Thanks for the heads up Instyle. Although this was checked with the ATO at the beginning of my Ubering days (with notes about which ATO agent provided the advice), I will re-confirm this once again for myself, and the advice provided to others.
Hi Ghostwren,The formula for GST and the disposal of capital assets is confusing. Can it be simplified for share drivers? Wouldn't an exemption from GST on the resale (disposal) of private cars be a better solution?
Formula = 1/11 x Price x (1 - Adjusted GST credit / Full GST credit)
Since the start of GST anyone providing what are called 'taxi travel' services under the GST law has been required to be registered for GST from the first supply. There has never been a $75,000 threshold for this type of supply.The annual $75,000 threshold for most Australian enterprise is an amount that very few, I'd argue if any share drivers will be able to reach solely through a ride sourcing enterprise. This raises several questions.
1. Why is share driving targeted for GST when there are so many vast differences between taxi services and ride share services, primarily of these, drivers provide a service to the app provider, not the public? We can prove this. We have the invoices and payments in our bank accounts from one and only one source, the app provider. The app provider sets all the rules for drivers such as who can drive, how much they are remunerated, how local (Australian) tax compliance issues are handled, and when a driver must cease, this list could go on. This is important in the context of how Australian contractors are protected from potentially predatory activity of overseas app providers. The distinction here is that cab drivers have a choice of who they contract their services too and are (often) contracted by Australian Taxi Fleets. Cab drivers have a union and negotiation power with their bosses. That's one very big difference.
The practical differences of the ride share experience: riders get my phone number, they cannot hail a share ride in the street, share drivers don't have access to cab ranks and pay more parking fees or use more petrol, the customer feedback experience is completely different to cabs, the rating system is completely different to cabs. I could go on.
So, the question is why have share driving services been labeled as taxi services when the fit is so very wrong?
This question has been asked a number of different ways.The annual $75,000 threshold for most Australian enterprise is an amount that very few, I'd argue if any share drivers will be able to reach solely through a ride sourcing enterprise.
This in itself appears to make the GST ruling for share ride services abhorrent.
$75,000 divided by 52 weeks in a year divided by 7 days a week (that's everyday of the year) equals over $206 a day....I'd guess that on average a share driver would need to work at best between 10-14 hours a day to earn that kind of money. Everyday, for a year without a single day off.
It just does not seem practically possible.
So why are share drivers being labeled as a taxi service when the service provider is based overseas, the drivers have practically no chance of earning $75,000 and share drive services are so different to taxi services? Are share drivers being used as a scapegoat and a unfair tax revenue source to appease other interest groups that are harder to negotiate with?
Any changes to GST laws need to be passed by Federal Parliament.Which legislators would be the most practical to approach to discuss matters concerning the issues of share driver independent contractors? Independent contractor share drivers to overseas app providers are a vulnerable Australian working community entering into unknown territory. Surely some protections can be put in place by law makers to help close loopholes and bring share drivers on an even playing field with the same or similar but appropriate protections as the rest of the Australian community?
Yes, you will have to pay 10% on the resale value at disposal if, at the time you sell the car, you are still registered for GST.If I bought a second hand car on the private market prior to starting share driving, paid no GST on that purchase, (I mean if I already owned a secondhand car) then used it for one or more share drives after August 1, will I need to pay the ATO 10% GST on 100% of the car resale value at disposal if I intended to keep driving with a replacement car, therefore remained registered for GST?
Is it a better idea in this scenario to deregister from GST, ABN etc (effectively shut down operations), sell the car (therefore only need to pay GST on the percentage used for business) then re-register for GST, ABN, facilitator etc and buy a replacement car?
I think this question is asking that if a Court overturns the ATO view of the law, or the Parliament amends the law retrospectively, how far back can drivers go if they wish to seek refunds of GST?Asst. Commissioner,
Is there any time limit imposed by law that will prevent you applying the law more favorably for share drivers, assuming are satisfied that the ruling is incorrect and disadvantages share drivers? If so when does this time limit expire?
Ref: https://www.ato.gov.au/business/gst...dustry---issues-register/?page=1#Introduction, 4th paragraph.
Hi Something's fishy. I can't discuss Uber's own tax affairs here, but the ATO does try to make sure that every taxpayer understands what they need to do under the tax law and that they comply with it.Ghostwren...
UBER is a hypocritical foreign corporation that runs an illegal taxi service, hiding behind the "share-economy" in order to avoid tax and GST to garner an unfair advantage over Australian businesses...
So stop trying to monopolise the commissioners time with UBER's pathetic demands for more tax and GST avoidance.
@ Assistant Commissioner,
What i wanna know is will UBER be paying it's fair share of tax and will it be paying GST on the 20% commission it receives or will the UberX drivers be liable for the entire amount of GST?
In fact Assistant Commissioner, as an illegally acting corporation, shouldn't the ATO be confiscating UBER's accounts and assets for running an illegal taxi service?
Hi Ghostwren. The ATO and Treasury normally only do modelling on tax when there is a new tax introduced or changed, including stopping a tax.Mr Hardy, it was reported in the Australian Business Review today that you said "the ATO had not modelled how much, if any, additional revenue would be generated by the [GST] change." But Mr Hardy, it's going to make one very big difference to the back pocket of the little guy, the share driver.
If you cannot be confident that the cost of processing, scrutinizing, policing and auditing an ever increasing amount BAS bearing individually ever decreasing GST tax revenues as more drivers are recruited and compete for their slice of the pie in a limited market, how is the ATO delivering value to the Australian Taxpayer? Could this ruling be running at a cost to the Australian Taxpayer?
