The Federal Court has held that provision of transport by an ‘uberX Partner’ (i.e. an Uber driver) to an ‘uberX Rider’ (i.e. the passenger) was the supply of ‘taxi travel’ for purposes of the GST Act – Uber BV v FCT [2017] FCA 110.
Griffiths J summarised the case in the opening paragraph of his decision:
“At the heart of this proceeding is the question whether persons who are Uber drivers are required to be registered for GST purposes. The issue is one of statutory construction. Enterprises with a turnover of less than $75,000 do not need to register for GST but there is a special rule or exemption, created by s 144-5 … [of the GST Act] … which has the effect that taxi and limousine operators are required to be registered regardless of turnover. That provision requires a person who is carrying on an enterprise to be registered for GST purposes ‘if, in carrying on your enterprise, you supply taxi travel’ (s 144-5(1)). The phrase ‘taxi travel’ is defined in s 195-1 of the GST Act as meaning ‘travel that involves transporting passengers, by taxi or limousine, for fares’. In simple terms, the core issue is whether, in carrying on the enterprise of providing uberX services to passengers (who are known as ‘uberX Riders’), underX drivers (who are known as ‘uberX Partners’) supply ‘taxi travel’ as defined. If so, they must register for GST purposes.”
The case specifically sought a declaratory order that, on 11 September 2015, Mr Brian Colin Fine did not supply taxi travel within the meaning of s. 144-5(1) of the GST law. We note that Mr Fine drove a Honda Civic.
It is sufficient for this article to indicate that the court concluded:
- that the word “taxi” is sufficiently broad in its ordinary meaning to encompass the uberX service supplied by Mr Fine on 11 September 2015;
- that, at that time, Mr Fine was supplying travel that involved transporting passengers by taxi for fares; and
- that service constituted taxi travel within the meaning of s. 144-5(1).
We note for completeness that, although not necessary, the Court also concluded that:
‘… the Honda Civic vehicle … [used by Mr Fine] on the relevant day is not a luxury car, with the consequence that Mr Fine was not on that day supplying a service which involved travel by limousine. That is not to deny, however, that the position may be different in a case of other uberX Partners who do use luxury cars in providing uberX services.’
Scope of the Decision
The ATO was quick to react to the decision, updating pages on its website titled ‘Providing taxi travel services through ride-sourcing and your tax obligations’ on the same day that the Uber decision was handed down (17 February 2017). In that document, under the heading ‘GST consequences of providing ride-sourcing services’, the ATO notes that where a Uber driver operates “infrequently, or … [the driver’s] activities are not commercial, … [the driver] may not be carrying on an enterprise.” Section 144-5 abrogates the need to meet the GST-registration turnover test but does not abrogate the need to carry on an enterprise.
Practically, it would be expected that the vast majority of entities signing up to be Uber drivers would be doing so as an enterprise or with an intention to carry on an enterprise. In such circumstances, they would be required to apply for an ABN and, based on the Uber Decision (it appears an appeal has not been instituted), would be required to be GST-registered.
Technically, however, it may be possible for an Uber driver to be operating sufficiently infrequently that their activities do not amount to an enterprise. This is a question of fact and, if this is the case, the consequences for the Uber driver are:
- they would not be entitled to an ABN;
- income tax deductions may not be available for costs incurred by the Uber driver;and
- the Uber driver would not be able to issue a tax invoice.
Notwithstanding the above, we note the ATO’s ride-sharing document states under the ‘What you need to do’ heading that:
‘If you do not have an Australian business number (ABN) and are not registered for GST, you must get an ABN and register for GST as soon as possible.’
and
‘If a passenger requests a tax invoice, not just an invoice, for a fare over $82.50 (including GST) you must provide one. If the facilitator [(e.g. Uber B.V.)] cannot do this on your behalf, use a tax invoice book with your ABN on it.’
As an aside to the foregoing, there is a general requirement for a person making a payment (payer) to withhold (and remit to the ATO) 49% of a payment where the person receiving the payment (payee) makes a supply to the payer in the course of an enterprise carried on in Australia and does not quote an ABN. The withholding obligation is subject to several exceptions, one which is where the payer is not acquiring the supply in the course of an enterprise. Another exception is where the amount is below the threshold for provision of a tax invoice (as discussed below). Given these exceptions, one might anticipate the question of the need to withhold part of Uber payment will not commonly arise, but at present it appears the Uber system does not accommodate this requirement.
Implications – Tax invoices for Uber Travel
As a practical matter, based on the above it would be difficult for most Uber drivers to contend that they do not need to register for GST and take the position that that their provision of transportation is not subject to GST. In particular, most drivers will not be able to claim that they do not need to provide a tax invoice where this is requested and the general (threshold) exception, which is noted below, does not apply.
