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Edited version of your written advice

Authorisation Number: 1051238127219

Date of advice: 20 June 2017

Ruling

Subject: Application of section 58Z of the Fringe Benefits Tax Assessment Act 1986

Question 1

Does the provision of luxury vehicle travel to an employee by the employer constitute taxi travel for the purposes of section 58Z of the Fringe Benefits Tax Assessment Act 1986?

Answer

No

This ruling applies for the following periods:

FBT year 1/4/2014 - 31/3/2015

FBT year 1/4/2015 - 31/3/2016;

FBT year 1/4/2016 - 31/3/2017

FBT year 1/4/2017 - 31/3/2018

The scheme commences on:

Not applicable

Relevant facts and circumstances

The employer is a multinational corporation.

From time to time, the employer provides some of its employees, who are employed in executive level roles, transportation by a luxury vehicle.

Transportation by this vehicle, which is often provided from the employee’s place of residence to the employee’s place of work or to an alternative place of work, is provided to assist the employees in carrying out their executive responsibilities, including meeting with shareholders, investors and other external stakeholders. The luxury vehicle enables the employee to conduct confidential work discussions and review work-related material effectively.

The vehicle is provided to the employee by a third party. The third party carries on the business of a tailored door-to-door service. Once the services have been provided, the employer is charged a fee. The fee is calculated based on the number of hours the service has been provided. The employer is also charged for miscellaneous expenses incurred by the vehicle provider, such as road tolls.

The transportation provided is predominantly provided in State A.

In State A, to operate a hire car business, the vehicle provider must apply for an Operator Accreditation – Private Hire Vehicle (PHV) in accordance with the Passenger Transport (Private Hire Vehicle Services) Regulation 2001. By virtue of the accreditation, the provider will hold a license to operate as a car for private hire.

This ruling applies to the provision specialised transportation in State A. The provision of this transportation in any other State or Territory is outside the scope of this ruling. A separate ruling application will need to be made where this transportation is provided in another State or Territory.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 58Z.

Reasons for decision

Under subsection 58Z(1) of the FBT Act, “Any benefit arising from taxi travel by an employee is an exempt benefit if the travel is a single taxi trip beginning or ending at the employee’s place of work”.

Subsection 136(1) of the FBT Act states that:

There appears to be nothing which would suggest that the term “taxi”, in section 58Z, was intended to have a meaning other than that given by subsection 136(1).

That being the case, the exemption in section 58Z of the FBT Act would only apply to travel in vehicles that are licensed to operate as taxis under the relevant State or Territory legislation.

FBT: a guide for employers at chapter 20.2 provides guidance on the application of section 58Z of the FBT Act. It states that:

This ATO publication then confirms that the exemption in section 58Z of the FBT Act would only apply to travel in vehicles that are licensed to operate as taxis under the relevant State or Territory legislation.

State A licensing regime

For the provision of luxury vehicle transportation in State A, it is necessary to look at the relevant legislation to consider the licensing arrangements for taxis and private hire vehicles.

In State A, a licensed taxi is regulated under the Point to Point Transport (Taxis and Hire Vehicles) Act 2016.

Under section 6 of this particular Act, a “taxi” means “a motor vehicle used to provide a taxi service”.

Under section 6, a “taxi service” means a passenger service where the transport is by a motor vehicle that:

Further, under section 47 of this Act, a person must not use a motor vehicle to provide a taxi service unless:

Under section 6, a “hire vehicle” means “a motor vehicle that is used to provide a passenger service that is not a taxi service”.

Under section 24 of the Passenger Transport (Private Hire Vehicle Services) Regulation 2001, a person must not tout or solicit for passengers for, or for a hiring of, a private hire vehicle.

In addition, under section 25 of the Regulation, the driver of a private hire vehicle must not:

It is clear then that the licensing regime distinguishes between a motor vehicle that is used to provide a taxi service (a licensed taxi) and a motor vehicle that is used to provide a passenger service that is not a taxi service (a licensed hire vehicle). The distinguishing factor is the ability of the motor vehicle to ply or stand for hire on any road or road-related area, with a licensed taxi being able to do so while a licensed private hire vehicle cannot do so.

While the third party provider holds a license to operate as a private hire vehicle, it is not licensed to operate as taxi. It therefore cannot ply or stand for hire on any road or road-related area. The exemption in section 58Z would not apply to the provision of luxury vehicle services in State A by the third party provider, as it is not licensed to operate as a taxi.

Only travel in a motor vehicle that is licensed under the State A legislation to operate as a taxi (and thereby use the rank and hail stands in that State), is eligible for the FBT exemption under section 58Z of the FBT Act.

More broadly, while the third party provider of luxury vehicle services in State A operates its vehicles on a fare for distance or time arrangement, it is in essence not providing a service that is similar to the services provided by the taxi industry nor is it providing a service that essentially competes with the taxi industry (see ATO ID 2002/23 and ATO ID 2002/24). It is providing a different kind of service with luxury motor vehicles tailored for private clients at the luxury end of the market (as evidenced by its private hire vehicle license).

The ordinary meaning of taxi is not a principle of general application

You have cited the recent decision in Uber BV v. Commissioner of Taxation [2017] FCA 110; 2017 ATC 20-608 (Uber) and argued that this type of transportation falls within the ordinary meaning of “taxi” as that term is used in the definition of “taxi” in subsection 136(1) of the FBT Act and within the meaning of “taxi travel” as that term is used in section 58Z of the FBT Act. Under your view, travel in a vehicle that starts or ends at the employee’s place of work would then be exempt under section 58Z.

In Uber the Federal Court considered whether a person supplying UberX services is required to be registered for GST purposes under Division 144 of the GST Act. This involved determining whether carrying on the enterprise of providing UberX services to passengers constituted the supply of “taxi travel” within the meaning of section 144-5 (as defined in section 195-1) of the GST Act as “travel that involves transporting passengers, by taxi or limousine, for fares”).

Griffiths J held that for GST purposes, the words “taxi travel” in section 195-1 were to be given their ordinary, everyday meaning and not a trade or specialised meaning. The ordinary meaning of the word “taxi” was a vehicle available for hire by the public which transported a passenger at his/her direction for the payment of a fare that would often, but not always, be calculated by reference to a taximeter. The word “taxi” was then sufficiently broad in its ordinary meaning to encompass the service provided by the Uber driver as being taxi travel for GST purposes. The word “limousine” was also to be given its ordinary meaning. That meaning was a private luxurious motor vehicle which was made available for public hire and which transported a passenger at his/her direction for the payment of a fare.

We consider that the Uber case only considered the ordinary meaning of “taxi” for the specific purposes of GST, which requires the compulsory registration of people providing taxi travel regardless of turnover (in order to avoid the confusion that would be created if some taxis had to charge GST and others did not). The ordinary meaning of “taxi” and “taxi travel” does not apply more broadly to FBT. Moreover “taxi travel” is also defined broadly in section 195-1 of the GST Act to include travel that involves transporting passengers, by taxi or limousine, for fares. The definition of “taxi” for FBT purposes on the other hand is not broad and simply “means a motor vehicle that is licensed to operate as a taxi”. The ordinary meaning of “taxi” as expounded in Uber applies only in the specific context of GST and is not a principle of general application. This is consistent with our published position on the Uber decision (see https://www.ato.gov.au/Tax-professionals/Newsroom/Your-practice/Ride-sourcing-is-taxi-travel/)

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