, the relevant part of the statute was not in its present form. In particular, the concept of prematurity was to be applied to the development of the "locality" in which the land was situated. It may well have been necessary to draw some distinction between the word "locality" and the word "vicinity"; but the word "vicinity" in the present statute is not linked with "locality", and factors other than mere proximity may well be relevant in bringing other subdivided land in the "vicinity" of the subject land into account. Indeed, 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 upon the circumstances of each case. One can imagine cases in which the land proposed to be subdivided is quite close to existing subdivided land in terms of distance, but if there is no access from the one parcel to the other - if, for example, they are separated by a river or a deep gully - the proximity of the subdivided land may have little bearing in deciding whether the new subdivision is premature. (Emphasis added) 44 Again, despite accepting the meaning of "in the vicinity of" as found by the primary judge the respondent submitted that the caution aired by Lord Reid concerning the use of synonyms ought be heeded in this case. Lord Reid in Brutus v Cozens [1973] AC 854 at 861F-G said: No doubt the court could act as a dictionary. It could direct the tribunal to take some word or phrase other than the word in the statute and consider whether that word or phrase applied to or covered the facts proved. But we have been warned time and again not to substitute other words for the words of a statute. And there is very good reason for that. Few words have exact synonyms. The overtones are almost always different. 45 The appellant's submissions in reply are persuasive. Courts commonly refer to dictionaries to assist in the determination of the ordinary meaning of a word used in a statute. As Lord Hoffmann observed, Lord Reid's statement amounts to no more than a recognition that "many words or phrases are linguistically irreducible in the sense that any attempt to elucidate a sentence by replacing them with synonyms will change rather than explain its meaning": Moyna v Secretary of State for Work and Pensions [2003] 1 WLR 1929 at [23] The word "vicinity" is not a word which is linguistically irreducible. The dictionary definitions indicate that it has at least two ordinary meanings and it is necessary to determine which is the most appropriate to the statutory context. In the present context the meaning is as found by the primary judge employing those words in a spatial sense. 46 Further, as Gummow and Hayne JJ observed in Coleman v Power (2004) 220 CLR 1 at [172], Lord Reid was dealing with the question whether the word "insulting" should be given an unusually wide or extended meaning, and not with an argument that its content and application must be determined by the context in which the word is used - which was the issue before the court in that case and is the issue in the present case: see also McHugh J at [59]. Significantly, all members of the majority in Coleman v Power referred to dictionary definitions in order to elucidate the meaning of "insulting" in the statute: at [53] and [170]. 47 In our opinion, the primary judge erred in concluding that, by using the words "in the vicinity of", Parliament must be taken to have intended that the question of the sufficiency or the nearness, closeness or proximity will require an assessment of the distance between where the employees car is parked and the primary place of employment in the particular factual context within which those places are located. At least, her Honour erred in the way this approach was given effect. 48 At first blush this approach might seem unexceptional if it were to describe the fact finding exercise of whether those two places are "in the vicinity of" meaning spatially near or close, that is, the ascertainment of whether the facts meet the ordinary meaning of "in the vicinity of". 49 However, it is apparent that the primary judge regarded the nearness, closeness or proximity of the two places as flexible depending on the facts. Again that might seem unexceptional if it were referrable to factors relevant in the statutory context of the provision which might render the two places spatially near or close but not in the vicinity of each other as was described by Jacobs J in Abley. 