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WLQC and Commissioner of Taxation [2018] AATA 14

 In WLQC and Commissioner of Taxation Deputy President McCabe examines an application for review brought by a series of Applicants in relation to a number of assessments raised by the Commissioner for a nil amount follow the Commissioner’s refusal to recognise the Applicants as a consolidated group.
 

The Applicants sought to apply for review by the Administrative Appeals Tribunal (‘AAT’) of a series of objection decision made to uphold assessments of nil for the 2004, 2005 and subsequent financial years as the Commissioner refused to treat the Applicants as a consolidated group.
 

Deputy President McCabe examined whether the nil assessments issued in 2004, 2005 and subsequent years provided the Applicants with a right of review pursuant to Part IVC of the Taxation Administration Act 1953.

2004 nil assessments:

With respect to the nil assessments in the 2004 financial year, section 175A of the Income Tax Assessment Act 1936 (‘ITAA36’) at the relevant time provided that:


“A taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953”

 

Further, section 6 of the ITAA36 at the relevant time defined assessment as:


(a) the ascertainment of:
      i. the amount of taxable income

 

The Commissioner contended that the language of these provisions make it tolerably clear that references to specific amounts of taxable income and a determination of the amount the taxpayer was liable to pay were essential features of an assessment at that relevant time.
 

In support of this position the Commissioner relied upon Batagol v Commissioner of Taxation [1963] HCA 51, which concluded an assessment within the means of the ITAA36 must ascertain an actual amount of tax being due and payable.
 

Conversely, the Applicants relied upon the Full Federal Court’s finding in Commissioner of Taxation v Ryan (1998) 82 FCR 345 that a nil assessment can be made under the ITAA36. However, the decision was overturned by the High Court on appeal on another point.
 

Ultimately, Deputy President McCabe found he was inclined to accept he was bound by the authorities, thus accepted that the nil assessments issued for the 2004 financial year were not valid, and that there is no right of review with respect to those decisions under Part IVC.

 

2005 and subsequent nil assessments:

 

Deputy President McCabe considered the assessments issued with respect to the 2005 and subsequent financial years separately, as the Tax Laws Amendment (Improvements to Self-Assessment) Act (No. 2) 2005 amended sections 6 and 175A of the ITAA36. Following the amendments sub-section 175A(2) was included, which reads:

 

(2) A taxpayer cannot object under sub-section 175A(1) against an assessment ascertaining that
     (a) the taxpayer has no taxable income; or
     (b) the taxpayer has an amount of taxable income and no tax is payable

Unless the taxpayer is seeking an increase in the taxpayer’s liability

 

The Applicants were unable to confirm whether any particular Applicant with a nil assessment was seeking an increase in liability as it would require further analysis of other companies in the corporate group.
 

On this basis, Deputy President McCabe found that section 175A(2) of the ITAA36 could not be satisfied by the Applicants’ merely foreshadowing the possibility of an increase.


Jurisdiction:


With respect to jurisdiction the Applicants argued that the Tribunal should not focus on whether the assessments were invalid, it should concern itself instead with whether the assessments were excessive.
 

In rejecting this argument the Deputy President McCabe found that:
 

“if there is no assessment – and I am constrained to accept there is no assessment in the 2004 year of income where the taxpayers have received a nil assessment – or if the legislation specifically limits the right of review as it has done in s175A(2), the Tribunal has no jurisdiction to review what has been decided”.

 

Co-authored with Ben Caratti
 

Posted in: Tax & ATO News Australia at 29 January 18

NZBG and Commissioner of Taxation (Taxation) [2017] AATA 2784

 The applicant, who currently lives in New Zealand, sought a review of the Commissioner’s refusal to a request for the release of a tax debt. The applicant tendered some written materials and made submissions by telephone at the hearing. The issues in review were whether the tax debt of $92,671.44 and general interest charge of $338,184.38 ought be released, in whole or in part, under s 340-10 of Schedule 1 to the Tax Administration Act 1953 (Cth).

