Uber takes ATO to court over GST

21

news Ride-sharing company Uber has taken the Australian Taxation Office to court over the agency’s insistence that drivers providing its ride-sharing service collect GST the same way taxi cabs do, in a move that represents Uber’s latest legal battle against the taxi industry.

Earlier this year the ATO issued a ruling stating that ride-sharing services were no different than taxi services for the purposes of collecting GST. The agency’s ruling states:

“If you provide ride-sourcing services, you are providing ‘taxi travel’ services. This is because you make a car available for public hire and use it to transport passengers for a fare. Under the GST law, if you carry on an enterprise and provide taxi travel services in that enterprise, you are required to be registered for GST regardless of your turnover.”

However, in a statement today, Uber noted that it was “disappointed” by the ruling and would seek legal options to have it overturned.

“Uber aspires to make transportation as reliable as running water,” the company said. “It started as a side project for a small group of friends but we quickly found that everyone loves the ability to push a button and get a ride. In the process, it also became clear that many hundreds of thousands of people wanted to become driver-partners because of the the flexibility that Uber provides. In a recent survey, over 80 percent of Uber driver-partners said that they use our platform because they love choosing when, if and how much they work.”

“This is why we are so disappointed that the Australian Tax Office (ATO) has tried to deny these people the same tax treatment as other individuals, who are only required to register for goods and services tax (GST) once they reach a turnover of more than $75,000 a year. Instead, they are suggesting that Uber’s driver-partners must register and remit this tax from the first dollar earned.”

“So on Friday we filed an application with the Federal Court to challenge the ATO’s position, which we believe clearly and unfairly targets Uber’s driver-partners. In our view, the ATO’s guidance should not have been issued when a federal tax review is underway and as the ATO has agreed that this is “an uncertain point of the law”.”

To be very clear, Uber’s statement said, the company believed all its driver-partners should pay their apropriate share of tax and meet their tax obligations.

“However, we feel they have been unjustly singled out by the ATO for different tax treatment than truck drivers, bike messengers, Airbnb hosts or any other participant of the sharing economy,” the company said. “Over fifty jurisdictions around the world have recognised ridesharing as a new model requiring updated regulations that reflect its unique attributes. The guidance by the ATO has tried to fit a new technology model from today into a 1990’s regulatory framework that was written long before this technology ever existed. Common sense would tell you that isn’t going to work.”

“The Federal Government through its current comprehensive tax review, not the ATO, needs to define how ridesharing and the sharing economy fits into the modern tax system and we look forward to seeing their recommendations.”

Uber is currently fighting a number of running battles across jurisdictions in Australia and globally, as it fights to have its pioneering service compete legally with the entrenched taxi industry.

opinion/analysis
Personally, I’m not sure whether uberX drivers should collect GST or not. However, I do know that there should be a level playing field for the entire personal transportation industry. If the taxi companies are forced to collect GST, then so should people regularly charging for transport services through Uber and similar services. And if the taxi companies are not forced to collect GST, then neither should the ridesharers. A level playing field ensures everyone can compete fairly — that should be a basic.

You can understand why someone merely giving someone else a lift in their car should not have to collect GST, if that person pays them for the ride. But if this is done on a professional basis — if a regular income is being earned, with a large company such as Uber acting as an intermediary — then that income should be taxed on a similar basis to taxi cab companies — either way, GST or not.

Image credit: Uber

21 COMMENTS

  1. Problem with a taxi is that you pay GST, then 10% “fee” for using a credit card on top.

    You get neither using Uber, but that is because the fare is supposed to be “inclusive” of GST. That, and the driver is usually somewhat intellectual, and would never listen to Alan Jones or Andrew Bolt.

    • The 10% (5% in some states) is essentially a merchant fee that the payment providers sting you with.
      In return the “equipment” is provided for free.
      Usually it’s cabcharge, who then give a cut to the dispatch company, drivers sometimes use their own which gives the cut to them instead of the dispatch company

  2. I think this whole area needs a really good look into it, the taxi industry it’s self has had “issues” for a long time.

    • Coming into this late (aint this current flu a kicker?), but this is just the latest in a long, complicated tussle between the ATO and taxi drivers, going back to the 90’s.

      Way back in the day, cab drivers were worse that tradies, and the industry had far more trade than today. Was a LOT of cash going unreported, and it was systemic. At one point, a project between the ATO and cab owners (in Brisbane I think, some time in the mid to late 90’s) happened, ultimately leading the the back to base machines every cab has today.

      Owners found out how much their drivers were rorting them. It went a long way to cleaning the industry up, but at the heart was still the cash in hand nature of the job, and the relationship between the driver and plate owner.

