This post was originally published on smh.com.au
Thousands of Uber drivers across the nation will have to register for GST by August 1, which could mean the cost of rides taken by consumers on the popular ride-sharing service rises by 10 per cent.
The Australian Taxation Office has confirmed that people who provide ride-sharing services such as Uber are providing “taxi travel” under GST law.
The decision may be viewed as slap in the face for fast-growing companies such as Uber, which has long argued that it’s a “ride-sharing” service and its drivers are not taxi drivers, and, therefore, do not need to have an ABN and pay GST.
The move could mean that Uber’s cheaper option, uberX, becomes more expensive as the 10 per cent GST rate is applied on rides.
For the first time, the Tax Office has issued guidance for taxpayers who provide “sharing economy” services like Uber and Airnbnb, warning that they may be up for GST, income tax and capital gains tax.
The ATO has said that people who occasionally rent out rooms or homes on Airbnb are not operating a bed and breakfast-style business, and, therefore, not required to register for GST. Individuals making money from renting out their rooms will still have to declare it as income on their tax return.
However, people driving Uber cars and similar ride-sharing services are being warned that they have until August 1 to register for GST –regardless of their turnover – or risk being caught under tax laws.
The penalties would be significant if the drivers failed to register by that date, the ATO said.
The taxi industry has been lobbying to have Uber drivers sit within the same rules and regulations as taxi drivers. To date, more than 9000 uberX drivers operating across major states in Australia have been able to avoid GST payments by arguing they fall under the $75,000 turnover threshold at which GST applies.
However, the ATO’s new guidance states: “If you drive passengers in a car for a fare, you may be providing ‘taxi travel’, and if you are, you need to register for GST.”
“Affected drivers must register for GST, charge GST on the full fare, lodge business activity statements and report the income in their tax returns,” Deputy Commissioner James O’Halloran said. “We’re of a view that ride sourcing is, in fact, providing taxi services and falls under the provisions of GST law.”
The ATO has held discussions with the taxi industry and the rapidly growing sharing economy services such as Uber and Airbnb.
Treasurer Joe Hockey recently noted concern that Uber drivers were not paying GST.
He said there were significant tax and regulatory issues that needed to be addressed in the tax white paper.
The ATO would not speculate on the revenue that could be collected once sharing service providers were brought into the tax net.
“This is not a revenue issue, it’s a level playing field issue,” Mr O’Halloran said.
“If those providing ride sharing have not obtained an ABN and not registered for GST, then we will undertake compliance activities – that means reviews and audits – and assessments may be raised.”
The current penalties are $220 for the non-lodgment of a BAS and there are additional fines that may be given depending on the circumstances, including paying outstanding GST on supplies already made, as well as interest, penalties and potential prosecution.
The ATO has also issued guidance for other sharing economy services such as Airbnb. The company, which has more than 1.2 million properties rented through its site worldwide, including 35,000 in Australia, has argued its new services do not fit in with outdated state and territory laws.
Mr O’Halloran said the ATO’s guidance only dealt with tax law and did not extend to other issues such as regulations around safety and insurance.
“We want to give people certainty [that] whilst these things appear new, the foundations of the [tax] law still apply,” Mr O’Halloran said.
The ATO would work with taxpayers to help them meet their obligations. Thereafter, it would analyse various information it has on taxpayers –through risk-rating profiles and third-party sources – to determine who may be dodging their GST and income tax obligations.
He said there may be those that challenge the ATO view, and if they could not work to resolve potential disputes, some cases may end up in court.
The chief executive of taxi booking app GoCatch, Ned Moorfield, had complained to the ATO about its competitor, alleging uberX was evading tax.
He told Fairfax Media in March that by not paying GST, uberX drivers got an immediate 10 per cent price advantage.
Read more: http://www.smh.com.au/business/the-economy/no-gstfree-ride-for-uber-warns-australian-tax-office-20150519-gh50iz.html