Uber has accused the Australian Taxation Office of being unduly influenced by the taxi lobby over its decision to require drivers using ride-sharing services like Uber to register for GST.
The taxi industry has been lobbying to have Uber drivers sit within the same rules and regulations as taxi drivers, and in May had a big win when the Australian Taxation Office handed down its interpretation of existing tax law saying that ride-sharing services are just like taxi services and therefore need to pay GST.
Uber drivers maybe forced to register for GST despite not earning more than the $75,000 turnover threshold.Credit: Erin Jonasson
Uber drivers across the nation will have to register for GST by August 1 or risk hefty penalties, the ATO says.
The move has angered Uber, which doesn't want to see the cost of rides taken by consumers on its popular ride-sharing service rise by 10 per cent.
Uber is legally challenging the ATO's decision, and in May wrote to its 9000 drivers advising them not to register for GST until the company gives them further advice.
Now, in a letter to Tax Commissioner Chris Jordan, the Silicon Valley tech giant has complained that the ATO was heavily influenced by the taxi industry lobby on its decision.
The letter, by Uber's director of public policy Brad Kitschke, said the company wanted its concerns investigated.
But Assistant Commissioner Michael Hardy said people needed to comply with the law and register for GST by August 1, or risk hefty fines and criminal prosecution.
Mr Hardy said the "ATO considered all possible interpretations of the law and also sought an opinion from a lawyer outside of the ATO before publishing advice in May".
Law interpretation accurate
"The ATO is confident that our interpretation of the law is accurate, however as with any ATO view it is open to be challenged by a taxpayer," he said.
Documents obtained by Uber under Freedom of Information show ongoing correspondence between the ATO and Australian Taxi Industry Association.
The correspondence "indicate a high level of involvement by the ATIA in editing and altering the proposed guidance note" the letter by Mr Kitschke said.
The information obtained under FOI also indicates that the ATO co-ordinated the public release of the guidance note with the ATIA and its media and public relations agency.
"This included ensuring both parties were aligned on messaging and the use of similar or in some cases exactly the same language and phraseology," he said. "We consider this to be highly irregular."
Mr Kitschke said at a meeting on May 2, between Uber and deputy commissioner James O'Halloran, Uber questioned the appropriateness of the level of consultation with the taxi industry and its representative bodies.
It asked why the ATO was taking advice from the taxi lobby "about a matter to which the ATIA is not a party to".
"Despite this concern being raised, the ATO continued to provide the ATIA with ongoing and in depth access to the draft guidance note and continued to liaise with the ATIA about matters which it is not a party to," Mr Kitschke said.
"The ATO does not consult with Uber about the general tax affairs of the taxi industry. It is surprising that the ATO would consult with the taxi industry in such a detailed way about matters specific to Uber and its partners."
Grey area of law
Mr Kitschke's letter further states that even the ATO considers its a grey law area.
"In correspondence to Uber, deputy commissioner O'Halloran advised that the decision to consider ride-sharing trips as 'taxi travel' was an 'uncertain area of the law'," he said.
"We consider it irregular that the ATO rushed a decision with the knowledge of this ambiguity," Mr Kitschke said.
A number of states across Australia are currently considering introducing ride-sharing legislation or regulations.
"There would be no need or justification for new state and territory based legislation or regulations specifically dealing with ride-sharing, if indeed ride-sharing could legitimately be seen to constitute 'taxi travel'," Mr Kitschke said.
"We maintain that the ATO's interpretation that ride-sharing is "taxi travel" is inherently flawed."
But Mr Hardy said if drivers were getting mixed messages from Uber, it was worth asking a tax adviser for their opinion.
"The ATO is responsible for interpreting and applying the taxation law and has tried to provide clear guidance for drivers," Mr Hardy said. "If drivers want to take advice from a different source, the ATO recommends that drivers get advice from a qualified tax adviser."
Since the ATO published its views GST registrations have gone up.
In the first three weeks of July, there was an average 44 new ABN registrations per week in the road passenger transport category, which is the category where ride sourcing drivers such as Uber register, up from an average of 33 before the guidance was given.
Mr Hardy said it's not too late for drivers to get their affairs in order before the August 1 deadline. "Playing catch up six months down the track if you didn't register when you should have won't be easy," he said.
For drivers who do not comply with GST registration, they would be reviewed and possibly audited and hit with penalties. The penalty for not registering for GST will be $3600 from July 31.
"We will be using data and information from various sources to identify drivers and check to make sure they are registered," Mr Hardy said.
To date, thousands of uberX drivers operating across Australia have been able to avoid GST payments by arguing they fall under the $75,000 turnover threshold at which it applies.