It does not matter that the Uber driver is not in fact registered for GST. A supply is a taxable supply, even if the supplier is not registered. It is sufficient (s.9-5(d)) that the person who makes the supply is required to be registered.
Under s 29-70(2) of the GST Act, a supplier of a taxable supply must provide a tax invoice within 28 days after the recipient of the supply requests provision of a tax invoice, failing which the supplier is subject to a penalty. However, as noted above, there is a threshold exception where a supplier does not need to provide a tax invoice where the fee inclusive of GST does not exceed $82.50.
In order to claim an input tax credit (ITC) for Uber travel, users will need to hold a tax invoice. However, corresponding to the threshold exception noted above, a tax invoice is not needed in order to claim an ITC (s. 29-80(1)) where the GST inclusive amount does not exceed $82.50.
In summary, persons seeking an ITC for Uber travel will need to ensure that a request is made for a tax invoice in relation to the Uber travel where the fee exceeds $82.50 (i.e. $75 + GST of $7.50).
Commonly, as a matter of good governance, employers will require staff to provide evidence of travel expenses even where the threshold is not met and if a tax invoice cannot be obtained, other documentary evidence of payment will be required before reimbursement by their employer. In the Uber decision, evidence was given to the Court referring to the passenger receiving an electronic receipt (for the amount debited to the passenger’s credit card or PayPal account) by email at the conclusion of the ride, and one might anticipate that this will be sufficient good governance evidence.
Implications – What happens if tax invoice is requested but not received?
The ATO website advises Uber users who request but are not provided with a complete tax invoice within 28 days of the request (and are, as a result, unable to claim an ITC) to seek ATO permission to claim the ITC. It notes that “in many instances … [the passenger’s] credit card statement details will be sufficient” supporting evidence. The ATO adds that “it would be ideal if … [the passenger] capture the details of the car number plate and report a concern” to the ATO.
As we surmise employees may be uncomfortable with providing a personal credit card statement (even with appropriate redactions) to their employer, we suggest that it would be prudent to ensure that evidence of the actual receipt of the service and payment for the service (e.g. the electronic receipt for payment emailed to the passenger) is retained and available to support the request. However, the ATO’s website does not advert to this alternate evidence.
Implications – Is Uber travel ‘taxi’ travel for FBT purposes?
We note the Uber decision was confined to analysis for GST purposes. In such circumstance, it should not automatically be considered that the decision makes Uber transport services “taxi travel” for the purposes of the FBT Act. Under s. 136 of the FBT Act, “taxi” is defined as “a motor vehicle that is licensed to operate as a taxi” (underlining added).
Where vehicles used by Uber drivers are not subject to a licensing regime governing their operation as a taxi, it appears that they are not taxis for FBT purposes. (Care should be taken in this regard, however, as different licensing regimes and definitions may apply in each State or Territory.) The Uber Decision turned on the Court’s conclusion that the reference to “taxi” in the GST Act was a reference to “taxi” in the ordinary sense of the word and it did not refer to a taxi in the sense of being a vehicle subject to any State or Territory regulatory regime. In this regard, the following comments of the Court (at paras 135 and 141) are especially relevant:
“… I consider that the words in s 195-1 [of the GST Act] should be given their ordinary, everyday meanings and not a trade or specialised meaning (including one which reflects what Dr Abelson describes as a ‘regulatory concept’). I accept the Commissioner’s submission that the ordinary meaning of the word ‘taxi’ is a vehicle available for hire by the public and which transports a passenger at his or her direction for the payment of a fare that will often, but not always, be calculated by reference to a taximeter. …
…
Secondly, I do not accept that the ‘regulatory concept’ of ‘taxi’, as described by Dr Abelson coincides with the ordinary meaning of the word ‘taxi’. The ordinary meaning of the word ‘taxi’, as is reflected in various dictionary definitions, is expressed at a higher level of generality than the ‘regulatory concept’ identified by Dr Abelson. I accept the Commissioner’s submission that there is no basis for concluding that the Parliament intended persons who offer supplies which are affected by the GST Act closely to analyse State or Territory legislation governing the provision of taxi or limousine services. …”
Under s. 58Z of the FBT Act, “taxi travel” is an exempt benefit in certain circumstances. We note that “taxi travel” is not expressly defined in the FBT law. However, it appears that travel using Uber vehicles may not qualify as such an exempt benefit on the basis it is not a “taxi” as defined for FBT purposes.
Conclusion
For GST purposes, most Uber drivers will be taxis even though they do not display an advertising lamp emblazoned with “taxi”, but they may as well display the invitation “tax us”.
Don’t be surprised if someone asks:
“Did anyone send for a ‘taxus’?”