      Uber is trying to be a car hire service, without being tied to the same rules at any level. And thats just wrong, when it gives such a massive advantage.

  3. Perhaps one could draw an analogy to running a business or a ‘shop’ on eBay, as opposed to an individual selling some of their personal belongings.

    If someone is acting as an Uber driver only occasionally, then maybe that is not enough to have to pay tax – similar to Uber’s own comments that people shouldn’t have to register for GST unless they are earning $75,000 per year – but if they are acting as an Uber driver as an occupation, then they should register and collect and pay the tax like a taxi driver would have to?

  4. I’m 50/50 on this issue. For taxi drivers, they are contractors (or directly working) for the taxi companies. So it is the company being paid, amounting to aa turnover of far more than $75k so they must collect gst. But this also enables them to claim the gst back.on fuel, services, repairs etc.

    Uber model is different. I believe that each driver is an independent business and the app is like an automated phone book that calls the closest one for an extra fee. In this case if an individual business does not turnover more than $75k, they should not have to register for or collect gst. But they also can’t claim back the gst they pay in the course of running their business.

    I assume uber’s fees must include gst as their turnover would be large enough.

    If on the other hand drivers are working as contractors for uber, then they should be collecting gst.

    • Nope, they work only for themselves, they have a Bailment agreement either giving a % (fucking ridiculous) or a fixed lease to the taxi owner.
      The company name written on the side is simply the Dispatch service (that gets a cut from the eftpos transactions plus “rank fees” for providing the dispatch service.

  5. @Ken S Uber pays NO GST as they are not an Australian company, the driver does plus 20% to Uber as commission.

  6. It strikes me that this foreign company called Uber wants us to rewrite our laws just for their benefit. It seems that all they are interested in doing is making money for themselves with no regard to anyone else including their drivers.
    I have one very simple message for Uber. If you can’t operate within the laws that exist then go back home and don’t come back until you can. There are some very nice words that describe people with your attitude, unfortunately I can’t use them here.

  7. “You can understand why someone merely giving someone else a lift in their car should not have to collect GST, if that person pays them for the ride. But if this is done on a professional basis — if a regular income is being earned”

    Afraid not Renei: it’s actually in the Australian licencing system, you are allowed to ask for basic running cost such as fuel for transporting people, but as soon as you are asking to make a profit from it you are driving “for reward” & are engaging in a commercial activity and are mandated to have the relevant “for reward ” licence endorsement (similar thing goes on with a commercial pilots licence btw) & in general a licence plate that identifies your vehicle has passed the statutory requirements for the type of reward licence eg TAXI, SCV, PT, etc.

    This is beside the point tho (although it is a quick introduction to why uber is illegal in all states).

    ATO mandates collecting gst on any taxi-like service regardless of money or time considerations (it is infact the ONLY mandatory gst reporting for less than $75k).

    Tax-wise I’ve been told that uber receipts don’t list the ABN nor how much gst the fare cost, which will be interesting for the ATOs no withholding regs as the drivers gst obligation is now charged at the maximum rate of just under 50% =D
    Hence why uber is “going into bat for their driver-partners”

    • thats fair enough but i think purpose of the vehicle should be considered too. a person offering seats under Uber purchases a a car for their personal use, but they recognise “i dont have to be the sole user of this vehicle, i can take some of the passenger load by filling a seat or two with a uber customer”. what is the primary purpose of the car?

      in the case of the Taxi companies, they purchase cars specifically for the purpose of selling seats for profit at a per km loading. the vehicle spends very little if not 0% of its time as a personal vehicle doing the shopping or running the kids to school.

      i do think Uber use case straddles the line between a vehicle specifically purposed as a business item, vs a personal item occasionally used for business. that complicates matters and i think it certainly gives impetus to the tax review dealing with these issues – this sort of stuff really needs to be sorted out, and id rather it be sorted legislatively than otherwise. if it doesnt get sorted that way the only winner i see is the lawyers….

      • Car pooling is perfectly legal, profiting from driving random strangers in your private car is illegal.
        Personally i see no reason to have to go out of our way to accommodate an illegal tax avoiding company.

      • Furthermore, working “for reward” means you are also operating under an altered set of rules, road rules for taxis are slightly altered for example.
        The biggest difference is rego, which suddenly heads well into 4 figure territory, and (commercial) insurance, don’t expect your insurance company to pay out of they find out & ubers dodgy 3rd party insurer is just as questionable

  8. Ken.S:

    As B0red says, taxi drivers in all states are pretty much exclusively independent contractors in much the same way as Uber drivers, so it’s not the company being paid, it’s the driver (via Cabcharge and the taxi network, but the transaction is with the driver and it’s the driver’s ABN on the receipt).

