Some musings on GST and its discriminatory application to rideshare

Jack Malarkey

Well-Known Member
1. Enterprises providing ‘taxi travel’ (including rideshare) do not benefit from the annual $75,000 GST threshold available to all other kinds of enterprise.

2. Australia is unique in having such a discriminatory exclusion in its GST/VAT legislation.

3. Uber’s response to any amendment of the GST law to remove this discrimination would be of interest.

4. When the Australian Taxation Office confirmed that rideshare fares were subject to GST, Uber increased Australian fares by 10% to pass on the GST liability to riders: see https://www.google.com.au/amp/s/amp...t/news-story/3511483b53368f8967c7b05559db16da.

5. In some cities, this increase came close in time to unrelated reductions in fares.

6. It’s feasible that Uber would lower fares by 10% to the extent that GST no longer applied.

7. The relevant explanatory memorandum that accompanied the Bill that became the GST legislation explained that the rationale for those providing ‘taxi travel’ not having access to the general GST threshold was to avoid having some drivers subject to GST because they were at or above the threshold while having others not subject to GST because they were below the threshold.

8. This might affect the level of fares payable by passengers based on the GST position of their driver. Drivers not registered for GST might charge a lower fare, or reflect the GST in the fare where it was not actually collected and remitted.

9. This demarcation also applies to other kinds of enterprise (for example, cleaning or lawn-mowing) but ‘taxi travel’ is special in that there would be a many thousands below the threshold and many thousands at or above it.

10. Application of the threshold to taxi travel might also have an economically distorting effect as drivers approaching the threshold cut back their driving to ensure they remained under it.

11. The way I see it is that the threshold needs to be at a level that it excludes from GST all micro-businesses. Otherwise, the GST imposes compliance costs and a level of complexity out of all proportion to the relatively modest levels of revenue raised.

12. There has been only one increase in the GST threshold since GST was introduced from 1 July 2000.

13. From 1 July 2000 to 30 June 2007, the GST threshold was $50,000. From 1 July 2007 onwards, it has been $75,000. (See https://www.aph.gov.au/About_Parlia...oncessions_for_business_in_the_2007-08_Budget).

14. If the GST threshold had been adjusted for inflation since 1 July 2007, it would now be almost $97,000.

15. At this level, it’s unlikely that many taxi or rideshare drivers would reach the threshold.

16. So a needed complementary amendment of the GST law would be also to increase the GST threshold to, say, $100,000 and to have annual adjustments thereafter to allow for inflation.
 
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Jack Malarkey

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I plan to pursue these GST issues over this financial year. I’ll be seeking:

(1) the removal of the legal discrimination against rideshare and taxi drivers so that they benefit from the same GST turnover threshold as all other businesses (currently $75,000); and

(2) a significant increase in the GST turnover threshold and annual indexation of the threshold.

I envisage an announcement in the 2020-21 Budget in May 2020 and the changes to apply from 1 July 2020.

I realise that my prospects for success may be slim but I’ll give it a go. I’ll be inviting other drivers to assist.

My first step is to request a constituent meeting with Senator Zed Seselja either at Parliament House or in his electorate office. I recently made that request and I am awaiting a response.

Senator Seselja is a Liberal senator for the ACT and is also Assistant Minister for Finance, Charities and Electoral Matters (in the Treasury portfolio): https://treasury.gov.au/the-department/about-treasury/our-ministers.

I’ll report back on developments.
 
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Werd up gee.

It's clearly a mistake in the legislation.

Whether there are enough votes in it to make any difference is another matter(?).

I'll poke from my end. All respect to Zed, but he does not tend to get much done. The ACT senate is a two horse race - it's sown up. We'll not have real senators until we have 5+.
 

Jack Malarkey

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Werd up gee.

It's clearly a mistake in the legislation.

Whether there are enough votes in it to make any difference is another matter(?).

I'll poke from my end. All respect to Zed, but he does not tend to get much done. The ACT senate is a two horse race - it's sown up. We'll not have real senators until we have 5+.
The explanatory memorandum to the Bill makes it clear that the discrimination was deliberate. I refer to the stated rationale in paragraph 7 of my original post.

