In early July 2019, the ATO clarified that the FBT exemption for taxi travel does not extend to ride-sourcing services provided in a vehicle that is not licensed to operate as a taxi. This is because the FBT exemption is limited to travel undertaken in a vehicle that is licensed to operate as a taxi by the relevant State or Territory. This position is based on the definition of ‘taxi’ in the FBTAA which differs to ‘taxi travel’ as defined in the GST Act. Notably, this view differs from the ATO’s preliminary view expressed in its September 2017 discussion paper.
The ATO holds the view that the FBT exemption for certain taxi travel does not apply where the employee travels using a ride-sourcing services such as Uber — but all is not lost. The fringe benefit may be eligible for other FBT relief.
Section 58P of the FBTAA provides an exemption for minor benefits. For the benefit to be considered ’minor’, the notional taxable value of the benefit must be less than $300 and it would be unreasonable to treat it as a fringe benefit, having regard to a number of factors including whether the benefit is provided infrequently and irregularly. It would be expected (and hoped) that becoming ill or injured in the workplace and requiring a ride home or to hospital is an infrequent event for any employee.
|Christine suddenly and unexpectedly becomes very ill at work. Her employer sends her to the nearest hospital by Uber and pays for the $40 fare. The employer cannot apply the taxi travel exemption to the expense payment fringe benefit. However, the employer should be able to apply the minor benefits exemption.
Where the minor benefits exemption is not available, two other options may be considered.
Under the ’otherwise deductible rule’, the taxable value of a benefit is reduced by the amount that would have been allowed as a deduction to the employee had they incurred the cost themselves (s. 24). Whether the Uber fare would have been allowable as a deduction to the employee depends on the facts and circumstances.
|Michael uses an Uber to travel from the office to the airport for an interstate client meeting. The cost of the Uber service is not an exempt benefit under s. 58Z of the FBTAA because the travel which originates from the place of work was not in a taxi. However, the travel between the office and the airport would have been deductible to Michael, so it is an exempt benefit under s. 24 of the FBTAA.
Broadly, the employer’s FBT liability in respect of an expense payment fringe benefit is reduced to the extent that the employee makes a payment to the employer as a contribution towards part or all of the cost of the benefit (s. 23 of the FBTAA). However, it is unlikely, in practice, that an employer would pay for an employee’s ride in an Uber then receive a payment for that ride from the employee that reduces the taxable value of the fringe benefit.
There may be a number of scenarios where the inability to access the taxi travel exemption in s. 58Z of the FBTAA will be an issue, but consider an employee who salary packages the cost of travelling to or from work in a taxi versus an Uber. If the employee salary packages taxi travel from their home to their place of work, or from their place of work to their home, the provision of the benefit is exempt under s. 58Z because the trip either begins or ends at the employee’s place of work and the travel is undertaken in a taxi. However, equivalent travel using an Uber would not qualify as an exempt benefit under s. 58Z; nor would it be otherwise deductible under s. 24.
From a policy perspective, this illustrates, yet again, how similar terms in the tax law can have very different meanings within specific statutes. Such inconsistencies lead to confusion, make the tax law more complex and can ultimately result in higher compliance costs. Practically, the difference in the meaning of ‘taxi’ for FBT purposes and ‘taxi travel’ for GST purposes has the following implications: