• Accounting and payment of GST

    17/12/03

    Who has to account for GST?

    Non-interpretative - straight application of the law.

    All taxi drivers, who are not employees, are required to be registered. Fares paid to taxi drivers by passengers include GST. Each driver is personally responsible for accounting for GST on supplies and paying their net GST amount to us each tax period. The net GST amount is the GST amount included in all fares taken by the driver, less any input tax credits for the GST included in the purchase price of business purchases, including bailment payments.

    27/10/03

    When and how is GST remitted to the ATO?

    Non-interpretative - straight application of the law.

    Taxi drivers are required to lodge an activity statement every three months. Drivers can also choose to lodge an activity statement every month if they wish. The activity statement will identify all business turnover (taxable supplies made) and all GST included in the price of business acquisitions, for example, bailments, fuel, repairs. The business (driver) will pay the net GST amount and lodge the activity statement no later than the due date for each tax period. The due dates are 28 October, 28 February, 28 April and 28 July for quarterly lodgers and the 21st day of the following month for monthly lodgers.

    27/10/03

    How are tolls and extras treated?

    For source of ATO view, refer to GSTR 2000/37External Link - Goods and services tax: agency relationships and the application of the law.

    Tolls are subject to GST. A toll is a charge by a roadway operator for a vehicle to use a specified roadway. It is a service provided by the roadway operator to the taxi driver. It is understood that it is normal industry practice for the toll to be passed onto the passenger.

    In regards to tolls, the driver must record the tolls paid to the tollway operator and is able to claim an input tax credit on the GST included in the price of the toll. The price of the toll is still passed onto the passenger and included in the total cost of the taxi travel supplied. The passenger, if registered for GST, is able to claim an input tax credit on the GST included in the total price of the taxi travel.

    For example:

    A driver transports a passenger and pays a toll of $2.20 including .20c GST.
    The driver claims an input tax credit of .20c.
    The metered fare is, say, $22 including $2 GST. The total charge including tolls is $24.20.
    The driver's GST liability on the fare is $2.20.
    The passenger, if registered, can claim an input tax credit of $2.20 being one-eleventh of $24.20.

    Extras are also subject to GST. An extra is paid for extra services like baggage handling, driving at night, or additional hiring fee. These payments form part of the service provided by the driver to the passenger. Therefore, the driver must record the extras received and remit the GST included in the price.

    27/10/03

    Which government taxes, fees and charges are subject to GST?

    Non-interpretative - straight application of the law.

    The Treasurer has determined that there is no GST on many government taxes, charges and fees. Refer to Appendix A for a list of some of the taxes and charges that have been included in the Treasurer's Determination and therefore will not be subject to GST.

    22/03/00

    Are traffic and parking fines subject to GST?

    A statutory fine or penalty is not subject to GST as there is no supply made in relation to the payment.

    22/03/00

    What are the GST implications if a passenger fails to pay a fare ("does a runner")?

    Non-interpretative - straight application of the law.

    If a passenger fails to pay a fare, we consider that this is not a taxable supply as there is no consideration received by the taxi driver. Under these circumstances there is no GST payable.

    20/12/00

    How are subsidies treated?

    For source of ATO view, refer to GSTR 2006/9External Link - Goods and services tax: supplies.

    Subsidies are often given by a regulatory authority to a driver for providing travel which is beneficial to the community. An example is the transport of wheelchair passengers whereby the regulatory authority contributes part of the fare. The driver must remit the GST being one-eleventh of the amount of payment received by the regulatory authority. Depending on their circumstances, the regulatory authority may be able to claim an input tax credit for the amount of GST included in the payment.

    22/12/03

    How is the factoring charge treated for GST when a Cabcharge docket is negotiated for a cash amount?

    For source of ATO view, refer to GSTR 2002/2External Link - Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions.

