Is Uber a taxi for tax purposes?

18 January 2018

, Stephanie Sims

The question was first formally addressed early last year in Uber B.V. v FC of T (2017). Generally speaking, enterprises with a turnover of less than $75,000 are not required to register for GST and remit 10% of their revenue to the Australian Tax Office (‘ATO’). However, under the GST legislation a special rule has been included which has the effect that taxi and limousine operators are required to be registered, regardless of turnover, where they are supplying ‘taxi travel.’ 

‘Taxi travel’ is defined in the A New Tax System (Goods and Services Tax) Act 1999 (‘GST Act’) to mean travel that 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, in other words, the ordinary meaning of the phrase. 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. Employers and tax professionals have raised the question of 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, it would seem that where 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 Fringe Benefits Tax Assessment Act 1986 (‘FBTAA’) 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.

The FBTAA defines a ‘taxi’ as a motor vehicle that is licenced to operate as a taxi. Despite Uber drivers requiring an F-extension to their driver’s licence to allow them to operate, they are not required to be licenced taxis. 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 FBTAA.

It seems odd to define ‘taxi travel’ as the transport of passengers by a vehicle for a fare for GST purposes, but not for FBT purposes. 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, however no further development has occurred since, which leaves employers and tax professionals in a predicament for the FBT year ending 31 March 2018. As it stands now, it is not clear whether the ATO’s interpretation of the FBT definition of ‘taxi’ includes Uber travel. Until the ATO’s position 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).

As such, employers should be recording 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. However, we hope the ATO releases a Tax Determination or Guideline before the end of the 2018 FBT year to provide employers with guidance as to what is and is not subject to FBT.

Be sure to keep an eye on BDO in Australia’s social media for any updates to the FBT definition of ‘taxi’ over the next few months.