50 That this is not what the primary judge intended by her approach is evident from what her Honour said at [20]-[21]: 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. Given this context the Melrose Car Park is in the vicinity of (in the sense of near, proximate or close to) Terminal 3. (Emphasis added) 51 The respondent supported this approach of the primary judge with the following submissions: (a) The respondent submits that the relevant factual circumstances are as follows. The context and therefore the "vicinity" in these proceedings is an international airport covering 2,378 hectares, and the provision of employee parking for the purpose of attendance at Terminal 3, which is part of that airport, as the primary place of employment. For many reasons, including safety, practicality, amenity and security, major international airports cover large areas. The size of the area needs to: accommodate … various matters … and many and various considerations will determine where particular facilities in that area will be located. (b) Both the Melrose Car Park and Terminal 3 are located within Melbourne Airport, that is, within the one neighbourhood, locality or vicinity. Indeed, within the 2,378 hectare airport site, they are situated only 2 km apart which is walking distance. Employees may make their way from the Melrose Car Park to Terminal 3 on foot or by a shuttle bus. At all times they are within Melbourne Airport and they traverse, between the Melrose Car Park and Terminal 3, only a small part of the Melbourne Airport site. (c) Both the Car Park and Terminal 3 form part of a precinct or neighbourhood with a distinct character. That might not be the case, for example, if the relevant car park were located alongside a shopping mall or a railway station outside of the Melbourne Airport site. The context of Melbourne Airport, in terms of its character, scale, development design and density, differs significantly from that of a CBD, for example, where 2 km may be the distance from one side of the CBD to the other. (d) The context in these proceedings has more in common with a large University campus where it might not be uncommon for a lecturer to use a staff car park located on one side of the campus to teach at a faculty building on the other side of that campus. In both cases the car park and the primary place of employment fall within a setting that has a distinct nature or character, and in both cases the car park would be said to be "in the vicinity of" the primary place of employment. (e) If the legislature had wanted to restrict FBT to situations where the relevant car park was "near" or "a short distance", or a specific distance from the primary place of employment, it could have done so. It did not and adopted a test of "vicinity". That might often be "near" the primary place of employment, but it need not necessarily be so. It is then unsurprising that the legislature adopted the word "vicinity" given the myriad situations in which employers might subsidise car parking for their employees, of which the present situation is a good example. 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. 53 This divergence in tax result is not supported by the legislative purpose of s 39A(1)(f). The airport or hospital employee in the above example derives no greater benefit from the parking than does the CBD worker. 54 The statutory test is whether the car park is in the vicinity of the employee's primary place of employment. The "primary place of employment" will ordinarily be capable of precise identification. That place is Terminal 3. It is not Melbourne Airport at large. The question is whether the parking provided is in the vicinity of Terminal 3. Consideration of whether or not the primary place of employment is functionally part of a large area such as Melbourne Airport, or a University Campus or a city's CBD is not warranted by the statutory language and serves only to distract from the question whether the car park is, synonymously, near, proximate or close to that place. It is the spatial and geographical separation between them that is important. To the extent that what lies between them is relevant to the application, as distinct from the meaning, of the statutory test this encompasses geographical features such as rivers, railway lines, freeways and other physical obstacles which might render a car park and an employee's primary place of employment near or close as the crow flies but not so in terms of the distance of the shortest practicable route between them. For example where a car park provided by an employer was on the other side of a railway line from the primary place of employment the distance between them might be 100 metres but because the nearest rail crossing was 1 km away the actual distance to be travelled to reach one from the other would be 2 km. This is consistent with the observations of Jacobs J in Abley at 152 to which we referred above and which were also referred to by the primary judge. It is in this sense that the expression "in the vicinity of" is flexible. 