Relief from discrepancy in the FBT treatment of taxi travel and riding-sharing travel services is ‘in hand’.
Long-standing readers of the TaxEd newsletter will be familiar with the tortuous history of ride-sharing travel services for tax purposes, especially in relation to FBT.
Current treatment of ride-sharing travel services
The nature of ride-sharing travel services, particularly its similarity to taxi services, previously raised queries regarding whether an Uber driver (or other ride-sharing travel services provider) was subject to the same taxation (GST, and FBT) consequences and concessions as a taxi service.
In the context of FBT, the question was whether employers would be able to access the exemption in s. 58Z of the FBTAA for travel undertaken by their employees in a taxi to or from work or due to illness of the employee where the travel was provided via a ride-sharing vehicle.
The decision in Uber B.V. v. Commissioner of Taxation [2017] FCA 110 confirmed that taxis and ride-sharing travel services are treated the same for GST purposes. However, this consistent treatment of the two similar types of service does not currently extend to the FBT regime.
The ATO has concluded that the definition of ‘taxi’ for FBT purposes only covers vehicles licensed by the relevant state or territory to operate as a taxi. For this reason, the ATO considers that the FBT exemption for travel services only applies to vehicles that are licensed to operate as a taxi, not to vehicles providing ride-sharing travel services.
Proposed amendments to FBT treatment
Treasury has released an exposure draft of legislation which will align the FBT treatment of ride-sharing travel services with the existing FBT treatment of taxis, for public comment.
The proposed legislation replaces references to ‘taxi’ in FBTAA with ‘a car used for taxi travel (other than a limousine)’. It also aligns the FBT definition of ‘taxi travel’ with the corresponding definition in the GST Act – ‘travel that involves transporting passengers by taxi or limousine, for fares’. However, it amends s. 58Z to specifically exclude limousine travel from the FBT concession.
The draft Explanatory Memorandum notes that this exclusion for limousines preserves ‘the existing policy of covering vehicles used for travel involving transporting passengers for a fare by way of a car but not including luxury cars such as limousines’.
Accordingly, these proposed changes will allow employers to access FBT exemptions regardless of whether the travel services they provide to their employees is via taxi or ride-sharing service, but not if the travel is via limousine.
The draft legislation is proposed to apply to fringe benefits provided on or after the day the legislation receives Royal Assent – noting that the legislation has not yet been introduced into Parliament.