    Cabcharge dockets are sometimes exchanged for a cash payment at a taxi depot with a discount or premium charged (often 2%) on the face value. The transaction involves the making of a financial supply by the driver. Therefore, there is no liability for the GST on the amount paid to the driver by the depot for the acquisition (that is, of the Cabcharge docket).

    The driver is not entitled to an input tax credit in relation to the discount or premium factor.

    27/10/03

    Are taxi driver training courses GST-Free?

    For source of ATO view, refer to paragraphs 9 to 11 of GSTD 2000/11External Link - Goods and services tax: is the supply of commercial pilot training GST-free as an education course under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

    In general, supplies of professional or trade courses are GST-free provided the following conditions are met:

    It is a course that leads to a qualification that is an essential prerequisite:

    (a) for entry to a particular profession or trade in Australia, or
    (b) to commence the practice of (but not to maintain the practice of) a profession or trade in Australia.

    The qualification is an essential prerequisite in relation to the entry to, or the commencement of the practice of, a particular profession or trade if the qualification is imposed by way of an industrial instrument such as a government law. If no industrial instrument exists, then it must be a requirement of a professional or trade association that has national uniform requirements relating to the entry to the profession or trade concerned.

    Therefore, if a driving course leads to a qualification which is necessary before commencing as a taxi driver because of certain government laws, then that driving course is GST-free. Note that general driver safety courses are not GST-free as it is understood that these are optional courses and are not a government requirement for taxi drivers.

    27/10/03

    How does GST affect the general insurances on my taxi business?

    Non-interpretative - straight application of the law.

    General insurance policies are policies which insure against loss, damage, injury or risk. The supply of most types of general insurance including motor vehicle, third party property, fire, theft and loss of income, are subject to GST.

    As a business, you can claim an input tax credit for the GST included in the price you pay for your insurance policy. One exception however is compulsory third party motor vehicle insurance. No input tax credits are allowable for premiums paid on a compulsory third party scheme prior to 1 July 2003. After 1 July 2003, you may only claim an input tax credit on your compulsory third party premium if the period of insurance for which you are paying commences after 1 July 2003. In other words, you cannot claim an input tax credit for a period spanning the 1 July 2003 transition date.

    It is advisable that you notify the insurer if you are able to claim a partial or full input tax credit prior to making a claim. This is so that the insurer is able to correctly account for any GST liability or adjustments in the event of a claim. As long as you have given your insurer this information, you are not required to pay GST to us when you receive a settlement.

    27/10/03

    How are insurance claims treated for GST?

    For source of ATO view, refer to the general application of the principles in GSTR 2006/10External Link - Goods and services tax: insurance settlements and entitlement to input tax credits.

    This depends on how the claim is settled and whether or not you advised the insurer of your entitlement to an input tax credit.

    (i) If you are not entitled to an input tax credit (because it is a private policy or you are not registered) the insurer will have a decreasing adjustment equal to one-eleventh of the amount paid in settlement of the claim.

    (ii) If your claim is settled and you have previously notified your insurer of your entitlement to an input tax credit, the settlement is not subject to GST.

    (iii) Where you have not notified your insurer of your entitlement to an input tax credit, or understated it, a pro-rata amount of GST is payable to that extent on settlement.

    This is the case regardless of whether the claim is settled in cash or by repairing or replacing the insured goods.

    20/08/01

    What are the GST consequences if a driver is robbed?

    Non-interpretative - straight application of the law.

    We have previously explained that a driver who suffers a fare evader or 'runner' is not liable to account for GST on the evaded fare as there was no consideration for the supply. A driver, who is robbed however, has made taxable supplies and must account for the GST on those supplies. As detailed above, an insurance settlement would normally reimburse the driver for the loss of takings. If you previously notified your insurer of your entitlement to an input tax credit, such a settlement is not subject to GST.

    27/10/03

    Can a bailor introduce procedures or systems to assist his or her drivers with their GST management?

    Non-interpretative - straight application of the law.

