Ned Moorfield, CEO of taxi booking app GoCatch recently complained to the tax office accusing UberX of evading tax. Two months after Mr Moorfield warned that Uber will become a powerful monopoly if governments don’t legalise ride sharing or crack down on it, the ATO has confirmed people who offer ride-sharing services will be considered “taxi travel” under GST law.
Uber drivers across Australia will now have to register for GST by August 1, a move which could mean rides may rise by ten per cent. Mr Moorfield told the Australian Financial Review that not paying GST is giving UberX drivers a ten per cent price advantage which competitors who complied with the law do not have.
James O’Halloran, ATO deputy commissioner, told Fairfax Media that affected drivers will have to “register for GST, charge GST on the full fare, lodge business activity statements and report the income in their tax returns.” Should drivers fail to comply with the new measure, the penalties would be significant. The ATO’s new guidance says people would “drive passengers in a car for a fare” may be offering ‘taxi travel,’ therefore they must register for GST. Mr O’Halloran emphasized that the decision is “not a revenue issue, it’s a level playing field issue.”
Meanwhile, people who use Airbnb to occasionally rent out rooms or homes are not required to register for GST because they are not operating a bed and breakfast-style business. Airbnb has roughly 35,000 properties rented through its site in Australia.
Uber confirmed it would challenge the ruling because it considers the watchdog “has taken it upon itself to dictate government policy for the sharing economy by imposing a flawed interpretation of a law that was introduced in the 1990s upon participants of a new business model that is only one year old,” the company wrote in a blog post. David Rohrsheim, the general manager of Uber Australia told The Australian that the ATO’s decision affects over 9,000 ordinary Australians who use the UberX platform. “Ridesharing is about having flexible income opportunities for those who might need it at different times in their lives,” the company wrote in its blog post. Therefore, “the ATO has created an administrative burden of $36,000 AUD new tax filings every year.”
The San Francisco-based company claimed ridesharing has been wrongly categorized as ‘taxi travel’ and emphasized that this service is not a taxi service because the vehicles are not taxis or limousines and street hail is not acceptable. There are no taxi meters and customers cannot wait at ranks, therefore the classification is incorrect.
UberX drivers have offered over 2.5 million trips in Melbourne, Sydney and Brisbane since the service was launched one year ago, so the tax ruling could be a massive windfall for state governments. To date, over 9,000 UberX drivers operating across major cities have avoided GST payments by arguing they fall under $75,000 AUD turnover threshold at which GST applies.
Mr Moorfield warned that the government’s inaction “is creating the next big monopoly in point-to-point transport in Australia.” Last year, Cabcharge wrote to the Prime Minister and state and territory leaders urging them to ban Uber.