Uber has lost a Federal Court case over whether its drivers should be charged GST, in a blow to its operations in Australia that could result in higher fares.
Usually, businesses that earn less than $75,000 per year are exempt from GST, but taxi are specifically left out of this relief — meaning drivers must pay the tax regardless of their earnings.
The Australian Taxation Office had counted UberX drivers as taxi drivers, but the ridesharing giant challenged that interpretation in the courts. Uber has claimed that most UberX drivers earn less than $20,000 a year and that they are not driving taxis — citing that customers can’t hail cars off the street or use a taxi rank.
The tax office argued that the term “taxi” has a broader definition, meaning any sort of service that took a person from place A to place B.
On Friday, Justice John Griffiths ruled that “taxi” did indeed cover ridesharing services in addition to the literal meaning. The ATO can, therefore, legitimately chase UberX drivers for GST — a cost that’s likely to be partially or fully passed onto passengers.
Uber, which was also ordered to pay the ATO’s court costs, did not comment on the immediate consequences for consumers.
“We are disappointed in the Federal Court’s decision,” said an Uber spokesperson. “We are reviewing the decision and will provide our driver-partners with more information as soon as we can.”
Meanwhile, the taxi industry celebrated the “ground-breaking” decision as a leg up for a level playing field.
“UberX drivers cannot expect to be treated as though they operate in a tax free zone. They should pay tax just like their taxi driver counterparts,” said Australian Taxi Industry Association chief executive Blair Davies.
“Fundamentally, uberX passengers are buying a service to take them from A to B in a car. Taxing that service differently to the equivalent trip in a licensed taxi would be unfair and constitute a regulatory distortion. That’s also the umpire’s view and so the ATIA is now calling on Uber to accept it and start cooperating with the ATO by supplying full details of its drivers’ earnings.”
Business Insider has also contacted Uber rival GoCatch for comment.
UberX drivers had already been under scrutiny from the tax office, with data-matching programmes in place to catch out those that did not declare personal income. The ATO did not immediately comment on its plans to crack down on the application of GST.
Uber Australia launched the case to challenge a 2015 ruling by the ATO that drivers had to get an ABN, register and begin charging GST from August 1 that year.
When Uber increased fares on UberX services by 10% a week later, the company attempted to blame the ATO for the rise.