 

The tribunal found that the applicant discharged his onus of proof. The tribunal was not satisfied that the applicant disclosed all of his assets and liabilities, asserting he had no assets other than monies in the bank, for which he failed to put current evidence. The tribunal was neither satisfied that the applicant had no other income besides his New Zealand pension. Statements by New Zealand residents that the applicant filed in relation to the Commissioner’s assertions of other possible assets and income sources were unable to be tested because those persons did not attend the hearing. For those reasons, the tribunal affirmed the Commissioner’s decision.
 

Posted in: Tax & ATO News Australia at 25 January 18

Tyl and Commissioner of Taxation (Taxation) [2017] AATA 2850

The Administrative Appeals Tribunal affirmed the Commissioner’s objection decision in relation to the taxpayer, Mr Damien Tyl. Mr Tyl was working as a truck driver in the 2012 and 2013 financial years when he claimed deduction for travel expenses, work-related expenses and car expenses. He was audited for those expenses resulting in the disallowance of the car expenses and reduction of all other deductions to nil. Mr Tyl objected to the results of the audit. In the objection decision, the Commissioner partly allowed deductions for all of the expenses. The administrative penalty was also reduced but not entirely remitted. Mr Tyl sought a review.
 

The Tribunal emphasised that the onus of proof in establishing his allowable deductions and that he has satisfied any substantiation requirements, as well as establishing that the administrative penalty should not have been made, was on Mr Tyl. Further, Mr Tyl is required to substantiate the whole claim if any expenditure exceeds the reasonable daily allowance allowed by the Commissioner which was $87 per day in the 2012 financial year and $89.60 per day in the 2013 financial year.
 

As noted by the Tribunal member throughout the review, Mr Tyl and his tax agent, Mr Fumberger, failed to provide good, if any, evidence in relation to several material assertions. They failed to present payslips, receipts, adequate bank statements or good evidence of travel allowance. A letter from Mr Tyl’s employer indicated that $50 per overnight trip was recorded on each weekly payslip. This evidence was inconsistent with Mr Tyl’s claim of actual travel expenditure and with his assertion as to the number of nights he spent away for both years, and showed that he exceeded the reasonable daily allowance in both years. He was thus required to substantiate the whole claim for each year with written evidence, which he failed to do.
 

The Tribunal thus affirmed the objection decision and found that the Commissioner was justified in issuing the administrative penalty because Mr Tyl and Mr Fumberger showed a lack of reasonable care.
 

Posted in: Tax & ATO News Australia at 24 January 18

Webb v Deputy Commissioner of Taxation [2017] FCA 1520

In this recent decision of the Federal Court, O’Callaghan J examines a self-represented taxpayers’ application for an extension of time to appeal from the Federal Circuit Court. This decision shows the importance of complying with the appropriate procedures in lodging an appeal and having an application with sufficient merits. With the greatest respect to Mr Webb this case demonstrates the difficulty of representing yourself in the Federal Court.

Following a sequestration order made on 30 May 2017 by the Federal Circuit Court, the taxpayer filed a notice of appeal on 19 September 2017, outside of the 21 day period provided under Rule 36.03 of the Federal Court Rules.

O’Callaghan J in his decision reiterated the well-established principles for allowing an extension of time, which include:

  • whether the applicant has an acceptable explanation for the delay;
  • whether the respondent would suffer prejudice in light of the delay should an extension be granted; and
  • the merits of the substantial application.

In the present case, O’Callaghan J found the taxpayer’s argument that the incorrect form was filed did not demonstrate an acceptable explanation for the delay.