    There are two reasons that taxi drivers must register for the GST (and were very specifically mentioned in the GST legislation in a way almost no other industry was singled out):

    – the taxi industry was already notorious for income tax evasion and the ATO saw an opportunity in the GST legislation to require drivers to register to bring them into the tax system (and there was a shortage of drivers for several years until increased numbers of overseas drivers – mostly from south Asia – started working in the industry)

    – taxi fares are regulated and it would have been crazily complicated for some drivers to charge GST and some not, especially with the dumber meter and payment technology available at the time

    Uber themselves, like a lot of overseas companies that interact with Australian customers via the internet, do not pay GST – that’s an issue that’s much bigger than Uber. The issues mentioned above don’t really apply to Uber in the same way, but for this court case that’s probably not the main point.

    B0red:

    “it’s actually in the Australian licencing system … as soon as you are asking to make a profit from it you are … engaging in a commercial activity and are mandated to have the relevant … licence endorsement”

    That’s mostly true in Australian states but kind of beside the point for this case – the ATO relied on the GST legislation that specifically mentions the taxi (not “taxi-like”) industry, and the legislation that you are talking about is all state-based.

    The GST legislation defines taxi travel as “travel that involves transporting passengers, by taxi or limousine, for fares”, but does not define taxis or limousines further. The ATO has an interpretation that a taxi is “a motor car for public hire, especially one fitted with a taximeter”, but Uber can probably argue that their drivers don’t fall under the interpretation (no meter, can’t do hails or sit on ranks so not public hire etc), or even that the interpretation is wrong (since the states don’t recognise them as licenced taxis).

    The fact that what the drivers (for at least UberX) are doing is probably are also illegal in the various states (it’s not entirely clear everywhere and the states are all over the place in their response) is not really decisive for the purposes of federal GST legislation – although I’m sure the court will take that into account along with everything else, it may not stop them interpreting the legislation in Uber’s favour, and in a way it may even help Uber with that second argument if they go that way.

    • @Mike:
      “The GST legislation defines taxi travel as “travel that involves transporting passengers, by taxi or limousine, for fares”, but does not define taxis or limousines further. The ATO has an interpretation that a taxi is “a motor car for public hire, especially one fitted with a taximeter”, but Uber can probably argue that their drivers don’t fall under the interpretation (no meter, can’t do hails or sit on ranks so not public hire etc), or even that the interpretation is wrong (since the states don’t recognise them as licenced taxis).”

      Depends on which page you look at (typical fucking bureaucracy) try this for example:
      https://www.ato.gov.au/Business/GST/Registering-for-GST/
      -you provide taxi or limousine travel for passengers in exchange for a FARE as part of your business, REGARDLESS of your gst TURNOVER – this applies to both owner drivers and if you lease or rent a taxi.

      limo’s (SCVs) & private taxi’s are pre-booked and have also always had to register for GST

      Then there’s this: “the taxi industry was already notorious for income tax evasion and the ATO saw an opportunity in the GST legislation to require drivers to register to bring them into the tax system”

      I’ve heard this before but it’s never made sense to me, a tradie doing a cashie can earn more in a weekend than a cabbie can in an entire GOOD week of fares.

      • “typical fucking bureaucracy”

        Yeah I agree, the point I was trying to make is that what you linked to is the ATO interpretation of the legislation, and that’s what Uber is challenging.

        The parliament passes the law (“A New Tax System (Goods and Services Tax) Act 1999” in this case – see https://www.comlaw.gov.au/Details/C2014C00008 and specifically Part 6‑3 Division 195‑1 for a long list of definitions including “taxi travel”), then the regulatory bodies (ATO in this case) interpret the law for the purposes of enforcing it, then the courts get to validate (or not) that interpretation in the process of judging that enforcement.

        A company that wishes to challenge a law can argue to a court that a law is not constitutional as written, or can preemptively challenge a regulator’s proposed action on the basis that the regulator has not interpreted the law correctly, or at a specific case level can challenge a court decision on the basis that the court (and presumably the regulator before them since the case went to court) has not interpreted the law correctly.

        This is the second case, and the court is perfectly entitled to decide that Uber has a more correct interpretation of the law than the ATO. Whether an average citizen or particularly a cab driver would agree is another matter, but billion-dollar multinationals tend to have better luck than the average citizen getting their way. Not sure what the ATO’s success rate is in having their interpretations challenged, but it’s certainly not unprecedented.

