The uncertainty and ongoing legal cloud surrounding GST is leading “masses” of Australian Uber drivers to quit the service, a former driver says.
The ATO ruled last month that all ride-sharing drivers must register for and pay GST on their fares, decreasing profits for drivers and meaning they have to get an ABN and file a tax return.
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The ATO ruling came into effect 1 August, although Uber is taking the fight to the Federal Court.
The main issue arises from the ATO classifying the service Uber offers as “taxi travel”, meaning GST is applied from the outset, rather than after earnings climb higher than $75,000 per annum.
This means Uber drivers will have to pay the ATO 10% GST on the fare, on top of the 20% cut Uber takes. Both of these are taken from the gross fare.
The impact on drivers
Amanda Morris says she will no longer be an UberX driver because of these changes and the lack of communication from Uber.
She says she has stopped driving for Uber as of August, and has now formed Share Drive Australia to in an attempt to represent these drivers.
“I haven’t been on the road since the GST has been introduced,” Morris says.
“It’s so ambiguous, and it’s more advantageous for me personally to hold off and see what the result is.
“It’s tricky for a lot of drivers to get their head around. There are mass amounts of drivers saying they’re not driving after the GST decision.”
“Many drivers have refused to drive since August 1 due to the unfair way the GST is being applied and the way it affects the driver’s bottom line.
“Many plan never to return to Uber while some others are waiting to see what the outcome of the court case is so that they can make an informed decision about their driving future.”
Other drivers have also said they will no longer by taking part in the service until the tax issues are cleared up.
Uber has expressed concern about the impact the tax ruling would have on its driver numbers.
As The Australian revealed, the startup apparently asked the Tax Office not to reveal the ruling last month as it would be a “disincentive for drivers to engage with the ride-sharing platform”.
In an emailed statement, Uber says its drivers should be treated the same as “truck drivers, bike messengers and Airbnb host”.
“To be very clear, we believe all our driver-partners should pay their appropriate share of tax and meet their tax obligations,” the statement says.
“The guidance by the ATO has tried to fit a new technology model from today into a 1990s regulatory framework that was written long before this technology ever existed.”
Uber says it has increased fares by “approximately 10%” around Australia following the ATO’s decision on GST.
Another driver, who wished to remain anonymous, told StartupSmart that Uber has been “pretty good” at communicating these changes and he’s already prepared for them.
“We were advised that we should probably get an ABN and tax advice,” he says.
“I’ve been doing that anyway, and I make sure I put away a percentage for tax.”
How the changes were communicated to Uber drivers
These updates were communicated to Uber drivers through a series of emails. The first was sent on July 29 regarding the GST.
“Normally small businesses do not need to register for GST until their turnover reaches $75,000 per annum but the ATO has taken a different approach to ridesharing,” the email says.
“The ATO believes that suppliers of ridesharing services must register and pay GST from the first dollar of turnover. We encourage you to consult with a tax professional.”
A subsequent email sent on August 7 outlined the fare increases.
“We are increasing UberX fares across Australia by approximately 10% to help cover any additional costs you may face,” the email says.
“It is still a matter for you and your tax advisor to decide whether… you have to register for an ABN and GST.”
In an email sent to Uber users on the same day, general manager David Rohrsheim says drivers will inevitably face more paperwork now.
“This is not a tax on Uber, but rather an additional tax on the thousands of everyday Australians who earn a flexible income by sharing rides on the Uber platform,” he says.
“It also means that drivers who share just a few rides each month may encounter unnecessary red tape such as the filing of quarterly business activity statements with the ATO.”
Lapsed Uber driver Morris says these emails only “muddy the waters further”.
“It’s tricky for a lot of drivers to get their head around,” she says.
“It’s really attractive for a new driver, but once you bring GST into the mix, that appeal really drops away rather rapidly. There’s a really intense level of paperwork for something meant to be a light and casual commitment.”
The approximate 10% increase mightn’t be all it seems as well, Morris says, and it’s not enough to cover the GST costs.
In Melbourne, the base rate increased by 17.5% from $2 to $2.35, but the per kilometre rate, which accounts for most of the fare, only rose by 4.5% from $1.10 to $1.15.
Another driver, who works for Uber to supplement his other employment and university studies, says he isn’t too concerned with the ongoing legal troubles though.
“It’s not as worrying for me because it’s not my full-time source of income,” he says.
Uber drivers might be a thing of the past come 2020, with Tesla board member Steve Jurvetson saying that Uber’s CEO told him if Tesla had a fully-functioning autonomous vehicle by that year, Uber would want to buy all 500,000 of them.
We’ll just have to wait and see whether self-driving cars will also have to pay GST.