Uber threatens legal action against Australian tax office

Uber said it is considering legal action against a decision which would force its drivers to pay GST on their first dollar earned from August.

After last month calling for regulation in Australia to allow it to operate legally, Uber is now considering using legal means to challenge a tax office ruling that requires its drivers to pay GST in line with taxi operators.

Earlier today, the Australian Taxation Office (ATO) classified Uber as a taxi service, and consequently its 9000 Australian drivers have until August 1 to get an Australian Business Number and register for GST.

Uber disagreed with the decision and said its drivers, who typically earn $30,000 a year, should not pay tax on their first dollar earned as it hit out at the ATO.

"The ATO has wrongly chosen to categorise ridesharing as 'taxi travel', which the GST Act defines as 'transporting passengers, by taxi or limousine, for fares'. Ridesharing is not a taxi service," the company said.

"It is a shame that the government is allowing a handful of bureaucrats to determine public policy for the newly emerging sharing economy, when this should really be the role of our elected representatives."

Uber director of policy in Oceania, Brad Kitschke, said the company could challenge the decision in court.

"This is something we are considering," he told ABC TV from Washington.

Kitschke said the government should assess the possibility of applying the AU$75,000 small business tax threshold to Uber and taxi drivers.

Uber now takes a 20 percent cut of each fare from its drivers, but in recent days has trailed taking 30 percent from new drivers in San Francisco and San Diego.

Australian general manager David Rohrsheim told AAP the company had not decided whether prices would increase or whether the company would reimburse their drivers if action against the changes failed. He said Uber had been awaiting a government review on ride-sharing businesses before the ATO's decision.

It was disappointing the GST would end up in state pockets when those governments had failed to legalise and regulate the ride-sharing industry, he said.

State governments across Australia have been issuing UberX drivers with, collectively, tens of thousands of dollars in fines, which Uber has been paying on behalf of its drivers.

"If any partner is charged by the state for providing ... transport to somebody else in their state, we support them 100 percent. We don't think anybody should be taken to court for providing a ride from A to B," Rohrsheim said last month. "This is not a matter for the courts, this is a policy question. Politicians need to step up and make a decision on how should ride sharing happen."

Uber is currently facing legal action in Western Australia for not having the right licence to operate. While cities such as São Paulo and Montreal have enacted various bans on Uber in recent weeks.

The taxi industry has welcomed the tax changes but says Uber still has less mandatory business costs than the formalised taxi industry.

Australian Taxi Industry Association CEO Blair Davies said many Uber drivers could be underinsured and do not face the same safety checks as taxi drivers.

"Apart from paying tax in Australia, Uber needs to commit to respecting state regulations that protect the safety of passengers and drivers," he said.

He also claims the company itself has avoided paying its fair share of Australian tax.

Rohrsheim said he rejects that in the "strongest possible terms" and said Uber paid "all relevant taxes in Australia". He would not say how much tax they paid last financial year.

A recent funding round valued Uber as a $50 billion company.

Rental services like Airbnb have also been included in the ATO's warnings to online businesses.

Its users will have to declare incomes from renting properties and may be subject to some capital gains tax.

But the earnings will be classified as residential rents, which are exempt from GST.

ATO deputy commissioner James O'Halloran said the tax office is simply applying the law.

The existing tax law apples equally whether a buyer and seller come together at a bricks and mortar business or via a mobile phone app or web site," he said.

"Affected drivers must register for GST, charge GST on the full fare, lodge business activity statements, and report the income in their tax returns."

"We understand that people often don't consider the tax consequences of new and emerging business models. Our first step is to assist taxpayers involved in the sharing economyto meet their tax obligations."

With AAP