Recent ATO guidance
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.
Other FBT exemptions may apply
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.
Minor benefits exemption
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
|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.
Otherwise deductible rule
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.
So how is the taxable FBT treatment of ride-sourcing services an issue?
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:
- an employer can utilise the FBT exemption for certain trips by their employees provided they use a taxi service which will generally cost more than a ride-sourcing service; or
- to try and save money the employer can a use a ride-sourcing service, but the trip will be subject to FBT …