Private ruling: Vehicle hire travel
Published: January 2013

Ruling: Q2: Are you liable for GST on the vehicle travel? Advice Yes



Reasons for decision: Summary: You advised that the vehicle operator contracts you to drive a vehicle to transport passengers for a fare. The vehicle operator pays you a commission based on the total fare charged. The first issue to consider is whether you are providing a supply of vehicle travel as defined by section 195-5 of the GST Act. 1. Are you required to be registered for goods and services tax (GST)? Under subsection 144-5(1) of the GST Act, an entity is required to register for GST if, in carrying on its enterprise, it make a supply vehicle travel. Subsection 144-5(2) of the GST Act further states that It does not matter whether: · the entity's GST turnover meets the registration turnover threshold; or · in carrying on its enterprise, the entity makes other supplies besides supplies of vehicle travel. That is, an entity that provides vehicle travel is required under section 144-5 of the GST Act to register for GST, regardless of their GST turnover. Taxi travel is defined in section 195-1 of the GST Act to mean 'travel that involves transporting passengers, by vehicle or vehicle, for fares'. That is, a vehicle service to transport passengers is similar to and essentially in competition with a vehicle in the vehicle industry and is therefore considered 'vehicle travel'. The specific industry issues register (issues register) provides the Australian Taxation Office (ATO) view on the GST implications of driving a vehicle/vehicle. It provides the following: For other businesses, the GST registration turnover threshold is $75,000. For vehicle drivers, including chauffeur driven vehicles and hire cars, there is no registration turnover threshold. This means that anyone who drives a vehicle, chauffeur driven vehicle or hire car, must register for GST, unless they are an employee for pay as you go withholding (PAYG withholding) purposes… Most drivers are under a bailment arrangement. This means that you make a payment of some kind that allows you to use the vehicle to drive. 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. In unusual cases, a person may be an employee in the vehicle industry. An employee works for the owner or leaseholder of a vehicle and is paid an hourly rate or weekly wage that is independent of the vehicles actual takings. Employees are subject to PAYG withholding on their earnings. That is, amounts of tax are withheld by their employer and sent to us. The amounts withheld will be credited against the employee's income tax liability when they lodge their income tax return after the end of the financial year. Employees will not have to account for GST. Records of expenditure will still needed to be provided to your employer. The employer is considered to be the person providing vehicle travel In the case of the Commissioner of Taxation v Deluxe Red and Yellow Cabs & Ors [98 ATC 4466] it was held that the relevant relationship between vehicle drivers and operators was one of bailment, rather than of employment or the provision of labour. In effect, this means that each vehicle driver is self employed and carrying on his or her own business whether or not a formal bailment agreement exists. In summary, where the driver is an employee of a vehicle operator, the vehicle operator makes the supply of vehicle travel and is therefore required to register for GST under subsection 144-5(1) of the GST Act. The driver being an employee is not required to register as they are not conducting an enterprise. However, if the driver is self employed and carries on his or her own business whether or not a formal bailment agreement exists, the driver is making a supply of vehicle travel when they drive a vehicle or vehicle to transport passengers. In this case you drive a vehicle to transport passengers. You do not work for the vehicle operator for an hourly rate or weekly wage. You receive a commission to transport the passenger. You have also provided your ABN to the vehicle operator so that the vehicle operator does not withhold Pay As You Go (PAYG) from the amount owing to you. Hence, you are not an employee of the vehicle operator. The vehicle operator retains part the total vehicle fare as a charge for a bailment arrangement between you and vehicle operator, even though you do not have a formal bailment agreement. Hence, you are required to be registered for GST under subsection 144-5(1) of the GST Act for your supply of vehicle travel. 2. Are you liable for GST on the vehicle travel? Under section 9-40 of the GST Act, an entity must pay the GST payable on any taxable supply that they make. Under section 9-5 of the GST Act, an entity makes a taxable supply if: (a) the entity makes the supply for consideration (b) the supply is made in the course or furtherance of the entity's enterprise (c) the supply is connected with Australia; and (d) the entity is registered, or required to be registered. However the supply is not a taxable supply to the extent that it is GST-free or input tax supply. Your supplies of vehicle travel satisfy all the criteria in section 9-5 of the GST Act. You make a supply of vehicle travel in which you are required to be registered for GST under subsection 144-5(1) of the GST Act. You provide the vehicle travel for consideration in the course of your enterprise and your supply is connected with Australia. In addition, the supply of vehicle travel is not GST free nor input taxed under any of the provisions under the GST legislations As your supply of vehicle travel is a taxable supply, you are therefore liable for GST under section 9-40 of the GST Act. You will need to account for GST in your activity statements. As a contract driver you are required to pay your own income tax. For Superannuation enquiries please phone 13 10 20 for advice.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You are not registered for the goods and service tax (GST). | You have an Australian Business Number (ABN). | You have been contracted to drive a vehicle. | Your GST turnover is less than $75,000. | The vehicle operator pays you a GST inclusive commission base on the total vehicle fare. | You confirmed that you do not have a bailment contract with the vehicle operator. | You do not incur any expenses in operating the vehicle.