55 As the appellant put it, the statutory purpose of s 39A(1)(f) is not served by allowing the physical reach of the places within the "vicinity" to expand or contract depending on the facts. This would disregard the object with which the relevant phrase was introduced, as cautioned against by Dixon J in Harrison v The Darling to Glen Waverley Railway Construction Trust (1934) 52 CLR 68 at 82. The approach of the primary judge, in its effect, was to conflate the statutory and factual contexts. ` 56 The function of s 39A(1)(f) is to limit the size of the area around the primary place of employment in which a parking space will be a fringe benefit. Section 39A reflects a policy that the inequity referred to in the Second Reading Speech is not seen as applicable to all employer subsidised car parking. The policy is not to impose tax on all employer subsidised parking. That would have been achieved if, instead of inserting Div 10A in 1992, the legislature had simply removed former s 58G. Rather, the tax is imposed only if all of the conditions of s 39A, and the other conditions of the FBTAA, are satisfied. Accordingly, not every car parking benefit constitutes a taxable fringe benefit. 57 We agree with the appellant's submission that the primary Judge's construction would leave s 39A(1)(f) with little or no work to do: Commonwealth v Baume (1905) 2 CLR 405 at 414; Project Blue Sky at 382. The subsection would almost invariably be satisfied because the place of employment will always be "physically accessible" from the parking space, otherwise the parking would not be used. For the same reason, it will usually take less than 15-25 minutes to travel between each location. In addition, the two places will usually be able to be described as within either the same functional space, or suburb, or other geographic region. 58 Moreover, it is no assistance to the identification of the correct statutory test to pose the rhetorical question, as the respondent does: why would the parties have entered into an arrangement if the Melrose Car Park and Terminal 3 were not in the vicinity of each other? This merely begs the actual question. As the appellants contended in response, if the rhetorical question were relevant then all employer-subsidised car parking would be subject to fringe benefits tax and s 39A(1)(f) would be otiose. As we observed earlier, and as senior counsel for the respondent conceded in oral agreement, not all such benefits are caught. 59 Ultimately it is a matter of evaluative judgment. This does not put the Court in the role of legislator as the respondent submits. Courts are often required to make such judgments in various contexts. In our opinion a car park which is approximately 2kms away from the appellant's employee's primary place of employment is not near, proximate or close to that place. It is not to the point, as the respondent submits, that the fact that an employer considers the car park provided to be appropriate or convenient. Were this relevant s 39A(1)(f) would again be otiose. The question rather, is whether the condition in that provision is satisfied. 60 It follows in our opinion that the car parking provided by the appellant to the employees in this case is not "in the vicinity of" their primary place of employment and FBT is not exigible in respect of those benefits. That the bus trip, taken twice a day, between the car park provided and the primary place of employment takes 15-20 minutes, excluding waiting time, serves only to strengthen this conclusion. 61 For these reasons we would allow the appeal with costs. 62 There will be orders that the orders of the primary judge be set aside; and in lieu thereof that the appeal be allowed with costs; that the decision of the respondent made on 15 October 2009 to disallow in full the objection made by the appellant on 16 June 2009 against assessments of fringe benefits tax for the years ended 31 March 2006, 31 March 2007 and 31 March 2008 (the Objection) be set aside; and in lieu thereof the Objection be allowed and that there be excluded from the assessments of fringe benefits tax payable by the appellant for the years ended 31 March 2006, 31 March 2007 and 31 March 2008 the amounts of $234,380.99, $301,918.20 and $294,437.66 respectively. I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Edmonds & Gilmour.

