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  • Industry assistance payments to taxi licence holders

    If you hold a taxi licence (including a hire car licence) and you receive an industry assistance payment from your state government in relation to the licence (excluding a licence surrender payment), it's generally not a capital receipt. It’s more likely to be ordinary income. There are no GST consequences.

    We want to help you to understand your tax obligations by providing guidance on what to look out for and where to go for help.

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    Taxi industry assistance payments

    In response to the arrival of new ride-sourcing arrangements (including Ingogo, GoCatch, and UberX), state governments have announced reforms to the regulation of their taxi and ride-sourcing industries.

    Some of these reforms, which differ across states, include industry assistance payments to taxi licence holders. These are to help offset the impacts of new regulatory regimes and help taxi licence holders compete under new industry arrangements.

    Depending on the state, some industry assistance payments to eligible taxi licence holders include:

    • one-off transitional assistance payments to help transition to the new regulatory arrangements
    • recurring hardship or income support payments (that are means-tested in some states).

    Some states have further announced that their industry assistance payments are to be funded through the introduction of a passenger movement levy on metropolitan taxi and ride-sourcing trips.

    Tax treatment of industry assistance payments

    Income tax

    The transitional assistance and hardship payments are generally not capital receipts, but are ordinary income. Where a government payment is made to an industry to assist businesses within that industry to continue operating or to compensate for loss of income, the payment is assessable income of the recipient. The payment is not capital in nature because the payments do not require licence holders to give up or sell their taxi licence plate or otherwise bring their business or income-earning activity to an end.

    On this basis:

    • the transitional assistance and hardship payments will generally be assessable as ordinary income to the licence holder
    • the licence holders are required to include the full amount of the payment in their assessable income.

    The nature of a payment is objectively determined by the character of the payment in the hands of the recipient. Where a licence holder has permanently and completely exited the taxi industry, or has evidence that they have undertaken a process to permanently and completely exit the taxi industry, at the time of receiving the transitional assistance or hardship payment, the payment may be included in the calculation of the capital gain or capital loss that is made by that holder on the surrender, sale or disposal of the taxi licence(s) of that holder.

    These outcomes also apply to equivalent state government payments made to hire car and limousine licence holders.

    You can claim a tax deduction for costs you incur for seeking legal or professional tax advice in relation to the taxation of the payment.

    GST

    Generally, there are no GST consequences in relation to the receipt of transitional assistance and hardship payments. GST only applies when the licence holder supplies something for the payment. If the licence holder need only meet eligibility criteria, and does not do or refrain from doing anything for the payment, no GST applies.

    Passenger movement levies

    In states or territories that are introducing passenger movement levies to fund industry assistance packages, additional income tax and GST issues arise.

    Income tax

    In some states the levy is imposed on the umbrella service provider (eg the taxi network) and levied on each trip they coordinate at a specified flat rate. For example, in NSW all authorised taxi and booking service providers need to pay a temporary $1 levy on all point-to-point transport trips taken in the state.

    To recoup the cost of the levy the service provider may charge an equivalent fee to a third party (eg a taxi operator or taxi driver) with the possibility that the fee will be further on-charged to passengers as part of their total fare.

    If you are a third party collecting the levy on behalf of a service provider:

    • include the amount of the fee charged to passengers in your assessable income in that income year
    • you can claim an income tax deduction for the fee the service provider charged you in that income year.

    The same tax outcomes apply to the service provider: the fee that flows to them from third parties is assessable income and the levy returned to the state government is deductible.

    GST

    As a passenger movement levy is an Australian tax, the payment of the levy does not attract GST.

    However, if the service provider or third party chooses to on-charge the levy to passengers, it is treated solely as an increase in price for the supply between those parties. For example, the on-charged amount will form part of the fare paid by a passenger for the passenger services. The GST to be remitted is calculated as 1/11th of the increased price.

    The third party collecting the levy on behalf of a service provider may be entitled to a GST credit for the GST payable on the supply between the parties, including the GST on the increased price as a result of the on-charge of the levy. This will depend on whether the supply is a creditable acquisition to the third party.

    Pay as you go (PAYG) instalments

    Where a payment is considered as taxable income, there may be implications for PAYG instalments as it would be considered as instalment income.

    For current PAYG instalment clients:

    • If you pay using the rate method, you will need to include this payment on the relevant activity statement within your instalment income. If you have forgotten to put it in a past activity statement, you can amend the instalment income for that statement prior to lodging your tax return.
    • If you pay using the amount method, you can continue to pay the normal amount, but remember to set money aside to pay at the time of your income tax return.
    • This payment will be included in the calculation of your next year’s instalments after you lodge your tax return. If the amount or rate is too high as you won't be receiving more payments, you can vary the instalment rate or amount you pay. If you are not currently required to pay PAYG instalments, this payment may bring you into instalments after you lodge your tax return. If this occurs, you will receive information notifying you of your options.

    See also:

    Labels to use in your tax return

    For annual income tax returns, individuals should include the payment in the same label that you have previously used to declare your income from holding your taxi licence (for example, Item 15 Net income or loss from business or Item 24 Label Y Other income). In the case of companies, the payment should be included in Label 6 Q Assessable government industry payments.

    Find out about:

    Further details on the taxation of government payments to the taxi and hire car industries is in the following tax rulings:

    See also:

    If you wish to discuss your circumstances, you can:

    If you are experiencing difficulties or hardship in meeting your tax debts, refer to Help with paying for assistance.

      Last modified: 16 Oct 2018QC 52707