Is an Uber a Taxi? – Part II

Is an Uber a Taxi? – Part II

a person holding a cell phone in their hand

Yes but Yes!

Ride sourcing now considered ‘taxi travel’ for fringe benefits tax purposes

In another blog last year we discussed the ATO’s position on ride-sourcing and the FBT taxi travel exemption. The law back then said that the taxi travel exemption from FBT did not extend to ride-sourcing vehicles like Uber.

The taxi travel exemption most commonly arises when an employer provides their employee the use of a taxi for a private purpose (such as a trip home from work when an employee is unwell). If an employer instead offers the use of a ride-sourcing vehicle for these purposes, they may incur a liability for FBT.

The law has now changed!

The ATO has confirmed that for fringe benefits tax (FBT) purposes, the taxi travel exemption has been extended to include ride-sourcing vehicles. The change is because of amendments to the Fringe Benefits Tax Assessment Act 1986, which are now law.

Before the amendment became law, a taxi was defined for FBT purposes as ‘a motor vehicle licenced to operate as a taxi’. This meant the FBT exemption did not extend to ride-sourcing services provided in vehicles that were not licensed to operate as a taxi.

What travels are exempt

Employers will now be eligible for the exemption for travel provided to their employees if it’s a single trip to or from the employee’s workplace:

  • on or after 1 April 2019
  • in a licenced taxi or other vehicle involving the transport of passengers for a fare – other than a limousine – such as a ride-sourcing vehicle.

Travel by an employee in such a vehicle on or after 1 April 2019 is also exempt if it’s as the result of sickness of, or injury to, the employee, and whole or part of the journey is directly between:

  • the employee’s place of work
  • the employee’s place of residence
  • any other place that it is necessary, or appropriate, for the employee to go as a result of the sickness or injury.

What these changes mean for employers

The change means any benefit arising from travel by an employee using a registered taxi or ride-sourcing provider (other than in a limousine) is now exempt from FBT subject to meeting certain criteria.

ATO Deputy Commissioner John Ford explained “The change is designed to help minimise compliance costs for businesses providing transport for their employees.”

Because the changes apply from 1 April 2019, the 2020 FBT return instructions have been updated to help employers who may need to amend their FBT return. For more information on the FBT taxi travel exemption, see ato.gov.au/FBTtaxi.

[source: ATO media release 03 Jul 2020]

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