Furthermore, O’Callaghan J found that there was no reasonable prospect of success of the appeal as the contentions outlined in the taxpayer’s affidavit were “self-evidently misconceived”. In the taxpayer’s affidavit, he contended that:

  • the Registrar of the Federal Circuit Court did not have authority to adjudicate the matter;
  • the Deputy Commissioner of Taxation did not have the authority to prosecute the matter;
  • the Registrar had given undue weight to the Income Tax Assessment Act 1936 as it has not been lawfully enacted, as it does not have a proclamation certificate prescribed by the Constitution;
  • the Australian Taxation Office was not a legal entity;
  • the Deputy Commissioner of Taxation did not have standing;
  • the Federal Court did not have jurisdiction to proceed without a trial by jury;
  • the “Voice of the Australian Constitution” is relevant.

 

Co-authored with Ben Caratti
 

Posted in: Tax & ATO News Australia at 08 January 18

VPRX and Commissioner of Taxation (Taxation) [2017] AATA 2156

The Applicant sold a website to a US buyer and received payment in instalments throughout the 2010 financial year, and further payments in the 2012 financial year. As the Applicant did not lodge a tax return for either year, the Commissioner issued default assessments with a 75% shortfall penalty based on amounts documented by AUSTRAC. The tax payable and penalties were reduced after the Applicant objected to the decision, and one payment was treated as capital.

The Applicant submitted that all of the documentation relating to the sale had been lost except for some emails. For the 2010 financial year payments, he contended that it was difficult to secure a fixed price during the GFC so the amounts received were ‘revenue payments’, consideration from the buyer based on their calculated profit, and were not income. He claims he was entitled to deductions for expenses in earning his ordinary income. With regard to the 2012 financial year payments, he contended that the penalty was unjust in circumstances where he was unable to locate the sale agreement. Indeed, the applicant was inefficient in producing evidence and failed to do so on several occasions.

The tribunal accepted the emails as evidence of a sale agreement but in the absence of its details, particularly the basis on which payments were calculated, treated the payments as income rather than capital. Regarding the penalty, the tribunal found that the Applicant’s inability to produce documents was no justification for concession and that, although he was not grossly careless, there was no justification for reducing the penalty in the circumstances. The tribunal reiterated that the onus is on the Applicant to establish that the assessments are excessive, and concluded that the Applicant was unable to discharge this burden. There were no submissions on the matter of capital gains tax.


 

Posted in: Tax & ATO News Australia at 28 November 17

Deputy Commissioner of Taxation v Ma [2017] FCA 1317

In the recent decision of Deputy Commissioner of Taxation v Ma, the Federal Court has examined an application by the Deputy Commissioner seeking interlocutory relief by way of freezing order against three respondents.

The relief sought by the Deputy Commissioner, is followed by separate proceedings by the Deputy Commissioner to recover accrued tax liabilities owed by the respondents to the New Zealand Commissioner for Inland Revenue as provided by Article 27 of the Australia New Zealand Double Taxation Agreement.

Pursuant to s 263-30 of the Taxation Administration Act 1953, upon registration of a foreign revenue claim, the amounts owed to a foreign revenue authority become pecuniary liability to the Commonwealth of Australia. In the present case, the tax debt were correctly registered and the required notice was given to the respondents.

Mortimer J in granting the interim relief sought by the Deputy Commissioner discussed the necessary elements for the Court to exercise its discretion. Each element and the relevant findings were as follows:

1. The Applicant must have a reasonably arguable case, both on the law and facts.

Mortimer J was satisfied that the evidence clearly showed that the Deputy Commissioner had a reasonably arguable case as the debt owed to the New Zealand Commissioner of Inland Revenue was duly registered. Thus, the Deputy Commissioner was entitled to the debt. 

2. A danger that a prospective judgement will be wholly or partially unsatisfied because the assets of the prospective judgement debtor will be removed from Australia or disposed, dealt with or diminished in value.

Each debt registered against the three respondents were of significant value. Although there was no evidence of a positive intention on the part of any of the respondents to frustrate the judgement of the Court, Mortimer J was satisfied that from the evidence an inference can be drawn that there is a real risk or danger that the respondent might attempt.

