In response to the arrival of ride-sourcing arrangements such as UberX, and GoCatch, state governments announced reforms to the regulation of taxi and ride-sourcing industries.
These reforms include industry assistance payments to taxi licence holders, which help:
- offset the impacts of new regulatory regimes
- taxi licence holders compete under new industry arrangements.
Depending on the state, 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. These are means-tested in some states.
These rules also apply to state government payments made to hire car and limousine licence holders.
Some states made further announcements that their industry assistance payments are to be funded through the introduction of a passenger movement levy on metropolitan taxi and ride-sourcing trips.
Income tax consequences of payments
If you hold a taxi licence (including a hire car or limousine 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 as it's a government transitional assistance and hardship payment made to licence holders to:
- assist them to continue operating
- compensate them for loss of income.
Licence holders are required to include the full amount of the payment in their assessable income.
The payments are generally not capital receipts (also known as capital proceeds) because the licence holder isn't required to give up or sell their taxi licence plate, or finish their business.
If a licence holder leaves the industry after receiving the transitional assistance or hardship payment, the payment may be included in calculating the capital gain or loss made by the licence holder when they surrendered or sold the taxi licence.
If you seek legal or professional tax advice about these payments, you can claim a tax deduction for the costs.
Victorian Taxi Reform Fairness Fund
We note the decision of the Administrative Appeals Tribunal (AAT) in the matter of Bains and Commissioner of Taxation  AATA 2477Opens in a new window about payments made to licence holders from the Victorian Taxi Reform Fairness Fund. The AAT found that these payments are not income according to ordinary concepts. This decision is only relevant to Victorian Taxi Licence owners who received a payment from the Victorian Taxi Reform Fairness Fund. It does not include payments from the Victorian Taxi Reform Hardship Fund or the Victorian Transition Assistance payments.
Having your past assessments reviewed
If you received a payment from the Victorian Taxi Reform Fairness Fund in the 2017–18 income year and included that in your income tax return, you will need to complete an objection form to have us review your past assessment.
Please ensure you complete Question 10 (the extension of time section) to set out why the objection was not lodged within the time limit. In response to this question, you should state that you have become aware of the recent Bains AAT case that decided that payments made under the Victorian Taxi Reform Fairness Fund are not assessable income.
As part of your objection, you must include:
- A statement that the objection relates to the Victorian Taxi Reform Fairness Fund.
- Evidence that you received the payment from the Victorian Taxi Reform Fairness Fund by the Victorian Department of Economic Development, Jobs, Transport and Resources, which includes:
- the letter or email stating the outcome of your application
- a bank statement showing receipt of the payment.
- The question number in the income tax return where you reported the payment as income and the payment amount.
- If other income was reported at that question, further information about that income and the amount.
If the interest in a Victorian taxi licence was held by an entity other than an individual (for example, a company, trust or partnership) and the payment was made to that entity, the entity may also have to lodge a separate objection form to adjust the amount in its income tax assessment.
Further information can be found at Decision Impact Statement: Bains and Commissioner of Taxation  AATA 2477Opens in a new window.
GST consequences of payments
Generally, there are no GST consequences in relation to the receipt of transitional payments or hardship payments if the licence holder:
- need only meet eligibility criteria
- doesn't change their behaviour in order to receive the payment.
There are also no GST consequences for payments received from the Victorian Taxi Reform Fairness Fund.
In states and territories that have introduced passenger movement levies to fund industry assistance packages, additional income tax and GST issues arise.
Income tax consequences of levies
In some states the passenger movement levy is imposed on the service provider and levied on each trip at a flat rate. For example, in NSW, all taxi and booking service providers need to pay a temporary $1 levy on all point-to-point trips taken.
To recover the levy, the service provider may charge a fee to a third party (for example, a taxi operator or taxi driver) and that fee may be passed on to passengers.
If you are a third party collecting the levy on behalf of a service provider:
- include the amount 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 rules apply to the service provider.
GST consequences of levies
Paying the levy doesn't attract GST. However, if the service provider or third party chooses to pass on the levy to passengers, it's treated as an increase in price for the supply of services. In that case, the on-charged amount will form part of the fare paid by a passenger and 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. This includes the GST on the increased price as a result of passing on the levy. This will depend on whether the supply is a creditable acquisition to the third party.
The transitional assistance and hardship payments and the passenger movement levies that are considered assessable income will also be instalment income for PAYG instalment purposes.
For licence holders who are paying PAYG instalments; if you pay using the:
- instalment rate method – you'll need to include this payment in your instalment income on your activity statement. If you've forgotten to put the payments in a previous activity statement, you can amend the instalment income for that statement prior to lodging your tax return.
- instalment amount method – you can continue to pay the normal amount. However, you should remember to set money aside to pay at the time of your tax return.
After you lodge your tax return, these payments will be included in the calculation of your next year’s instalments. If the amount or rate is too high (as you won't be receiving any more payments) you can vary the instalment rate or amount you pay.
If you're not currently required to pay PAYG instalments, this payment may bring you into the instalments system after you lodge your tax return. If this occurs, we will let you know what your options are.
Individuals should include the payments in the same label as previously used to declare income from holding a taxi licence (for example, Item 15 Net income or loss from business or Item 24 Label Y Other income).
For companies, the payment should be included in Label 6 Q Assessable government industry payments.
For more information see:
- Class Ruling CR 2017/15Opens in a new window Income tax: assessability of payments from the Victorian Taxi Reform Hardship Fund
- NSW Transitional Assistance paymentsOpens in a new window
- Qld Transitional Assistance paymentsOpens in a new window
- Vic Transitional Assistance paymentsOpens in a new window
- WA Transitional Assistance paymentsOpens in a new window
- SA Transitional Assistance paymentsOpens in a new window
- Perth metropolitan Voluntary Taxi Buyback Scheme paymentsOpens in a new window
- Victorian taxi industry Fairness Fund paymentsOpens in a new window
- Phone us on 13 28 66
- If you are experiencing difficulties or hardship in meeting your tax debts, refer to Help with paying