Since the Federal Court confirmed in 2017 that an Uber driver was supplying taxi travel for the purposes of the GST Act when he was operating as an uberX Partner, there has been a cloud of doubt hanging over whether employers are entitled to the FBT exemptions available to taxis when they use an Uber and similar ride-sourcing services. In recent guidance on the operation of the FBT exemption for taxi travel, the ATO has clarified its view that the FBT exemption does not extend to ride-sourcing services provided in a vehicle that is not licensed to operate as a taxi.
The case of Uber B.V. v FCT  FCA 110 (‘the Uber decision’) in the Federal Court turned on whether carrying on the enterprise of providing uberX services to passengers constituted a supply of ‘taxi travel’ within the meaning of s. 144-5(1) of the GST Act which requires that an entity is:
required to be registered if, in *carrying on your enterprise, you supply *taxi travel.
Taxi travel is defined in s. 195 of the GST Act to mean:
travel that involves transporting passengers, by taxi or limousine, for fares.
The taxpayer contended that the provision of uberX ride-sharing services was not travel that involves transporting passengers by taxi because:
The Commissioner contended that the definition of taxi travel should be construed as a whole and connotes:
the transportation, by a person driving a private vehicle, of a passenger from one point to another at the passenger’s discretion and for a fare, irrespective of whether the fare is calculated by reference to a taximeter.
On 17 February 2017, the Federal Court dismissed the taxpayer’s application and made a declaratory order to the effect that the uberX service supplied by the Uber driver constituted ‘taxi travel’ within the meaning of s. 144-5(1) of the GST Act.
All ride-sourcing (sometimes referred to as ride-sharing) arrangements — encompassing uberX, uberXL, UberSELECT, UberBLACK, Hi Oscar, Shebah, GoCatch and similar services — constitute ‘taxi travel’ for GST purposes. All these services are subject to GST. Accordingly, ride-sourcing drivers must have an ABN and be registered for GST. The usual turnover threshold of $75,000 does not apply in the case of ‘taxi travel’.
The ATO has reminded those providing ride-sourcing services that they will need:
GST must be calculated on the full fare, not on the net amount received after deducting any fees or commissions.
|If a passenger pays $55 for a fare:
Adapted from ATO example
There are also income tax issues for those earning ride-sourcing income. They will need to:
The ATO is conducting a data matching program in relation to ride-sourcing for the 2015–16 to the 2018–19 income years. The ATO is acquiring the following information from ride-sourcing facilitators:
Section 58Z of the FBT Assessment Act 1986 (FBTAA) provides employers with an exemption for taxi travel in certain circumstances. It provides that:
Taxi is defined in s. 136 of the FBTAA to mean:
a motor vehicle that is licensed to operate as a taxi.
Other references to taxis in the FBTAA include:
Following the Uber decision in February 2017, TaxBanter (and other tax professionals) promptly identified that there could be an inconsistency between the GST legislation and the FBT legislation, depending on whether the meaning of ‘taxi travel’ for GST purposes which was determined to include ride-sourcing services also applied for the purposes of the FBT exemption for ‘taxi travel’. There was speculation that the ATO would consider the FBT exemption as being confined to traditional taxi services. On 27 September 2017, the ATO issued a discussion paper titled TDP 2017/2: Fringe Benefits Tax – Definition of Taxi. The discussion paper set out the ATO’s preliminary views on the meaning of ‘taxi’ for FBT purposes, having regard to the Uber decision and the proposed changes to taxi licensing regulations in a number of States and Territories. In the discussion paper, the ATO stated:
It is the ATO’s preliminary view that it is appropriate to interpret the meaning of ‘taxi’ in the FBTAA in a manner that encompasses the Federal Court’s finding in Uber. Accordingly, the ATO is proposing that a ‘taxi’ — as defined in the FBTAA — should be interpreted to mean a vehicle that is available for hire by the public and is licensed to transport 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.
Feedback was requested in relation the following questions:
In early July 2019, the ATO clarified that the FBT exemption for taxi travel does not extend to ride-sourcing services provided in a vehicle that is not licensed to operate as a taxi. This is because the FBT exemption is limited to travel undertaken in a vehicle that is licensed to operate as a taxi by the relevant State or Territory. This position is based on the definition of ‘taxi’ in the FBTAA which differs to ‘taxi travel’ as defined in the GST Act. Notably, this view differs from the ATO’s preliminary view expressed in its September 2017 discussion paper.