In drawing such an inference, Mortimer J examined several categories of evidence that demonstrated a real risk of deliberate dissipation existed, which are discussed below:

  • (a) On the evidence, the first respondent conducted serious transactions as an authorised person to an account owned by a Chinese national. On these facts, Mortimer J found “the first respondent appears to be concealing his financial activities behind the façade of another person through the use of this bank account.”
  • (b) After the first and second respondent were notified of their tax debt they proceeded to put their Australian properties, either owned personally or through a corporation (under their control) on the market for sale.
  • (c) Following the Deputy Commissioner notifying the first and second respondent of the foreign revenue claim and subsequent garnishee notices, they transferred substantial funds from Australia to China.
  • (d) Other dishonest behaviour exhibited by the first and third respondents as directors of companies that have claimed and been paid large amounts of Goods and Services Tax credits, which they were not entitled to.

Accordingly, on the basis of the evidence discussed Mortimer J recognised that their behaviour gave rise to an inference that there is a real and not fanciful risk that each of the respondents may seek to dissipate or dispose assets should the orders not be made.

3. The balance of convenience favours granting of the freezing order

Mortimer J was satisfied the balance of convenience favours making the freezing order, accounting for the undertakings proffered by the Deputy Commissioner.

In granting the freezing order sought by the Deputy Commissioner, Mortimer J found that providing an exception for the respondents to deal with or dispose of assets in the ordinary court of business was not appropriate in the present context. In light of the risks demonstrated on the evidence, the respondents may use the exception improperly and inappropriately. 

Posted in: Tax & ATO News Australia at 22 November 17

Shord v Commissioner of Taxation

 The case is reasonably unremarkable for any legal or factual analysis, but it does provide a good insight into the attitude of the ATO towards acting as a uncompromising litigant, which makes the most of every possible procedural point, as opposed to a model litigant as they are required.

Justice Logan from Qld made some fantastic comments (with respect);

 

The standard of fair play expected of the Crown and its officers in litigation is a standard in keeping both with the avoidance of behaviours that, in an extreme form, led to the civil war and with the later constitutional settlement. Once this heritage is understood, the requirement for its observance is, or should be, as Griffith CJ stated, “elementary”.

 

I note that Robert Gottleibsen also discussed this case and raised these comments in yesterday’s Australian.

 

Shord v Commissioner of Taxation [2017] FCAFC 167


Between 2006 and 2011, Mr Shord worked on various overseas assignments as a supervisor for foreign companies in the oil and gas industry. He did not lodge tax returns for that period, believing he was a non-resident. The Commissioner believed otherwise and issued amended assessments including all Mr Shord’s foreign income. The Commissioner disallowed Mr Shord’s objection.

The Tribunal found in favour of the Commissioner. The Tribunal found Mr Shord was a resident and, in particular, that his income was not exempt pursuant to s 23AG of the ITAA36. This provision exempts income of residents engaged in foreign services for a continuous period of not less than 91 days.

At the onset of the hearing, counsel for the Commissioner withdrew a contention that Mr Shord’s circumstances failed to meet the legislation’s definition of ‘foreign services’. The Tribunal nonetheless found that Mr Shord did not meet this definition. Fletcher v FCT is authority that a taxpayer is denied procedural fairness when a Tribunal makes a decision on the basis not argued by any party.

Procedural fairness was not raised on appeal to the Federal Court. Instead, the first two questions of law related to the proper application of s 23AG. These hinged on the third question which was whether the Tribunal had jurisdiction to decide whether Mr Shord was engaged in ‘foreign services’. The fourth question was whether Mr Shord was entitled to offsets for foreign taxes paid. The primary judge found against Mr Shord on the third and fourth question and did not therefore consider the first two.

On appeal to the Full Federal Court, procedural fairness was finally raised by Mr Shord as the first ground in an amended notice of appeal. The Commissioner initially objected to the amendment but eventually conceded the ground to Mr Shord. The Full Court thus remitted the matter to the Federal Court to decide the two questions about s 23AG. Unlike the majority, Justice Logan reprimanded the Commissioner, as a representative of the Commonwealth, for its failure to act as a model litigant and raise the crucial issue earlier.

