Uber and the Australian Taxation Office (ATO) have been fighting for years over whether Uber has taxi status, which has had an effect on the likes of GST and price hikes.
The latest episode of this battle involves the Fringe Benefits Tax (FBT), which could have a significant impact on businesses that allow employees to use the service.
Uber drivers collecting GST isn't anything new, ever since the Australian Taxation Office weighed in on the situation back in 2015. However, you may not have known that Uber took the ATO to court over the decision. The case came to a conclusion on Friday, with the Federal Court ruling in favour of the ATO.Read more
According to the ATO’s website, ride-sharing services like Uber are not considered taxis and therefore employers are not exempt from paying the FBT on any rides their employees take through Uber for Business.
The FBT is a tax applied to employers who offer their employees benefits outside of their usual wages. It can include things like work cars, gym memberships and concert tickets. Working out that sum is little tricky but its the employer, not the employee, that ends up with the bill.
But, some things like taxi rides, are exempt from the FBT meaning employers don’t need to pay that huge tax bill.
According to the ABC, this clarification was allegedly added in just this month.
“The exemption is limited to travel in a vehicle licensed by the relevant State or Territory to operate as a taxi. It does not extend to ride-sourcing services provided in a vehicle that is not licensed to operate as a taxi.”
Speaking to Business Insider, Uber stated that it was disappointed by the ATO’s decision but is working to find a solution.
“While it is disappointing that the ATO has decided not to proceed with a practical guidance note in this case, we are working closely with the ATO to address this inconsistency. Delivering this would ease the burden for Australian taxpayers and level the playing field between taxi and all rideshare.”
“Importantly, this does not prejudice all Uber, or indeed all rideshare, travel and represents the ATO confirming the status quo.”
“We note that in a number of scenarios rideshare travel should not be subject to FBT on the basis of the ‘otherwise deductible’ rule i.e. travel from Employer’s offices to clients or suppliers.”
According to a statement provided to the ABC, the ATO has suggested Uber’s non-FBT exempt status could be applied retroactively meaning any employer who hasn’t paid FBT on Uber (or any other ride-sharing services) for their employees in the past few years, may be up for a big tax bill.
“We have maintained our ongoing view that the FBT taxi travel exemptions is limited to travel undertaken in a vehicle licensed to operate as a taxi by the relevant state or territory—that is, licensed to provide rank and hail work,” the ATO spokesperson told the ABC.
Businesses will now need to reconsider whether they reimburse their employees for using the service now the ATO has clarified its position.