Uber filed its case with the Federal Court this week in their effort to thwart the ATO's bid to apply GST to its drivers. The case appears to be centred around two principles:
- whether the drivers are conducting an enterprise at all: the ATO would be confident of success on this point; and
- whether the drivers supply taxi travel: if not, it is only those drivers generating more than $75,000 turnover that would need to register & pay GST.
In my view, the decision will centre around whether the legal form of the arrangement (assuming Uber contracts with drivers are not taxi driver contracts as such) will trump the substance (with the consumer outcome being a taxi-like service). Substance usually trumps form in tax cases these days, so this case will be interesting to follow.
Since August 1, the ATO has required ride-sourcing drivers to register for and pay GST on fares. This effectively reduces their earnings by 12.5 per cent because they pay GST on the gross fare before Uber deducts its 20 per cent commission.It also means drivers must declare their earnings to the tax office. Before August 1 many drivers were not declaring their earnings or paying any tax on money earned through ride-sourcing. Research by Fairfax Media has found many drivers were unhappy with the new rules.Uber disputes the ATO's interpretation, but rather than providing clear instructions to drivers has been advising them to seek accounting advice