The second ground related to Mr Shord’s entitlement to tax offsets. The Full Court found that Mr Shord did not produce any evidence as to what, when and how much foreign tax he paid, and that neither the Tribunal nor the Commissioner had an obligation to help him adduce evidence to the contrary.
 

Posted in: Tax & ATO News Australia at 01 November 17

Moignard And Commissioner Of Taxation:

This is an interesting decision of the AAT in relation to trust distributions. Much of the analysis it unsurprising, but the trust disclaimer argument would have been of great interest had it had a better run.  With the greatest of respect to Mr Moignard this case also shows the difficultly of representing yourself in tax cases, even before the case gets to the more formal jurisdiction of the Federal Court (eg, on objections with the ATO, or at the AAT). Raising matters at the last minute never find favour with the courts and tribunals, and getting early advice about the potential arguments is critical.


Quick Summary:

  • Commissioner issued an amended assessment for $243,959.84 and imposing a penalty of $187,043.45 for 2007-8 FY.
  • Taxpayer sought to introduce a ‘capital argument’, which the tribunal disallowed.
  • Commissioner advanced alternative argument that the taxpayer was presently entitled to one third of the $480,476, which was the net profit from the sale of a property held by the trust. On the basis that the default provision of the RST Deed provided where there has been no exercise of trustee discretion to pay, apply or set aside the Deed had the effect of making the taxpayer and his two children entitled to the net profits in equal shares.
  • Bean DP found that the default clause of the trust deed operated, the amounts assessed by the Commissioner were excessive being “$51,671.10 versus $195,814.20”.
  • Bean DP found the written resolution and the “certificate” did not support a valid distribution to another trust as they were produced well after financial year in question.
  • Bean DP found the taxpayer’s true entitlement did not come to his knowledge before making the disclaimer, thus it was not effective.
  • Bean DP agreed with the Commissioners Moignard application of 50% penalties for the taxpayer’s recklessness as he had the capacity and resources which should have enabled him to arrive at a better and more accurate understanding of what his true taxation liability was. 


Article Summary:

This is an interesting decision of the Administrative Appeals Tribunal (‘AAT’) in relation to trust distributions. Much of the analysis is unsurprising, but the trust disclaimer argument would have been of great interest had it had a better run.
 

On 18 October the AAT released its decision in relation to the rehearing of Moignard and Commissioner of Taxation, following an appeal to the Federal Court.
 

Upon the rehearing of the matter, the Commissioner sought to advance his alternative argument that the trustee did not exercise their discretion to pay, apply or set aside the trust income. On this basis, the default provisions of the trust deed would apply to deem trust income be distributed equally between the taxpayer and his two children.
 

In light of the Commissioner’s abandonment of his primary argument, the taxpayer sought to include a new argument, which Bean DP dismissed given it was raised at a very late stage of the proceedings.
 

The taxpayer sought to argue that it had made a valid distribution during the 2007-8 financial years, which was supported by a written resolution and certificate made in April 2011. Bean DP agreeing with the Commissioner concluded that the resolution was not made until well after the end of the relevant accounting period, and therefore could not amount a determination to distribute.
 

Additionally, the taxpayer contended that the taxpayer disclaimed the purported distribution of funds” from the sale of the property. However, the Tribunal rejected this argument, finding that the disclaimer did not relate to the actual share of the taxpayer’s trust income and was clearly not made on the basis of an understanding of the operation of the deed or the share of the trust income to which he was entitled.
 

Bean DP found that in order for a disclaimer to be effective, the disclaimer would have to indicate or be made on the basis of an understanding of what the taxpayer’s entitle actually was.
 

