FBT Alert: Ride-sourcing travel services such as Uber may be subject to FBT

The ATO has recently confirmed their view that the FBT exemption for taxis only applies to vehicles that are licensed to operate as a taxi. (Refer to FBT and taxi travel – QC 59508). In other words, if your employees travel using ride-sourcing services such as Uber, the travel expense may be subject to FBT.

How we got here: The Uber case

In Uber B.V. v. Commissioner of Taxation [2017] FCA 110 (the Uber case), the Court had to consider whether ride-sourcing drivers were providing taxi travel for GST purposes. Taxi travel for GST purposes means travel that involves transporting fare-paying passengers by taxi or limousine.

The word taxi is not defined for GST purposes and was essentially considered to mean a vehicle available for hire by the public which transported a passenger at his/her direction for the payment of a fare that would often, but not always, be calculated by reference to a taximeter.

This conclusion was wide enough to capture ride-sourcing services as provided by Uber drivers.

Definition of ‘taxi’ for FBT purposes

Under s. 58Z of the FBTAA, employers are specifically exempted from having to pay FBT in respect of travel undertaken by their employees in a taxi to or from work or due to illness of the employee.

The word taxi is a defined term for FBT purposes and means a motor vehicle that is licensed to operate as a taxi. Following the decision in the Uber case, the ATO reviewed its interpretation of the definition of taxi for FBT purposes and issued discussion paper TDP 2017/2.

Now, the ATO has confirmed their existing view that the definition of ‘taxi’ for FBT purposes only covers vehicles licensed by the relevant state or territory to operate as a taxi. This means that where an employer provides their employee with travel using ride-sourcing vehicles, or any other vehicle that does not meet the definition of taxi, the expense may be subject to FBT unless another exemption or other concessions apply.

For further information on the FBT exemption for taxis, refer to Chapter 20 of the FBT guide for employers.