An announcement (tactfully called “advice”) by the Tax Office gave Uber operatives until 1 August 2015 to register for GST on fare earnings.
Perhaps predictably, Uber reacted furiously to the ultimatum by essentially arguing that this is an unwarranted attack on micro-businesses.
Under the GST rules generally, businesses don’t have to register for GST and lodge BAS returns unless earnings reach a threshold level of $75,000 per annum. The taxi industry has always been an exception to that, but Uber is claiming that it is somehow different.
Contributing to Uber’s pain is no doubt the understanding that if the Tax Office is correct, some price or cost-bearing adjustment will need to take place to allow 10% of every fare to be sent to the Tax Office.
Uber’s stance on the issue is consistent with it’s reputation as an aggressive competitor, and therefore not unexpected. Its somewhat emotional appeal on behalf of battler micro-businesses taps into a kind of people-power sentiment that may well translate into political sympathy for its position – time will tell how successful that will be.
However from the Tax Office standpoint, the only question needing clarification is whether Uber operatives are providing a ‘taxi travel’ service. If they are, then the GST rules are explicit, and have been so, ever since the introduction of GST some 15 years ago.
Historically, the taxi industry was seen as part of the cash economy with potential for tax leakage, and was therefore deliberately excluded from the GST registration turnover threshold given to all other businesses. Regardless of the registration threshold, there has never been any suggestion that the nature of taxi travel services income as such does not fall into the GST or income tax net.
In that context, the Tax Office registration deadline which was a full 2 months away from the announcement, is probably generous enough.
Uber and others like them have certainly introduced fresh operational and marketing methods to their respective business models by harnessing the internet, but their core services are very simple, and are as old as the hills.
Applying common sense, it is difficult to see how Uber could successfully argue that it is not providing a taxi travel service, and should not therefore be subject to the same tax rules as all other taxi services. Uber services are the proverbial quacking duck, which looks smells and quacks like taxi travel. It will be interesting to see if Uber can come up with a stronger counter-argument.
As a consolation for formalising their ABN and GST-registered business status, perhaps the Uber micro-businesses should take note of their entitlement to claim all business related expenses, and even leap aboard Tony’s Tradies $20,000 instant asset deduction bandwagon, which could help to soften the tax impact.
Updates to this story and events subsequent:
- Since their initial announcement the Tax Office has undertaken a publicity and education campaign targeting the ride-sourcing industry
- 31 July 2015: Uber launches legal challenge to overturn ATO’s directive that obliges to pay GST
- 7 Aug 2015: Uber gives in to ATO, charges users GST
- 5 October 2015: The ATO is reinforcing their compliance objectives with a data matching program, reviewing payment data across the 2013-14, 2014-15 and 2015-16 financial years, obtained from financial institutions.
- 18 October 2015: Transcript – Uber’s questioning by the Senate Economics References Committee
- 20 January 2016: Report – The ATO is data matching to catch tax-dodging Uber drivers and Airbnb landlords
- 17 February 2017: The Federal Court decided that (consistent with Tax Office arguments) Uber services are indeed “taxi travel” for gst purposes.
- 21 July 2017: ATO outlines (updated) ride sharing services tax obligations