One of the final issues the Tribunal addressed was the appropriate penalties. The Commissioner sought to apply a 50% administrative penalty for Mr Moignard’s recklessness in complying with tax laws. The Tribunal taking into account Mr Moignard’s extensive qualifications and commercial experiences found that he “had capacity and resources which should have enabled him to arrive at a better and more accurate understanding of what his true taxation liability was.” Accordingly, the Tribunal agreed with the Commissioners application of a 50% administrative penalty.

In conclusion, Moignard and Commissioner of Taxation shows the importance of understanding the terms of a trust deed and ensuring the appropriate documents for distributions are recorded in the same accounting period.



 

Posted in: Tax & ATO News Australia at 25 October 17

In Pursuit of a Fairer System

 The Federal opposition seems to be searching hard for the glib soundbites. The latest attack is on expensive accountants, who only the uber-rich can afford, who use their superior accounting skills at high cost, to manipulate their clients’ affairs to pay no tax.


I came across a recent article in Accountants Daily which reported:


Last week, Bill Shorten delivered the opposition’s federal budget reply speech in which he proposed a cap on the amount individuals can claim as a tax deduction for the management of their tax affairs.


“In 2014-15, 48 Australians earned more than $1 million and paid no tax at all. Not even the Medicare levy. Instead, using clever tax lawyers, they deducted their income down from an average of nearly $2.5 million … to below the tax-free threshold,” Mr Shorten said.


“One of the biggest deductions claimed was the money they paid to their accountants, averaging over $1 million. That’s why a Labor government will cap the amount individuals can deduct for the management of their tax affairs at $3,000.”


The article goes on to make a point about “individuals potentially getting penalised for simply having to deal with a complex tax system and ever increasing requirements of the Tax Office”. I agree with this, and think that this policy is one of the most stupid ideas I have ever heard. Who advises these people?


I strongly doubt that anyone is paying north of $1m for annual tax advice, no matter how complex their tax affairs, or brilliant their advisor's advice.
What is much more likely is that these people have been involved in complex and aggressive audits, and have had to fight to prove their case against a huge team comprising the Commissioner of Taxation's in-house lawyers, external lawyers, junior barristers and silk.


Defending yourself in the face of this is incredibly expensive, particularly when you as a taxpayer bear the onus of proof. What most people don't realise is that barristers charge taxpayers a much higher rate than they charge the ATO. In circumstances where the ATO's audits are often little more than guesswork, debt recovery proceedings commence immediately, and the courts have continually maintained that the onus is on the taxpayer to prove their case and their correct tax position, then of course the cost of fighting the ATO is going to be huge.


To make this not tax deductible is simply ridiculous.


I will give you an example of how ridiculous and expensive audits can be: a few years ago, one of my colleagues was selected for audit. He had been doing alot of driving in a particular year, and the resultant (high) deduction triggered an audit. Fair enough. But the audit quickly blew into a full investigation of every item of income and expenditure this taxpayer had incurred. It took months. The accountant was of great assistance, and because absolutely everything was done correctly, the auditor eventually signed off without a single disallowance.


The accountant had done a huge amount of work and did it very well and efficiently. The bill was, none-the-less, eyewatering. My colleague paid happily in consideration of a job well done.


Guess what happened the following year? My colleague was again selected for an audit. Why? Because he had claimed so much the year before as a deduction for managing his tax affairs.


You would laugh if it wasn’t so frustrating.


Here's a better idea - limit the tax deduction for managing tax affairs by all means, but if the ATO starts an audit, provide the taxpayer a voucher for use on the accountant or lawyer of their choice, equivalent to the ATO's cost of the audit and any appeals (including external lawyers as well as the ATO wages and oncosts). In reality it should be much higher to factor in overheads and the Commissioner's disproportionate purchasing power, but even at only 100% of the ATO’s costs that will be a significantly higher figure than the corresponding deduction.


Or better yet, why don’t we limit the ATO budget for each auditto no more than $3,000, including overheads and a share of fixed costs.