Associate: Dated: 30 November 2010 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 852 of 2010

JUDGES: EDMONDS, JESSUP AND GILMOUR JJ DATE: 30 NOVEMBER 2010 PLACE: SYDNEY

Jessup J: 63 I agree with the disposition of this appeal proposed by Edmonds and Gilmour JJ and, subject to what follows, with their Honours' reasons. 64 The present controversy arises from the legislature's adoption of the imprecise term "vicinity" as a condition for the imposition of tax. Because the term is inherently imprecise, recourse to dictionary definitions takes the debate nowhere useful. At base, the sense in which "vicinity" is used in text or conversation depends entirely on context. We are reminded by the Oxford English dictionary, for example, of the maritime context: 1891 Science-Gossip XXVII. 14/1 During a severe storm in that year the Port Glasgow ship 'Marseilles' capsized in the vicinity of Portpatrick. For a vessel which has capsized, the proximity of a port is of obvious significance, and "vicinity" takes its sense from that context. We are also entertained by the notion, given to us in The Pirates of Penzance, that a band of pirates might have it in mind to engage in a kind a mass nuptial with the Major-General's daughters, an idea apparently rendered the more feasible because there was "… a doctor of divinity … located in this vicinity". In this context, "vicinity" was used in a sense which implied convenience of access for an immediate purpose. 65 In legislation - and particularly in a taxing statute - the word must, in my view, be given a sense which is rooted in the context of the relevant section. Here we are concerned with something which is presumptively a benefit given to employees, not merely an operating convenience for the employer. As a matter of construction, the "vicinity" to which the legislature referred in s 39A(1)(f) of the Fringe Benefits Tax Assessment Act 1986 (Cth) was such as would make the parking space provided a benefit for the employee concerned. We should also, in my view, note what it means in common parlance, to "park" a vehicle. The context is that of commuters who use their cars to travel to and from work. The point of the exercise is to get to work. The car must be parked not as an objective in its own right, but because it has served its purpose. In normal parlance, one expects to be at one's destination when one parks the car - to be "there", as it were. If it is necessary to take a further means of transport, or to walk for any appreciable distance, generally the commuter would not regard the parking place as a suitable or convenient one. I consider that the legislature used "vicinity" as a reference to the degree of proximity that would generally be regarded as appropriate to the paradigm in which the commuter had used his or her car as the single means of getting to work, and then parked it. 66 It is also, in my view, significant that the legislature has used the compound expression "at, or in the vicinity of". The context which lies at the core of the fact situation with which the provision is concerned is that of a carparking space provided "at" the primary place of employment. The disjunctive is not being used here to indicate a distinct alternative as between quite different things. It is, rather, being used as a term of extension, but keeping within the general sense, and responding to the same statutory purposes, as implied by the core provision. Just as the pleader who alleges that a contract was made "on or about the first day of March" allows for the possibility that the contract may have been made a day or two either side of that date, in s 39A(1)(f) the legislature has allowed for the possibility that some employers may provide the parking space not strictly at, but in reasonably close proximity to, the employee's primary place of employment. 67 An understanding of the statutory context will not, of course, eliminate the scope for argument in the practical application of the provision, in fact situations which lie close to the line. Although such an understanding will assist in confining the area of uncertainty, it can never avoid it altogether. In any case, however, as it seems to me, the starting point for the application of the provision must be the identification of the employee's "primary place of employment". It may be that, for some employees, their primary place of employment is spread over a considerable area. In the present case, we do not need to consider such a situation, since it is common ground that the primary place of employment of the employees of the appellant was Terminal 3 at Melbourne Airport. The issue before the primary judge was whether the parking spaces provided by the appellant were in the vicinity of Terminal 3. It was not whether they were in the vicinity of the airport as such. 68 For an employee assumed to use his or her car as the only means of transport to and from work on a daily basis, a car parking space some two kilometres distant from his or her workplace should not, in my view, have been regarded as being "in the vicinity" of that workplace within the statutory context to which I have referred. It may be that many employees - either by choice or otherwise - proceed by foot over such a distance from car to work, but I doubt that they, or their employers, would regard the provision of the parking space as a benefit provided by the latter. Such an employee would, in my view, sum up the position accurately by saying: "I do have a carparking space, but it's not in the vicinity of my work". The provision by the appellant of a shuttle bus to move its employees from the Melrose Car Park to their place of work is, in my view, some practical recognition of the reality of such a conclusion on the facts of the present case. 69 The essence of the error made by the primary judge in the present case, in my respectful view, is that her Honour did not bring to her treatment of the factual issues which arose a construction of s 39A(1)(f) which was informed by the statutory context as I have attempted to explain it above. She thus came to consider whether the Melrose Car Park was in the vicinity of Terminal 3 at a more general level than was required by the statute. 70 I agree that the appeal should be allowed, and that the orders proposed by Edmonds and Gilmour JJ should be made. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.