Evidence of how the number of share drivers on the road could increase if the patterns here follow those in the US, which they likely will as they follow the same business model:
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It's a good question.Quoting again from the same Australian Business Review article:
"Mr Hardy said the ATO's decision was not intended to have any impact on the business models of "facilitators" - ATO's word for Uber and its competitors.
"We're just trying to provide a level playing field," he said.
"We're trying to be pretty even-handed about the operation, both for the drivers and the facilitators too."
Mr Hardy, how is it "even-handed" if the "facilitator" is as you say unaffected by the tax and the share drivers bear the burden of collecting 100% of the GST out of an 80% share? Cab drivers only need pay GST on their share of their cut but there is nothing in place to protect share drivers from having to provide the 100% of the GST from their own incomes. Is it not a cop out to say that this is just a matter between share drivers and the facilitator when it is the ATO that has made this determination in view of the unavoidable fact that an OS facilitator will take a cut?
Hi Ghostwren. It's good to see you providing some example. I assume you are saying that the cab driver gets 50% of the fare under a bailment arrangement or something similar with the owner of the taxi cab.To illustrate this point and how the GST is being unfairly applied to share drivers when compared to cab drivers:
Fare was $55
GST was $5
Cab Driver gets 50%* of the fare, collects 50% of the GST, $2.50
Cab Driver can claim input credits of $2.50 for $27.50 outlay
Cab Driver has no GST burden
Fare was exactly the same: $55
Share Driver collects 100% of the GST $5 regardless of their % of the fare
Share Driver can claim input credits of $2.50 for exactly the same $27.50 outlay
Share Driver has a remaining $2.50 GST burden but Cab Driver under the same circumstances has none.
*the actual percentage a cab driver makes is irrelevant in this equation because it still demonstrates the point no matter what percentage split you apply.
Please examine the above equation. Because cab drivers who work for companies split their GST bill between the driver and the company (or owner), whereas share drivers as of August 1 will be required to provide 100% of the GST regardless of any split with a facilitator, share drivers are being unfairly treated compared to cab drivers as their GST bills are higher and their GST input tax credits will be a relatively lower proportion of their GST bill compared to cabbies.
This creates a slanted playing field against share drivers and effectively lets the source of all this fuss, "Overseas Facilitators" off without any comparable tax burden. Now when you compare OS Facilitators to taxi companies who do pay GST, this ruling when they examine it closely will not work well for them either, the ATO is over taxing the wrong party and there is one party only that stands to be the runaway winner out of this ruling: the OS Facilitator.
The question is Mr Hardy, in light of this, will the ATO change it's classification of share driving services as taxi services as it is clearly unfair for share drivers, and wait until legislators create fairer and more appropriate regulations, then apply those instead? In that waiting period, by all means ask share drivers to get an ABN, keep business records and pay income tax. But the GST, not the GST in and of itself but the way it's being applied to share drivers is just not fair under the current ruling.
Sorry, Asst Commissioner but that assumption is not really accurate because we don't know what the taxi/bailment arrangement is. The equation simply compares business expenses regardless of what those expenses are.Hi Ghostwren. It's good to see you providing some example. I assume you are saying that the cab driver gets 50% of the fare under a bailment arrangement or something similar with the owner of the taxi cab.
I think it would be more accurate to say for a taxi driver:
Fare was $55.
GST was $5 (payable by driver).
Driver pays $27.50 for bailment (using you figures) and can claim a $2.50 GST credit
Driver pays net GST of $2.50 ($5 GST - $2.50 GST credit) to ATO out of the $27.50 it receives.
Driver claims $25.00 ($27.50 - $2.50 GST credit) as an income tax deduction in an income tax return at the end of the year.
For an Uber driver:
Fare was $55.
GST was $5.
Driver pays $11 for commission (my figure for this example (20% of $55))
Driver pays $5 in GST to ATO out of the $44 it receives less any input tax credits for example on fuel.
Driver claims the full $11 commission as a business expense in an income tax return at the end of the year.
The ATO is applying the law equally, it's just that under one model there can be a bailment expense and under another model there is an offshore commission expense.
Hi camouflage,Mr Hardy , I asked Uber about their position on the GST this morning in person at the brisbane office , and was told there wasn't a firm answer on the gst and how they were going to implement it . Should they have a plan in place already ? is there any reason for them to still be questioning the ruling ?
Hi ubermelb,I honestly cannot see any other solution but for the ATO to extend the deadline by which drivers have to register for GST. It seems that the ATO have haphazardly rushed into making a ruling and setting a deadline that was unrealistic and impractical. To be honest, a January 1 2016 deadline would be more realistic allowing time for proper consultation between drivers and the ATO as well as Facilitators and the ATO. From all accounts the ATO certainly had time to consult at length with the ATIA but are now scrambling to inform drivers of their obligations through an "online information blitz" in the space of a month or so.
My question to Mr Hardy is why has there been such a short time for drivers to become compliant with a new ruling? Is this time period consistent with other rulings made by the ATO and if not, why not?
Hi SydneyUberMichaelATO how is it that the ATO can come to a simple understanding that UBERX IS an on-demand Taxi Service where a driver has no prior knowledge of the direction and duration of travel, rather than TRUE Rideshare where a driver shares his car traveling on a route and at a time suitable to the driver and a cost per seat set by a driver?
Will this fundamental operational characteristic be adhered to by pimped out Polyanna Politicians who must give the ATO the shits when tasked with applying Tax law without favour and with consistency
In an earlier post, I mentioned that the ATO obtains information from a range of sources, and does not rely on one source only.MichaelATO
Enforcement agency raids in other countries of UBER offices have not provided the operational and financial data those agencies sort. In France, it was reported that there was clear evidence that hard drives where erased and data made unobtainable. If met with continued non-compliance by UBER, or ANY Corporation which trades in Australia to make financial data availability to the ATO, what legal action is open to the ATO to secure compliance?