Tax Office confirms Uber drivers to pay GST

Monday, Aug 31, 2015

Embattled ride-sharing service Uber this week said it will challenge new guidance released by the Australian Taxation Office (ATO) that its drivers must collect and pay GST.

Uber believes its ‘driver-partners’ are being unfairly treated by the ATO because other “sharing economy” services like Airbnb have not been singled out with unique tax treatment.The company says that the ATO is beyond its remit in seeking to impose GST on all Uber drivers while a review into taxation of disruptive economies is underway.

“[The ATO] has tried to deny [Uber drivers] the same tax treatment as other individuals, who are only required to register for GST once they reach a turnover of more than $75,000 a year”, it said in a statement.

“In our view, the Tax Office’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’”.

Under the current GST law, an entity carrying on an ‘enterprise’ with turnover of $75,000 or more must register and charge GST on goods and services supplied. The $75,000 turnover threshold however does not apply to those providing ‘taxi travel’ services so GST applies from the first dollar earned.

The issue for Uber drivers critically hinges on the meaning of the word ‘taxi’ as it appears in the GST law.

According to the ATO, “For GST purposes, the word ‘taxi’ takes on its broad ordinary meaning of a car (vehicle) made available for public hire that is used to transport passengers for fares.” It therefore believes that Uber partner-drivers provide services which are no different to a taxi driver and so they must register for GST from their first dollar earned.

The ATO does acknowledge however that State and Territory laws regulating transportation of passengers contain specific definitions of the term ‘taxi’. As such, it is possible a vehicle may be a taxi for GST purposes, but not for State and Territory regulatory purposes.

There is also some contention as to whether an Uber driver-partner is an employee or contractor under the law. The ATO is adamant however, that for such arrangements, an Uber driver is a contractor and not an employee. In other words, this is no different to the traditional self-employed taxi driver. If so, the Tax Office’s decision to require GST collection of drivers makes sense.