I am approaching Senator Seselja as he has access to the current Government’s decision-making processes.
 

Sandhills

Well-Known Member
Your efforts to help never cease to amaze...Its also interesting looking from a tax policy perspective why there is any threshold..

My limited understanding is that it was prima facie to encourage small business but more practically when consumption taxes were introduced they calculated out the collection and compliance costs made it uneconomic... Imagine the effort in trying to collect gst from all those micro businesses..

But technology has changed and that may not be the case if so u then have a ( very unpopular) arguement GST operates best with no exemptions and no thresholds

My cynicism is that the real reason for no threshold on cabbies was the ATO put a word in that cashies were a threat to revenue... Again that arguement has been superseded by technology from data matching.

That could be a very good arguement to remove an arbitrary and very discriminatory application of the gst law..there is no longer any need for the lower threshold because there is no longer a cash threat from cabbies and uber .the law council also has a review body which is interested in such things.

If any one can do it your the man... Best of luck and if u succeed we will honour you with the golden cardy spun from Kevin's very locks and rumoured to restore virginity
 

Jack Malarkey

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Your efforts to help never cease to amaze...Its also interesting looking from a tax policy perspective why there is any threshold..

My limited understanding is that it was prima facie to encourage small business but more practically when consumption taxes were introduced they calculated out the collection and compliance costs made it uneconomic... Imagine the effort in trying to collect gst from all those micro businesses..

But technology has changed and that may not be the case if so u then have a ( very unpopular) arguement GST operates best with no exemptions and no thresholds

My cynicism is that the real reason for no threshold on cabbies was the ATO put a word in that cashies were a threat to revenue... Again that arguement has been superseded by technology from data matching.

That could be a very good arguement to remove an arbitrary and very discriminatory application of the gst law..there is no longer any need for the lower threshold because there is no longer a cash threat from cabbies and uber .the law council also has a review body which is interested in such things.

If any one can do it your the man... Best of luck and if u succeed we will honour you with the golden cardy spun from Kevin's very locks and rumoured to restore virginity
Spain has no VAT threshold for any kind of business.

The general thinking, however, is that a threshold is justified to keep down the compliance costs of micro businesses and government administration costs having regard to the relatively small amount of GST revenue collected from those businesses.
 

Jules66

Well-Known Member
P
1. Enterprises providing ‘taxi travel’ (including rideshare) do not benefit from the annual $75,000 GST threshold available to all other kinds of enterprise.

2. Australia is unique in having such a discriminatory exclusion in its GST/VAT legislation.

3. Uber’s response to any amendment of the GST law to remove this discrimination would be of interest.

4. When the Australian Taxation Office confirmed that rideshare fares were subject to GST, Uber increased Australian fares by 10% to pass on the GST liability to riders: see https://www.google.com.au/amp/s/amp...t/news-story/3511483b53368f8967c7b05559db16da.

5. In some cities, this increase came close in time to unrelated reductions in fares.

6. It’s feasible that Uber would lower fares by 10% to the extent that GST no longer applied.

7. The relevant explanatory memorandum that accompanied the Bill that became the GST legislation explained that the rationale for those providing ‘taxi travel’ not having access to the general GST threshold was to avoid having some drivers subject to GST because they were at or above the threshold while having others not subject to GST because they were below the threshold.

8. This might affect the level of fares payable by passengers based on the GST position of their driver. Drivers not registered for GST might charge a lower fare, or reflect the GST in the fare where it was not actually collected and remitted.

9. This demarcation also applies to other kinds of enterprise (for example, cleaning or lawn-mowing) but ‘taxi travel’ is special in that there would be a many thousands below the threshold and many thousands at or above it.

10. Application of the threshold to taxi travel might also have an economically distorting effect as drivers approaching the threshold cut back their driving to ensure they remained under it.

11. The way I see it is that the threshold needs to be at a level that it excludes from GST all micro-businesses. Otherwise, the GST imposes compliance costs and a level of complexity out of all proportion to the relatively modest levels of revenue raised.

12. There has been only one increase in the GST threshold since GST was introduced from 1 July 2000.

13. From 1 July 2000 to 30 June 2007, the GST threshold was $50,000. From 1 July 2007 onwards, it has been $75,000. (See https://www.aph.gov.au/About_Parlia...oncessions_for_business_in_the_2007-08_Budget).

