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Ruling

Subject: GST and limousine services

Questions

Are you required to be registered for goods and services tax (GST) under the compulsory registration requirements contained in subsection 144-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

If yes, is GST also payable on supplies that you make in relation to your other business, which has the same Australian business number (ABN) but is registered under another business name?

Answers

Yes, you are required to be registered for GST under the compulsory registration requirements contained in subsection 144-5(1) of the GST Act.

Yes, GST is also payable on the supplies that you make in relation to your other business.

Relevant facts and circumstances

You are registered for GST.

You are a sole trader providing limousine driving services as a contractor to private hire companies.

You have a limousine driver's licence and operate in accordance with the Victorian Taxi Directorate's limitation of private hire vehicles.

You do not own a limousine. You drive for more than one limousine company.

The limousine companies deal directly with the customer in relation to the driving arrangements and fees charged.

You do not accept limousine hire directly from ranks or public areas.

The limousine does not have a meter.

You collect payments from the customers and pass them directly to the limousine companies.

You invoice the limousine companies at the set rate of 35% of the fare. You receive the payment from the limousine companies after you present them with the invoice.

You have a verbal agreement with a limousine company under which:

you must obtain your limousine driver's licence;

you are responsible for cleaning the car and housing the car on your property when not in use;

you incur fuel and toll expenses;

the limousine company is responsible for the repair and upkeep of the limousine and for providing you with stocks of champagne and water for the customers as part of the limousine hire.

The verbal agreement will continue until mutually agreed upon by both parties.

There is no written bailment agreement or other written agreement in respect of this arrangement.

You have provided the Australian Taxation Office (ATO) with tax invoices which show the types of travel supplied; for example, airport transfers, formal, wedding, hairdresser awards.

You are also carrying on another business as a sole trader.

The business is registered under another business name. However, you use the same ABN for this business.

Your combined income from the limousine driving business and your other business is under $75,000.

Reasons for decision

Section 144-5 of the GST Act requires entities carrying on an enterprise of supplying taxi travel to be registered for GST even if the entity's GST turnover is below the registration turnover threshold. Section 144-5 of the GST Act states: 

You are required to be registered if, in carrying on your enterprise, you supply taxi travel.

It does not matter whether:

your GST turnover meets the registration turnover threshold; or

in carrying on your enterprise, you make other supplies besides supplies of taxi travel.

This section has effect despite section 23-5 (which is about who is required to be registered).'

Subsection 9-20(1) of the GST Act defines 'enterprise' to include, amongst other things:

· an activity or series of activities done in the form of a business, and

· an adventure or concern in the nature of trade.

The activities of an employee are excluded from the definition of enterprise.

This means that if you drive a taxi or limousine and you are not an employee, you are considered to be carrying on an enterprise of supplying taxi travel. In such a case, you are required to be registered for GST, regardless of your GST turnover.

Employee and enterprise

In unusual cases, a taxi or limousine driver may be an employee. The driver is an employee when the driver works for the owner or leaseholder of the vehicle, is not entitled to keep any of the takings and is paid an hourly rate or weekly wage that is independent of the vehicle's actual takings. Employees are subject to PAYG withholding on their earnings. Employees do not have to account for GST; the employer is considered to be the entity providing taxi travel and will therefore account for GST.

In the case of the Commissioner of Taxation v Deluxe Red and Yellow Cabs & Ors [98 ATC 4469], it was held that the relevant relationship between taxi drivers and operators was one of bailment, rather than of employment or the provision of labour. A bailment arrangement means that the driver makes a payment of some kind that allows the driver to use the taxi or limousine to drive passengers. The payment could be in the form of lease payments or an amount that is paid in at the end of each shift. It does not matter whether the amount is a set amount or a percentage of the shift takings.

Consequently, this means that a taxi or limousine driver is considered to be self employed and carrying on his or her own business whether or not a formal bailment agreement exists, unless they are deemed to be an employee.

In your case, you are a sole trader contracting to limousine companies. You receive a percentage of the fare takings for completing each trip. Therefore, you are not an employee of the limousine companies. The portion of the fare amounts that the limousine companies retain represents payment for a bailment arrangement between you and the limousine companies, even though you do not have a formal bailment agreement. Therefore, you are carrying on an enterprise in driving your limousine. It now remains to be determined whether your supply of limousine services falls within the meaning of 'taxi travel' for the purposes of Division 144 of the GST Act.

'Taxi travel'

'Taxi travel' is defined in the dictionary in section 195-1 of the GST Act as travel that involves transporting passengers, by taxi or limousine for fares. It does not distinguish between a taxi and a limousine. The terms 'taxi' and 'limousine' are not defined in the GST Act and therefore take on their ordinary meaning. The Macquarie Dictionary (1997) defines 'taxi' as, 'a motor car for public hire, especially one fitted with a taximeter' and defines 'limousine' as any large luxurious car.

According to ATO Interpretative Decision ATO ID 2002/23 GST and registration of a wedding car operator (ATO ID 2002/23), the term 'limousine' should be interpreted in accordance with the context in which the term 'limousine' is used. For the purposes of Division 144 of the GST Act, the term 'limousine' should therefore be used in the context of taxi operations. That is, it is considered that only limousine services that are provided by the taxi industry or are similar to and essentially in competition with the taxi industry are 'taxi travel'. In ATOID 2002/23, the limousine was restricted to the specific purpose of providing wedding car hire only. Such stringent conditions of operation indicates that it could not be seen as being in competition with the taxi industry and it is therefore not considered to be the supply of taxi travel.

However, contracted limousine drivers who transport passengers on point to point journeys for a fare are regarded as being in competition with the taxi industry, and therefore are considered to be supplying 'taxi travel'.

In your case, you operate under the standard restrictions for limousine hire (that is, no meter and you can't use taxi-ranks - customers need to pre-book the fare with the limousine company). Once a booking has been made for an agreed fare by the limousine companies, you are able to transport passengers to a variety of point to point journeys. As such, you are considered to be operating in a similar way to a taxi and making a supply of 'taxi travel'.

As you are carrying on an enterprise of supplying taxi travel, you are required to be registered for GST despite your GST turnover being under the registration turnover threshold.

Question 2

An entity needs only one ABN regardless of the number of enterprises it carries on. Similarly, the entity will only have one GST registration which covers all the enterprises. When an entity is registered for both GST and ABN, the ABN is also the entity's registration number for GST.

As an entity, you are carrying on two enterprises which are both included in your registration for ABN and GST. As long as you are registered for GST, either because you are required to be registered for one of your enterprises, your GST turnover meets the registration turnover threshold or you voluntarily registered; your GST registration covers all the enterprises that you carry on.

GST is payable on the taxable supplies.

You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act which states

You make a taxable supply if:

· you make the supply for *consideration; and

· the supply is made in the course or furtherance of an *enterprise that

· you *carry on; and

· the supply is *connected with Australia; and

· you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

In your case, the supplies that you make in relation to your other business satisfy the requirements of section 9-5 of the GST Act. That is, you make the supplies for consideration, in the course or furtherance of your enterprise; these supplies are connected with Australia, and you are registered and required to be registered for GST.

There are no provisions in the GST Act or any other Act under which your supplies are GST-free or input taxed.

Therefore, the supplies that you make in relation to your other business are taxable supplies. As such, GST is also payable on those supplies.