    Yes. There is nothing in the GST law that stops a third party from providing assistance. You can provide shift and or monthly accounting information for drivers to transpose into their individual activity statements. You should note however that your provision of such assistance does not remove a driver's responsibilities under the GST law. The driver still needs to be registered and complete a monthly or quarterly activity statement in their own name. It is also the driver who is responsible for the accuracy of the information and any GST liability incurred as a result.

    27/10/03

    Can a bailor collect GST and hold it on behalf of the driver, and later pay the driver who then remits it to the ATO at the end of each tax period?

    Non-interpretative - straight application of the law.

    While the GST law does not address this issue it is open to any parties to reach agreement on how to handle practical administration and assistance of this kind.

    As this is not covered by GST law people entering these arrangements should do so on a purely voluntary basis as there may be risks associated with arrangements of this kind. For example, if a bailor who is holding GST funds on behalf of drivers is entered into bankruptcy, dies or simply disappears, the driver is still liable for GST on his or her turnover.

    27/10/03

    What is the GST treatment of taxi bailment fees for a shift that starts before midnight on 30 June 2000 and ends on 1 July 2000?

    Non-interpretative - straight application of the law.

    In an earlier edition of this publication, we explained that GST did not apply to fares for journeys completed before midnight on 30 June 2000, nor did it apply to journeys started before midnight but completed after. All fares for journeys that commenced after midnight on 1 July 2000 are subject to GST.

    The bailment fee or pay-in for a shift that started on 30 June 2000 and ended on 1 July 2000 is subject to GST, apportioned on a time basis for that proportion of the shift that occurs after midnight. For example, if a driver commences a shift on 30 June 2000 at 6.00pm and finishes on 1 July 2000 at 6.00am, then 50% of the bailment fee or pay-in is subject to GST. The operator (bailor) in this example is liable for GST of one-eleventh of 50% of the pay in. The driver is entitled to an input tax credit for that amount of GST.

    As the GST on the bailment fee is calculated on a time basis, it does not matter what proportion of the fares for that shift were subject to GST.

    27/10/03

    How do I account for the GST when clients pay by credit cards?

    • For source of ATO view, refer to:
    • paragraphs 30 and 31 of GSTR 2003/12External Link - Goods and services tax: when consideration is provided and received for various payment instruments and other methods of payment
    • paragraphs 14 and 32 of GSTR 2000/29External Link - Goods and services tax: attributing GST payable, input tax credits and adjustments and particular attribution rules made under section 29-25.

     

    You account for the GST on these transactions in the tax period in which you receive payment from the passenger. A business that accounts on a cash basis will account for GST on the supplies it makes, in this case taxi travel, in the tax period in which it receives payment for those supplies. A passenger that uses a credit card to pay his or her fare has made a payment at the time that the signed and completed docket is handed to the driver, or the passenger signs the authority printed by the taxi cab's EFTPOS terminal.

    27/10/03

    How do drivers account for tips received from passengers?

    For source of ATO view, refer to paragraphs 104 to 111 of GSTR 2006/9External Link - Goods and services tax: supplies.

    A tip that is paid to a taxi driver, who is not an employee, either as a cash payment, or by adding it to a credit card or EFTPOS payment, forms part of the driver's turnover for the relevant tax period, and is therefore subject to GST.

    This is because the taxi driver is conducting an enterprise that is required to register for GST. The payment of the tip is consideration for services supplied by the driver in the course of their enterprise.

    20/12/00

    Is a taxi driver (bailee) in NSW liable to pay GST on leave payments made under the NSW Taxi Industry (Contract Drivers) Contract Determination?

    For source of ATO view, refer to paragraphs 71 to 73 of GSTR 2006/9External Link - Goods and services tax: supplies.

    No. A leave payment made to a taxi driver who is a bailee under a bailment arrangement is not consideration for a supply made by the driver and GST is not payable. The operator making the payment does not make it in connection with, in response to or for the inducement of a supply, but to comply with the Determination.

      Last modified: 19 May 2015QC 16403