        I don’t know if Uber will win this one, but to this non-lawyer it looks like they have at least enough to drag a case out for a while. If that turns out to be long enough for (say) Western Australia to formally legalise UberX (perhaps with a minimum level of regulation like say the driver has to have a hire driver licence – which Uber already requires in Queensland at least) which looks likely, then any argument that the ATO has about Uber being illegal disappears (which may still not win Uber the case of course).

        None of this is to say that Uber is necessarily a good thing, I have major problems with the whole “sharing economy” malarkey when it acts as a masquerade for sham contracting (although not so much when it is more like genuine “sharing” – something like AirBNB is probably a better poster child although also not without problems). The problem with the taxi industry is that it has much the same problems plus mostly captured regulators and lots of monopolies and duopolies, so it’s not actually much better and often worse. I say this as someone who has been in the industry at many levels for 20+ years – the industry needed a shakeup.

        Not that it will matter in the medium term – self-driving cars owned by the likes of Avis and Uber will replace taxis within twenty years, and possibly private cars and other public transport modes as well depending on political acceptance – if we get safety campaigns like those around drink driving in the 80s and 90s advocating for no human controlled vehicles on the streets (starting in city centres and working out from there), in fifty years you’ll only be allowed to control a vehicle yourself in things like 4WD parks and the like (and you’ll be made to feel like smokers do now).

        “a tradie doing a cashie can earn more in a weekend than a cabbie can in an entire GOOD week of fares”

        I don’t know where or when or if you drive a taxi, but when I was driving in Brisbane in the 90s you could easily take $1,500 or more in a good weekend and only declare maybe $1,000 (not me of course). Add that up over 1,500 or so cabs over 52 weekends and you are starting to talk real money, and that’s just the drivers who declared something. I knew plenty of drivers who never did tax returns over tens of years.

  9. “I don’t know where or when or if you drive a taxi, but when I was driving in Brisbane in the 90s you could easily take $1,500 or more in a good weekend and only declare maybe $1,000 (not me of course).”
    Hard to do that nowdays with the majority of payments being via eftpos…

    Ignoring for a moment that brizzie taxis are the most expensive in oz: real income of cabbies in australia has pretty much halved in the last decade, especially after the us b(w)ankers fucked up the global economy, net income is WELL under minimum hourly wage nowdays.
    When my dad started driving cabs in the early 70’s it was a solid middle income job, by the time he retired in 09 it was essentially a borderline poverty level job, the insane cost of living in oz didnt help either.

    • I agree that the hourly return has dropped considerably, although I don’t know that the global economy is the major cause.

      When your dad was driving most drivers owned their own licences (in Brisbane, anyway). There was little speculation on licences and the majority of earnings from the cab went to the owner and maybe a weekend or night driver.

      When taxi licences were made fully leasable and transferable with little restriction (you have to be a fairly serious criminal not to get OA that allows you to absentee own a licence) sometime in the late 80s or early 90s, all of a sudden licence prices shot through the roof and so did the return to the licence owner to support that investment, so less of the share to the driver.

      Now you also have drivers from South Asia who are willing to drive much longer hours for a lower hourly return – they can still make a pretty good weekly return, but have to drive for 60 to 80 hours a week to get it. That’s much more acceptable to them than to an average Anglo Aussie for a variety of cultural and economic reasons. It’s also not a new phenomenon, similar waves of immigration have had similar effects in the taxi industry before – see all the Greek, Italian, Vietnamese, Chinese and now Indian and African clusters of drivers-becoming-owners in the industry to various degrees in the different cities.

      There’s also a lot more competition for transport now, various technologies have changed travel patterns, people don’t go out as much, costs (of living as you say but also running costs) have gone up faster than fares….

      And while all this is happening, customer expectations for service are going up and they hold networks responsible, so the networks are trying to enforce standards on drivers without the benefit of an employment relationship, which doesn’t work out well for either party. Drivers are under more pressure for (mostly) less (hourly) return, networks are finding their cosy regulatory relationships don’t survive as well under political pressure from governments who all of a sudden find sensible policy difficult, and their centralised technology and procedures doesn’t play well with customers expecting disintermediation (but also high standards).

      Interesting times.

  10. Are UBER not ACN registered?. Thats pretty dodgy if they arent. But then a lot of what they do is pretty shady and dishonest. Not a good poster child for the gig economy, notwithstanding they are the biggest example of this sector. Personally think they are in for a world of pain unless they pivot ahead of any likely successful legislation that looks likely to dent their ability to operate in any particular jurisdiction. Im kind of on their side about stripping back all the cozy protectionism around taxi services but not paying taxes is not being a good corporate citizen and will only result in a belt with a big financial stick by taxation authorities. And those you dont want to challenge : they always win, one way or another. Just ask Apple, Google or Facebook.

Comments are closed.