FBT – Expansion of the taxi travel fringe benefit exemption

There has been a retrospective legislative change that includes ride-sourcing in the FBT exemption relating to taxi travel.

Section 58Z of the FBTA Act provides that certain taxi travel is an exempt benefit. It was drafted prior to the advent of ride-sourcing and its reliance on the definition of taxi as a ‘motor vehicle that is licensed to operate as a taxi’ has been problematic.

Extension of the section to ride-sourcing vehicles and not just to ‘licensed’ taxis (see Treasury Laws Amendment (2019 Measures No 3) Act 2020 – ‘the Amending Act’) became law on 22 June 2020.

The Amending Act repeals the FBTA Act definition of ‘taxi’, inserts a definition of ‘taxi travel’ and amends the various provisions that relate to taxis. As a result of the amendments, s.58Z will apply to certain benefits ‘arising from taxi travel (other than a limousine) by an employee’.

The term ‘taxi travel’ is defined using the GST Act definition, namely ‘travel that involves transporting passengers by taxi or limousine, for fares’.

Three comments should be made in relation this change.

Firstly, the GST Act definition of ‘taxi travel’ was considered in the case of Uber B.V. v FCT [2017] FCA 110 (‘the Uber decision’). The Court held the relevant definition of ‘taxi travel’ extended to services provided by a Uber driver.

The second point is that the revised s. 58Z expressly excludes limousine travel.  The explanatory memorandum (‘EM’) for the Amending Act observes that ‘the intention is to preserve the existing policy of covering common or ordinary vehicles used for basic travel involving transporting passengers for a fare by way of a car or other motor vehicle but not including limousines’. The EM regards ‘limousines’ as luxurious motor vehicle transport and confirms that transport by these remains outside the exempt benefit arising under s. 58Z FBTA Act.

It is worthwhile recapping the general ambit of the s. 58Z exemption. Taxi travel is an exempt benefit under that provision, if the travel:

• is a single taxi trip beginning or ending at the employee’s place of work, or
• is a result of sickness of or injury to the employee, and is the whole or a part of the journey directly between the employee’s place of work, or the employee’s place of residence, or other place that it is necessary, or appropriate for the employee to go as a result of the sickness or injury.

The legislative change effectively includes the use of ride-sourcing vehicles that are not limousines in the concept of ‘taxi travel’.

The ATO has updated their website and Chapter 20 of the Fringe benefits tax – a guide for employers to reflect the change.

The third point is that the change will have retrospective effect. Being operative from 1 April 2019, it will apply to the 2019-20 FBT year.

Points for Action

Employers who have lodged their 2020 FBT return and have not treated taxi travel which arises from use ride-sourcing vehicles (and which meets the other conditions set out in s58Z) as exempt benefits may want to amend the return.

Going forward, employers may want to review their administrative policies that require use of ‘licensed’ taxis and consider whether limitations on employees using ride-sourcing services should be removed.

It may seem trite, but employers should not forget to tell employees about any policy change!

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