A legal case lodged this week by Uber and designed to cement drivers' GST-free status in Australia comes down to eight words - "ride-sourcing drivers do not supply taxi travel".
In a three-page filing lodged with the Federal Court in New South Wales on Monday, Uber's lawyers simply state that providing services to UberX was not the same as supplying taxi travel. Therefore UberX drivers should be treated like micro-businesses and exempt from GST until they earn $75,000.
The application states that "...drivers are not permitted to register for GST unless they carry on an enterprise....[and] drivers are only required to register for GST if any supply of taxi travel is made in 'carrying on your enterprise',".
Uber claims the Australian Tax Office has misinterpreted section 144 of the GST Act and has been misleading UberX drivers in recent months by telling them to register for an ABN and GST.
Ride-sourcing drivers use their own cars to transport paying passengers who book the ride through a smartphone app. The ATO believes this constitutes taxi services. Uber disagrees.
The documents were filed by Uber B.V., a part of the company registered in the Netherlands. An Uber spokesman said it was appropriate for the Dutch company to take action because that was the "company that provides the platform and technology" and which has a relationship with drivers.
Uber B.V. was being represented by a solicitor from accounting firm Ernst and Young's Tax Controversy division, Craig Jackson.
A spokeswoman for the ATO said it was considering the legal proceedings, but that its advice to drivers was "advice is consistent with the current GST law".
The court documents also outline multiple meetings, teleconferences and correspondence between Uber and ATO representatives in the lead up to the ATO's May 20 declaration that GST rules would come into effect on August 1.
Since August 1, the ATO has required ride-sourcing drivers to register for and pay GST on fares. This effectively reduces their earnings by 12.5 per cent because they pay GST on the gross fare before Uber deducts its 20 per cent commission.
It also means drivers must declare their earnings to the tax office. Before August 1 many drivers were not declaring their earnings or paying any tax on money earned through ride-sourcing. Research by Fairfax Media has found many drivers were unhappy with the new rules.
Uber disputes the ATO's interpretation, but rather than providing clear instructions to drivers has been advising them to seek accounting advice, particularly from H & R Block. Uber argues that unless annual turnover reaches the ATO's $75,000 threshold, an UberX driver was not carrying on an enterprise.
Director of tax communications at H&R Block, Mark Chapman, said its advice to drivers was "to pass on [to drivers] what the ATO has told them, which is that they need to have an ABN and be registered for GST".
Meanwhile, the ATO has been conducting a communications campaign in online forums to tell drivers they must register for and pay GST, regardless of how much money they earn.
