Uber drivers must pay GST, court rules

DO YOU drive an Uber? We’ve got some very bad news for you. And for customers, rides are about to get more expensive.

THE taxman cometh for Uber drivers.

More than 50,000 Aussies who use the service to make extra cash ferrying passengers around will now be required to collect and pay GST to the government, after Uber lost a landmark legal battle with the Australian Taxation Office.

In August 2015, the ATO cracked down on drivers for Uber and the low-cost UberX service, saying people who used their cars to provide rides should pay the tax for every dollar they earned, just like normal taxi drivers.

Uber hiked its regular fares by 10 per cent to cover the extra tax, but had argued UberX drivers shouldn’t be forced to pay GST because they were not taxi drivers. The company challenged the ATO’s ruling.

But in the Federal Court in Sydney on Friday, Justice Griffiths ruled in favour of the ATO, agreeing that UberX services constituted taxi travel services. Uber had argued that the definition of taxi travel under the GST Act was only applicable to taxis and limousines.

Under the original ruling, UberX and other ride-sharing drivers should have been registered for GST since August 2015. It’s unclear what effect the decision will have on Uber drivers who failed do to so while awaiting the outcome of the case.

An Uber spokesman said: “We are disappointed in the Federal Court’s decision today. We are now reviewing the decision and will provide our driver-partners with more information as soon as we can.”

In 2015, Uber Australia boss David Rohrsheim said the ATO’s ruling created “unnecessary red tape” that included setting up an Australian Business Number and filing quarterly business activity statements with the ATO.

“We feel that the position taken by the ATO jeopardises this flexible income, harms job creation, and is guidance that should not have been issued while a comprehensive federal government tax review is under way,” he said.

The Australian Taxi Industry Association has welcomed the decision. It said Uber’s arguments hinged on whether the court would accept that there was a deficiency in the GST Act that would allow ride-sharing to slip through a legal loophole.

“We applaud the decision,” ATIA chief executive Blair Davies said. “It’s just an extension of the old maxim, if it walks like a duck, quacks like a duck, it’s a duck.

“It means that UberX drivers have to be registered for GST just like taxi drivers, so they can’t go under the radar. Anybody that’s been sitting back there thinking they could avoid registering for GST because this case might go Uber’s way, they’re in a bit of trouble.

“We are glad that this ruling has cut through much of the marketing spin and hype surrounding ride-sourcing services. Fundamentally, UberX passengers are buying a service to take them from A to B in a car.

“Taxing that service differently to the equivalent trip in a licensed taxi would be unfair and constitute a regulatory distortion. That’s also the umpire’s view and so the ATIA is now calling on Uber to accept it and start co-operating with the ATO by supplying full details of its drivers’ earnings.”

Mr Davies said the ATIA “simply want a level playing field”. “The tax office has decided to do that, we just wish some of the state governments would take the same view and not have regulatory hand-ups for UberX and regulations and red tape to stop taxi services being as efficient as they possibly can.”

An ATO spokeswoman noted that the court had accepted the Commissioner’s position that the ordinary meaning of the word “taxi” meant “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”, and that Justice Griffiths had ordered Uber to pay the Commissioner’s costs of the litigation.

“It is important that Uber and other ride-sourcing providers now work cooperatively with us to help assist their drivers to understand and comply with their tax obligations and to claim their entitlements,” the spokeswoman said in a statement.

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Originally published as Uber drivers must pay GST, court rules