ATO steers GST legal case away from Uber

The Australian Taxation Office has contested Uber's argument that the definition of taxi and limousine needs to be examined.

The Australian Taxation Office (ATO) has disputed Uber's attempts to raise doubt around the "ordinary" definition of "taxi travel" as outlined by the Goods and Services Tax (GST), saying that the connotation of the phrase along with the words taxi and limousine need to be considered.

During the second hearing day at the Australian Federal Court, counsel representing the ATO said during his closing statement that Uber's argument that the definition of taxi travel under the GST Act is only applicable to taxis and limousines is not plausible.

He proposed for Justice John Griffiths to consider the connotations associated with the words taxi and limousine.

Pointing to the specific case of Sydney-based UberX driver Brian Fine as an example, counsel representing the ATO said Fine revealed during cross-examination that he would drive around -- much like a taxi would -- until someone wanted his service, before picking up a passenger, driving them to their destination, and charging a fare for the service.

"Like a taxi driver, [Mr Fine] pry the streets, and really effectively is hailed. We say functionally, he's hailed by users of the app," he said.

This goes against the argument that counsel representing Uber declared on Wednesday, which said the "real point of distinction" between UberX versus taxis and limousines is that taxis are the only vehicles that can pick up passengers from the curb side or be hailed.

Counsel representing the ATO further argued that regardless of whether taxi travel is provided by a taxi, limousine, or any form of other vehicle service, it does not mean that UberX is part of a different industry, and therefore its drivers should not be exempt from having to register for GST.

Blair Davies, Australian Taxi Industry Association CEO, told ZDNet that the case is addressing the "heart of the issue", which is creating a level playing field for taxi drivers in Australia.

"We're not running away from the fight. In fact, we are keen to take up the challenge and contest it in the marketplace based on everybody playing by the same rules, not by one side having an unfair advantage," he said.

"The case at the moment is the ATO is treating Uber drivers much like taxis, and we commend for that. We hope the court upholds that."

Uber lodged legal action against the Australian Taxation Office (ATO) back in August last year in the hope that the ATO would overturn its decision requiring Uber drivers to register for GST.

Last May, the ATO issued a directive that advised those providing a ridesharing service must have an Australian Business Number and be registered for GST.

However, in documents lodged to the Federal Court, Uber argued the public issue by the ATO "unfairly targets Uber driver-partners".

An Uber spokesperson previously told ZDNet that it believes the ATO's guidance should not have been issued, given that a federal tax review is currently under way.

"To be very clear, we believe all our driver-partners should pay their appropriate share of tax and meet their tax obligations," the company said.

"However, we feel they have been unjustly singled out by the ATO for different tax treatment than truck drivers, bike messengers, Airbnb hosts, or any other participant of the sharing economy."

The company went on to express its disappointment in the ATO, saying that it is unfairly targeting Uber's driver-partners, who "must register and remit this tax from the first dollar earned". This is in comparison to individuals who are only required to register for GST once they reach a turnover of more than AU$75,000 a year.

"The guidance by the ATO has tried to fit a new technology model from today into a 1990s regulatory framework that was written long before this technology ever existed. Common sense would tell you that isn't going to work," the company said.

On Monday, the NSW government announced that it is offering AU$20,000 in compensation grants to taxi drivers who have lost business due to Uber and other ridesharing services.

The AU$250 million industry transition package will allow the drivers to apply for upfront payments for up to two licences, AU$100 million of which will be paid for by a AU$1 levy on all taxi and ridesharing trips, meaning that NSW ridesharing and taxi users will have to collectively contribute AU$100 million to pay for the scheme. AU$142 million has also been set aside for hardship claims.

According to the Transport NSW website, eligible drivers' licences must include a condition that it may be transferred, and drivers have to have held their licence prior to July 1, 2016. Applications for the payments are currently open until January 13, 2017.

Uber was officially legalised in NSW by the state government in December last year, with a new regular and commissioner put in place to oversee the industry. A transition period was also put in place for a number of months for ridesharing drivers to obtain the correct accreditation to drive legally on NSW roads.

This was after the ACT became the first Australian state or territory to legalise ridesharinglast October. This included the same regulatory conditions that are enforced for taxi drivers, such as driver history checks and vehicle safety checks.

Uber was then deemed to be legal in Western Australia under major taxi industry reform in December, with the proviso that drivers had to obtain special "omnibus" licences in addition to their standard driving licences; while a decision passed by a Victorian County Court judge in favour of a Melbourne Uber driver effectively gave the service the green light to operate in Victoria in May.

While South Australia followed suit at the start of this month, Uber is still battling the Queensland government to become legal in that state. The Queensland government last month passed new legislation to crack down on Uber drivers, which included increased fines and more powers for traffic enforcement officers.

The Northern Territory government is still refusing to allow Uber to operate.