The ATO holds the view that the FBT exemption for certain taxi travel does not apply where the employee travels using a ride-sourcing services such as Uber — but all is not lost. The fringe benefit may be eligible for other FBT relief.
Section 58P of the FBTAA provides an exemption for minor benefits. For the benefit to be considered ’minor’, the notional taxable value of the benefit must be less than $300 and it would be unreasonable to treat it as a fringe benefit, having regard to a number of factors including whether the benefit is provided infrequently and irregularly. It would be expected (and hoped) that becoming ill or injured in the workplace and requiring a ride home or to hospital is an infrequent event for any employee.
|Christine suddenly and unexpectedly becomes very ill at work. Her employer sends her to the nearest hospital by Uber and pays for the $40 fare. The employer cannot apply the taxi travel exemption to the expense payment fringe benefit. However, the employer should be able to apply the minor benefits exemption.|
Where the minor benefits exemption is not available, two other options may be considered.
Under the ’otherwise deductible rule’, the taxable value of a benefit is reduced by the amount that would have been allowed as a deduction to the employee had they incurred the cost themselves (s. 24). Whether the Uber fare would have been allowable as a deduction to the employee depends on the facts and circumstances.
|Michael uses an Uber to travel from the office to the airport for an interstate client meeting. The cost of the Uber service is not an exempt benefit under s. 58Z of the FBTAA because the travel which originates from the place of work was not in a taxi. However, the travel between the office and the airport would have been deductible to Michael, so it is an exempt benefit under s. 24 of the FBTAA.|
Broadly, the employer’s FBT liability in respect of an expense payment fringe benefit is reduced to the extent that the employee makes a payment to the employer as a contribution towards part or all of the cost of the benefit (s. 23 of the FBTAA). However, it is unlikely, in practice, that an employer would pay for an employee’s ride in an Uber then receive a payment for that ride from the employee that reduces the taxable value of the fringe benefit.
There may be a number of scenarios where the inability to access the taxi travel exemption in s. 58Z of the FBTAA will be an issue, but consider an employee who salary packages the cost of travelling to or from work in a taxi versus an Uber. If the employee salary packages taxi travel from their home to their place of work, or from their place of work to their home, the provision of the benefit is exempt under s. 58Z because the trip either begins or ends at the employee’s place of work and the travel is undertaken in a taxi. However, equivalent travel using an Uber would not qualify as an exempt benefit under s. 58Z; nor would it be otherwise deductible under s. 24.
On 6 September 2019, the Government released for comment draft legislation titled Treasury Laws Amendment (Measures for a Later Sitting) Bill 2019: Miscellaneous Amendments. Part 2 of the draft Bill proposes to amend the definition of ‘taxi’ in s. 136(1) of the FBT Act to replace the reference to ‘taxi’ with ‘a car used for taxi travel (other than a limousine)’ (see paras. 1.61 and 1.62 of the draft EM).
The term ‘taxi travel’ will be defined as having the same meaning as in the GST Act, namely:
travel that involves transporting passengers by taxi or limousine, for fares.
This will address concerns that the current meaning of ‘taxi’ (i.e. ‘a motor vehicle licenced to operate as a taxi’) in the FBT Act prevents the FBT exemptions from applying to ride sharing providers such as Uber.
Since the Federal Court’s decision in Uber B.V. v FCT  FCA 110, Ubers have been treated the same as taxis for GST purposes. However, the distinction for FBT purposes has been an issue, as this article has discussed.
The application of the proposed amendment is the provision of a fringe benefit on or after the day of Royal Assent.
From a policy perspective, this illustrates, yet again, how similar terms in the tax law can have very different meanings within specific statutes. Such inconsistencies lead to confusion, make the tax law more complex and can ultimately result in higher compliance costs. Practically, the difference in the meaning of ‘taxi’ for FBT purposes and ‘taxi travel’ for GST purposes has the following implications:
… take your pick.