Federal Court finds that Uber drivers need to register for GST
In February this year, Griffiths J of the Federal Court handed down a decision outlining that Uber drivers must register to pay GST. The proceedings were commenced by an Uber driver seeking a declaration that they did not need to register for GST as they were not operating ‘taxi travel.’ The arguments in the case were quite complex, with the decision turning on the proper interpretation of the legislation and the meaning of the word ‘taxi.’
When do you need to register for GST?
Goods and services tax (GST) is a tax paid on most goods and services in Australia. As a general rule, only businesses with a turnover more than $75,000 need to register for GST (or $150,000 for not-for-profit organisations). For businesses with a lower turnover, registration is optional. Section 144-5(1) of the New Tax System (Goods and Services Tax) Act 1999 (Cth) (‘GST Act’) provides an exception to this, being that taxi and limousine operators must register for GST regardless of turnover. The applicant in these proceedings argued that Uber rides do not constitute supply of taxi travel. The Commissioner did not agree.
What is a ‘taxi’?
The driver argued that the word ‘taxi’ should be given an ordinary or ‘trade or non-legal technical’ meaning. He pointed to a range of features attributed to taxis, including displaying a taximeter and schedule of fares, uniform of taxi driver, waiting at ranks and display of a roof light. In contrast, uberX riders are not provided with any real-time calculation or ongoing tally of the cost of the ride by the Uber app. Drivers use their private vehicles without display lights and do not wear uniforms. UberX drivers only pick-up riders from their location and do not wait at ranks.
The Commissioner found that uberX services supplied by the driver constituted ‘taxi travel’ within the meaning of the provision, and therefore they needed to be registered for GST. The Commissioner pointed out that the characteristics of taxis were due to regulation by legislation that is inconsistent between the States and Territories. Hence, there can be no definite example of what a taxi is or should be.
Another important point highlighted by the Commissioner was the intention of the legislation as outlined in the Explanatory Memorandum: “that taxis not registered for GST would charge a lower fare, or reflect the GST in the fare where it was not actually collected and remitted.” As outlined by the High Court in the landmark Project Blue Sky case: “the duty of the court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have.” This means that lawyers need to have caution in regard to relying on dictionary meanings of terms used in legislation.
One of the most important lessons we can draw from this case is that the ordinary meaning of a work in everyday discourse is not the same as the meaning it is given in legislation. The court must interpret a legislative provision in a way that reflects the meaning that the legislature is taken to have intended them to have.
It is also important to understand that legislation does not need to be incorporated narrowly within its historical context. In this case, the court overlooked the fact that the software and technology used to provide the uberX service may not have been created before s 144-5 was added to the GST Act.
How can you register for GST?
You can register your business for GST when you first register the business, or you can do it later. If you are not registered, you will need to check monthly to see if you have reached the threshold or are likely to reach the threshold. If your turnover reaches the threshold, you must register within 21 days.
It is important to remember that GST turnover is based on your gross business income rather than profit. The threshold excludes:
- GST included in sales
- non-taxable sales that are not for payment
- sales not connected with your business
- input-taxed sales, and
- sales that are not connected to Australia.
So how do you register? Before you register your business for GST, you need an Australian Business Number (ABN). You can register for GST:
- online through the ATO Business Portal
- by phone on 13 28 66, or
- through your registered tax agent or BAS agent.