Posted in: Tax & ATO News Australia at 23 May 17

Uber BV v The Commissioner of Taxation

Last Friday, the Federal Court held that services supplied under the uberX service constitute “taxi travel” within the meaning of s 144-5 (1) of the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

 

To give context to this dispute, following the rise in popularity of the ride sharing platform the Australian Taxation Office (ATO) announced in 2015 that Uber drivers will have to register and pay GST, regardless of turnover. The general rule regarding registration is that an enterprise with a turnover of less than $75,000 is not required to register for GST. An exception to this rule is Section 144-5(1) which requires a person who is carrying on an enterprise of supplying ‘taxi travel’ to be registered for GST regardless of turnover. Section 195-1 of the GST Act goes on to define ‘taxi travel’ as ‘travel that involves transporting passenger, by taxi or limousine, for fares’.

 

The Australian Taxation Office (ATO) took the position that the Uber platform fell within this exception. However Uber disagreed with this position and sought a declaration from the Federal Court that the services provided by UberX drivers did not constitute taxi travel.

 

Applicant Submissions:


The applicant made submissions on the construction of ‘taxi travel’ claiming:

 

  • ‘Taxi Travel’ was intended to apply only to the taxi industry as the legislature did not seek to deal with this issue in any other industry.

  • The statutory context suggests that the words “taxi” and “limousine” bear a trade or non-legal meaning. Alternatively the ordinary meaning of the words “taxi” and “limousine” was heavily influenced by the underlying regulatory regime.
  • The disjunctive “taxi or limousine” in the definition of s195-1 provides that “taxi” and “limousine” have different meanings.

 

Using the above mentioned arguments on statutory construction, the applicant put forward factual arguments distinguishing Uber from Taxis. The applicant contended that Uber services did not display the essential operational features of a taxi, on the basis that Uber vehicles do not show markings, the access is limited to Uber licensees (App Users), payment systems and calculations differ and Uber drivers are not required to display a fare meter.

 

Respondent Submissions:


The respondent’s made submissions that:

 

  • “Taxi travel” is to be construed as a whole and connotes the transport, by a person driving a private vehicle, for a fare irrespective of whether the fare is calculated by reference to a taximeter.

  • The services supplied by Uber demonstrate the essential features of transport “by taxi” and “by limousine”.
  • The applicant incorrectly relied on the regulatory regimes applying to the taxi industry.

 

The Commissioner in support of its submission on the construction of ‘taxi travel’ used dictionary definitions to help identify the key features of a ‘taxi’ in ordinary understanding.

 

Furthermore the Commissioner made submissions that the difference between a limousine and a taxi was that a limousine is not calculated by reference to a taximeter and will need to be pre-booked. Therefore, “limousine” could apply to any hire car.

 

Decision:


Justice Griffiths “accepted the Commissioner’s submission that the word “taxi” is a vehicle available for hire by the public and which transports a passenger at his or her direction for the payment of a fare that will often, but not always, be calculated by reference to a taximeter”. In reaching this decision, consideration was placed on principles of statutory interpretation. Further to this the dictionary definitions the Commissioner relied upon provided the court with a supporting context of this interpretation.

 

However, Griffiths J rejected the Commissioner’s position that limousine was not confined to luxury cars. Instead the ordinary meaning of limousine “was a private luxurious motor vehicle which is made available for public hire and which transports a passenger at his or her direction for the payment of a fare”. Although the present matter involved a Honda Civic which did not meet this definition, Griffiths J recognised this position may be different in cases of other UberX drivers who do use luxury cars.


Ultimately this decision will impose huge compliance burdens on Uber and its drivers. Particularly Uber drivers will now have to register both an Australian Business Number and register for GST, charge an additional 10%, lodge Business Activity Statements and claim Input Tax Credits.

 

With this being another win for the Commissioner, it can be expected that there will be a crackdown in tax compliance within the ride sharing industry. 

Co-authored with Ben Caratti

Posted in: Tax & ATO News Australia at 09 March 17

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Author: David Hughes

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