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AJML Accountants Update – November 2017

Internet based business – Uber (part 1)

How did Uber work?

Uber uses technology to facilitate a ride-sourcing (taxi-like) service. The key players and the flows of funds, involved in the Uber businesses model are broadly as follows:

  • The drivers – basically anyone aged at least 21 years with a driving license and a registered car can apply to be an Uber Partner (‘driver’). After passing a background test, the driver is enlisted in the Uber system and given an Uber iPhone (to access the ‘Uber app’). According to the ATO, the drivers are not employees of Uber, they are independent contractors and Uber has no obligation to pay PAYG or superannuation guarantee on a driver’s behalf (refer to ATO factsheet: “Ride sourcing and tax” for the ATO view in this regards). Drives can work their own hours, and for the purpose of these notes it is assumed the driver operates as a sole trader.
  • The riders (or passengers) – anyone wanting to obtain a ride from an Uber driver can register as an Uber ‘user’ on the Uber website or via the ‘Uber app’. Users can use the app to order an Uber to set location (after viewing a photo of the driver and car registration details). Arrival time can be tracked on a map provided in the app. Ride confirmations are sent to the passenger via email and mobile number (these details are provided on the registration).
  • Uber – Among other things, Uber facilitates the ride-sourcing service by providing and maintaining the necessary technology (e.g., the Uber app) and also collects payments from passengers and passes payment on to drives (after deducting a set commission fee). It is also understood the Uber provides a certain level of insurance cover for Uber drivers.

Is the income derived by Uber drivers subject to GST?

The short answer according to the ATO is that Uber income is subject to GST. More specifically, the ATO are of the view that Uber drivers are providing ‘taxi travel services’ and, as such, are subject to the same GST requirements as taxi drivers. Of note, this means Uber drivers are not entitled to apply the $75,000 ‘turnover test’.

By way of background, in order to avoid the confusion that might otherwise arise if only some taxi travel is subject to GST, S.144-5 of the GST Act providers that ‘taxi travel’ supplied as part of an enterprise is subject to GST regardless of turnover. For this purpose, ‘taxi travel’ means ‘travel that involves transporting passengers, by taxi or limousine, for fares’ in a motor powered vehicle (refer ID 2004/478) that is available for public hire (refer ID 2002/23). Importantly, from 1 August 2015, the ATO began to enforce its view that ‘taxi-travel’ includes ‘ride-sourcing’ services, including Uber (meaning Uber drivers must pay GST in respect of their Uber income). Uber drivers must register for GST by this date (and obtain an ABN) and lodge quarterly BASs (the annual BAS option is not available for taxis and, thus, Uber drivers).