If a ride-sharing service such as Uber is just like a taxi when it comes to paying goods and services tax (GST), then it’s just like a taxi when it comes to getting generous tax breaks.
- Several tax changes have passed Federal Parliament including one that gives employers using ridesharing services like Uber tax breaks
- The change is a relief for many as it avoids employers being hit with big tax bills dating back several years
- Another change to tax laws stops heirs taking advantage of lower tax rates by injecting assets into a trust after someone dies
Employers across Australia who have been letting their staff use ride-sharing services, rather than a licensed taxi, will now be able to get tax benefits under new laws that passed Federal Parliament this morning.
Other changes have been made as part of the same law amendments to stop heirs injecting assets into a trust after someone dies to take advantage of lower tax rates.
Previously the Australian Taxation Office (ATO) had said while ride-sharing drivers have to register for and pay GST like the taxi industry does, ride-sharing is not a “taxi” for the purposes of fringe benefits tax (FBT) exemptions.
It meant that companies that had relied on services such as Uber, rather than licensed taxis, could have been hit with big tax bills dating back several years.
But after years of industry consultation, and lobbying from companies like Uber, on Wednesday Parliament passed an amendment to the Fringe Benefits Tax Assessment Act 1986 that changes the rules.
In the end, all it required was a simple change to the definition of “taxi”.
The new law replaces references to a “taxi” with “a motor vehicle used for taxi travel (other than a limousine)”.
Employers urged to amend tax returns
Uber for Business country manager, Australia and New Zealand, Georgia Foster, welcomed the law change.
“The Federal Government has taken an important step to enable more Australian businesses to reduce costs and provide a more reliable and convenient transport option for their employees,” she said.
“Thousands of Australian companies already choose Uber for Business as their corporate transportation partner … and more are turning to the Uber platform as employees look to return to work.”
“Employees too will be able to claim transport costs from their employers, confident in the knowledge that their company won’t be liable for a fringe benefits tax as a result.”
Ms Foster said when the FBT exemption for taxi travel was originally introduced in 1995, ride-sharing did not exist in Australia.
“At that time, taxis were often the only transport option available to a number of employers,” she said.
“There are 3.8 million Australians who actively use the Uber app to get from A to B, supported by more than 74,000 driver partners.”
RSM Australia associate director Tracey Dunn said the change to the definition of taxi under the FBT Act has been long-awaited.
Ms Dunn encouraged employers who had incurred basic “taxi” travel expenses for employees in the 2020 FBT year to review and lodge an amendment to their return.
She said this included cases where the employee has used a taxi or rideshare service to travel to home or to obtain medical treatment due to sickness or injury.
Wealthy to be stopped from gaming certain trusts
In the 2018-19 Budget, the Federal Government announced that it was strengthening rules surrounding certain types of trusts.
The change, which also passed Parliament on Wednesday, means that minors who are the beneficiaries of a common type of family trust known as a “testamentary trust” will be taxed at top marginal rates.
Prior to the law change, one of the tax benefits of testamentary trusts was that income distributed to minors is taxed at normal adult rates, which access the $18,200 tax-free threshold, rather than being taxed at the highest marginal rate.
The Federal Government in its budget announcement said that some people had been able to “inappropriately obtain the benefit of this lower tax rate” by injecting assets unrelated to a deceased estate into the testamentary trust.
The law change means they are now taxed at the top marginal tax rate, but only in respect of income a testamentary trust generates from assets of the deceased estate.
The change applies from July 1, 2019, but income from assets already in testamentary trusts prior to July 1, 2019, won’t be affected.
The Government has said the rule change will have “a small unquantifiable gain” to the budget bottom line.
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