Is Uber a taxi for tax purposes?
This question was addressed early last year in Uber B.V. v FC of T. Generally speaking, enterprises with a turnover below $75,000 are not required to register for GST and remit 10% of their revenue to the ATO. However, there is a special rule in the GST Act that specifies that taxi and limousine operators are required to be registered where they are supplying ‘taxi travel’, regardless of their turnover.
Taxi travel is defined in the GST Act as all travel that l involves transporting passengers by taxi or limousine, for fares. The Court found that taxi travel connotes the transportation, by a person driving a vehicle, of a passenger from one point to another at the passenger’s direction and for a fare, irrespective of whether the fare is calculated by reference to a taximeter. Therefore, Uber drivers are now required to be registered for GST as their service offering fits the ordinary meaning of the GST provision regarding an enterprise supplying ‘taxi travel.’
However, ‘taxis’ and ‘taxi travel’ are not defined the same way across all Australian tax legislation. Therefore, it is not clear that whether an Uber is also considered a taxi for Fringe Benefit Tax (‘FBT’) purposes.
Generally, travel between home and work is considered private in nature and not deductible. Therefore, if an employer provides transport to an employee by way of taxi between the workplace and their home, it would be a regarded as a fringe benefit and taxed to the employer. However, there is a specific exemption in the FBT Act whereby employers are specifically exempted from having to pay FBT in respect of taxi travel by an employee between their home and place of work.
Within the FBT Act, it defines a ‘taxi’ as a motor vehicle that is licenced to operate as a taxi. Uber drivers are not required to be licenced taxis, but they need to have an F-extension requirement to their driver’s licence to allow them to operate. Therefore, an Uber trip taken between the workplace and home provided by an employer to an employee would not qualify for the exemption under the FBT Act.
A discussion paper (TDP 2017/2) was released in September last year where the ATO proposed to review its interpretation of the definition of ‘taxi’ to align the FBT ‘taxi’ and GST ‘taxi travel’ definitions to take an ordinary meaning approach. Comments by the public were invited by 24 October 2017. There has been no further update by the ATO on this yet. As it stands now, it is not clear whether the ATO’s interpretation of the FBT definition of ‘taxi’ includes Uber travel.
Until this issue is clarified it is recommended that employers continue to assume they will need to pay 47% tax on the grossed up value of the Uber travel benefits provided (unless the trip qualifies for the minor benefit exemption). Employers should be recording separately those trips which are made by taxi and those which are made by Uber to ensure the correct amount of FBT is being reported and paid for 2018.
Need help in understanding the above, please contact one of our tax accountants at The Quinn Group on (02) 9223 9166 or submit an online enquiry.