14. If the GST threshold had been adjusted for inflation since 1 July 2007, it would now be almost $97,000.

15. At this level, it’s unlikely that many taxi or rideshare drivers would reach the threshold.

16. So a needed complementary amendment of the GST law would be also to increase the GST threshold to, say, $100,000 and to have annual adjustments thereafter to allow for inflation.
One of the most stupid things is if you are say a cleaner or lawn mower you are effectively prohibited from doing ride share for a few extra dollars as you have to register for gst and all of your other activities you have to pay gst on (I think). If you are a wage earner you are fine. That seems like discrimination to me
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Every three year I buy a new (second hand) car. Which I get back about 3k in gst. My gst is usually $250 to $350 a quarter. So there is definately a valid argument that is the overhead worth it. I paid nearly $500 in accounting fees.
 
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Jack Malarkey

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P

One of the most stupid things is if you are say a cleaner or lawn mower you are effectively prohibited from doing ride share for a few extra dollars as you have to register for gst and all of your other activities you have to pay gst on (I think). If you are a wage earner you are fine. That seems like discrimination to me
Post automatically merged:

Every three year I buy a new (second hand) car. Which I get back about 3k in gst. My gst is usually $250 to $350 a quarter. So there is definately a valid argument that is the overhead worth it. I paid nearly $500 in accounting fees.
Yes, that’s correct. Rideshare and taxi drivers need also to pay GST on other business activities including where the total amounts are under the threshold otherwise available.

Businesses benefiting from the threshold (currently $75,000) can, if they fall under the threshold, still CHOOSE to register for GST and benefit from GST credits, subject to a requirement that generally applies of remaining registered for at least 12 months: see https://www.ato.gov.au/business/gst/registering-for-gst/.

I envisage that rideshare and taxi drivers would receive the same GST treatment as all other kinds of business and that the threshold apply at a level that excludes all micro businesses from being obliged to register for GST.
 
The ATO is chasing small business in general as it is easier. They are not chasing Uber though. Didn't Uber have a $750 million profit in Australia but only payed a small amount of tax due to transferring the profit offshore?
 

Ivan B

Well-Known Member
es, that’s correct. Rideshare and taxi drivers need also to pay GST on other business activities including where the total amounts are under the threshold otherwise available.
That is so sad, in the case of a guy with a lawnmowing business that is not doing too good, one option would be for him to take advantage of the flexibility of Uber to utilise his downtime (bad weather, winter etc) to bolster his bottom line.
If he does that he would have to pay GST on all his income including lawn mowing, placing him at a disadvantage with his competitors.
It is just wrong, it is discrimination, there is no justifiable reason for this injustice.
 

Jack Malarkey

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That is so sad, in the case of a guy with a lawnmowing business that is not doing too good, one option would be for him to take advantage of the flexibility of Uber to utilise his downtime (bad weather, winter etc) to bolster his bottom line.
If he does that he would have to pay GST on all his income including lawn mowing, placing him at a disadvantage with his competitors.
It is just wrong, it is discrimination, there is no justifiable reason for this injustice.
I’ll ensure that I bring this point out in my representations.

We also see its practical application where those drivers who engage in rideshare and Uber Eats deliveries pay GST on both sources of income without the benefit of the $75,000 threshold.

On the other hand, those who do Uber Eats deliveries without any rideshare do benefit from the $75,000 threshold without needing to pay GST.

This treatment would also be expected to stifle and hinder those involved in innovative start-ups that are still at the micro business level where they choose rideshare to help them through.
 

Jack Malarkey

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Kyanar

Well-Known Member
I’ll ensure that I bring this point out in my representations.

We also see its practical application where those drivers who engage in rideshare and Uber Eats deliveries pay GST on both sources of income without the benefit of the $75,000 threshold.

On the other hand, those who do Uber Eats deliveries without any rideshare do benefit from the $75,000 threshold without needing to pay GST.
Actually, they do not. Uber increases their commission to 30% for Eats Only drivers (35% if bicycle).
 
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