Taking an Uber is about to get more expensive

CONTROVERSIAL ride-sharing app Uber is about to get more expensive, after the tax office decided it should be classified as a taxi service.

Uber versus taxi challenge.

CONTROVERSIAL ride-sharing app Uber is considering legal action to challenge a tax office ruling that requires its drivers to pay GST in line with taxi operators.

The company has been classified as a taxi service under a crackdown on electronic businesses, and its 9000 Australian drivers now have until August 1 to get an ABN and register for GST.

The company disagrees with its classification and says its drivers, who typically earn $30,000 a year, should not pay tax on their first dollar earned.

Its Oceania policy director, Brad Kitschke, said the company could challenge the decision in court.

“This is something we are considering,” he told ABC TV from Washington.

He also said the government should assess the possibility of applying the $75,000 small business tax threshold to Uber and taxi drivers.

Uber now takes 20 per cent of each fare from its drivers.

Australian general manager David Rohrsheim said the company had not decided whether prices would increase or whether the company would reimburse their drivers if action against the changes failed.

He said Uber had been awaiting a government review on ride-sharing businesses before the ATO’s decision.

It was disappointing the GST would end up in state pockets when those governments had failed to legalise and regulate the ride-sharing industry, he said.

The taxi industry has welcomed the tax changes but says Uber still has less mandatory business costs than the formalised taxi industry.

Australian Taxi Industry Association chief executive officer Blair Davies said many Uber drivers could be underinsured and did not face the same safety checks as taxi drivers.

“Apart from paying tax in Australia, Uber needs to commit to respecting state regulations that protect the safety of passengers and drivers,” he said.

He also claims the company itself has avoided paying its fair share of Australian tax.

Mr Rohrsheim said he rejects that in the “strongest possible terms” and said Uber paid “all relevant taxes in Australia”. He would not say how much tax they paid last financial year. Rental services like Airbnb have also been included in the ATO’s warnings to online businesses.

Its users will have to declare incomes from renting properties and may be subject to some capital gains tax.

But the earnings will be classified as residential rents, which are exempt from GST.

Deputy tax commissioner James O’Halloran said the tax office was simply applying the law.

“Regardless of the technology, the current laws for both income tax and GST apply and people need to be aware of their obligations,” he said.

Originally published as Taking an Uber is about to get more expensive