With the increasing number of new and innovative businesses forming such as Uber, questions have been asked like ‘how does the government regulated ride-sharing arrangements and GST’? Generally, a business only needs to register for GST if it has an annual turnover of $75,000 or more. However this threshold does not apply to taxi operators.
The law currently requires all taxi operators to be registered for Goods and Services Tax (“GST”) if, in carrying on an enterprise, they supply taxi travel.
“Taxi travel means travel that involves transporting passengers, by taxi or limousine, for fares.” (s195.1 of the GST Act)
“Taxi” is not defined and so takes its ordinary meaning. It is defined in The Macquarie Dictionary to mean, “a motor car for public hire, esp. one fitted with a taximeter”.
The Australian Tax Office (“ATO”) has recently confirmed that for GST purposes, the word ‘taxi’ is taken by it to mean:
‘a car (vehicle) made available for public hire that is used to transport passengers for fares’.
This broad definition means that drivers who participate in ride-sourcing arrangements such as Uber will be regarded by the ATO as supplying taxi travel services and will subsequently be caught by the GST legislation pertaining to taxi operators. The ATO take the view that ride-sourcing involves an arrangement where:
- “a driver makes a car available for public hire;”
- “a passenger requests a ride via a third party facilitator, for example, by using a website or a smart phone app;” and
- “the driver then uses the car to transport the passenger for a fare, with a view to make a profit.”
Drivers partaking in ride-sourcing arrangements will now fall within the existing regime relating to taxi operators, which requires that all taxi operators must be registered for GST, regardless of turnover. This means that providing services via ride-sourcing arrangements is a taxable supply under GST legislation.
It should be noted that only those who provide taxi travel services whilst ‘carrying on an enterprise’ will be required to be registered for GST. Therefore some exemptions may apply.
Enterprise is defined in s9.20 of the GST Act as follows:
(1) An enterprise is an activity, or series of activities, done:
(a) in the form of a * business; or
(b) in the form of an adventure or concern in the nature of trade; or
(c) on a regular or continuous basis, in the form of a lease,licence or other grant of an interest in property; or
(2) However, enterprise does not include an activity, or series of activities, done:
(b) as a private recreational pursuit or hobby; or
(c) by an individual … or a * partnership … without a reasonable expectation of profit or gain; or
… (emphasis added)
If you operate a ride-sourcing, ride-hailing or ride-sharing service whilst carrying on an enterprise, the application of GST legislation means you should be aware of some of the following requirements (without limitation):
- You will need to obtain an Australian Business Number and register for GST;
- You will be required to lodge Business Activity Statements (BAS) and pay any GST by the relevant due date, or penalties may apply;
- You will be required to add GST to the cost of your service and remit this GST to the ATO with your BAS;
- You will be required to provide customers with a tax invoice at the customer’s request if the fare exceeds $82.50 (including GST); and
- You may be entitled to small business concessions, deductions and depreciation for your services.
The ATO have published a helpful resource offering detailed guidance to providers and users of ride-sourcing arrangements here: https://www.ato.gov.au/Business/GST/In-detail/Managing-GST-in-your-business/General-guides/Providing-taxi-travel-services-through-ride-sourcing-and-your-tax-obligations/
A webinar has also been published by the ATO on the same topic here: https://attendee.gotowebinar.com/recording/1020347158450013186.
Despite the rapid success of start-ups with collaborative consumption or sharing economy, such as AirBnB and Uber, and online services, such as Netflix, there is still a lot of uncertainty and developments in relation to the tax applications and legal implications. Recently we have seen the Victorian Taxi Services Commission commence successful claims against Uber drivers and proposals from the Federal Budget 2015 to introduce a “Netflix Tax” by applying GST to sales digital products and services from overseas suppliers.
As the law progresses into the digital age, we will continue to provide you with legal updates that may be relevant to your start-up or business.
For more information regarding Ride-Sharing Arrangements and GST
Please contact our Business Development Team or call us on (07) 3252 0011 to book an appointment with one of our specialist Commercial Lawyers today.
 Australian Taxation Office, Registering for GST (2015) <https://www.ato.gov.au/business/gst/registering-for-gst/>.
 A New Tax System (Goods and Services Tax) Act 1999 (Cth) (“GST Act”), Div 144.
 Australian Taxation Office, Providing taxi travel services through ride-sourcing and your tax obligations (2015) <https://www.ato.gov.au/Business/GST/In-detail/Managing-GST-in-your-business/General-guides/Providing-taxi-travel-services-through-ride-sourcing-and-your-tax-obligations/>.