FBT Article ‘ Definition of ‘taxi’ for FBT purposes

The Uber decision

In 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.

Taxi for FBT purposes

Under section 58Z of the FBTAA, employers are specifically exempted from having to pay fringe benefits tax 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. The ATO has interpreted the definition of ‘taxi’ for FBT purposes to cover only vehicles licensed by the relevant state or territory to operate as a taxi.

Following the Uber decision the ATO is reviewing its interpretation and has issued a technical discussion paper on the definition of ‘taxi’ under the FBTAA – Technical Discussion Paper TDP 2017/2.

The discussion paper specifies the following questions for consultation:

1. Should a ‘motor vehicle that is licensed to operate as a taxi’ be interpreted to mean a motor vehicle that is statutorily permitted to transport a passenger at his/her direction for the payment of a fare that will often, but not always, be calculated by reference to a taximeter?
2. Should the definition of the word taxi in section 136(1)of the FBTAA be interpreted to include not just vehicles licensed to provide taxi services, including rank and hail services, but ride-sourcing vehicles and other vehicles for hire?
3. If the proposed definition is adopted, the result will be an expansion of the exemption. Are there consequences of taking this approach that we should be aware of?
4. Have you identified any issues with the proposed interpretation of ‘taxi’ in its application to other provisions within the FBTAA?

From an FBT perspective if the results of the consultation process are that the definition of ‘taxi’ for FBT purposes be interpreted more widely so as to include ride-sourcing services then this is a good thing for employers as it will widen access to the FBT exemption.

As more information comes to hand in relation to the above consultation questions we will make sure to advise our members accordingly.

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