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Ride Sharing, Taxis and Fringe Benefits Tax – What are your Obligations?

Employee travel has long caused employers headaches when it comes to Fringe Benefits Tax (FBT) and claiming deductions. For those organisations that require employees to travel fairly regularly for things like meetings, seminars and other events, providing this travel is often a great way to ensure that your team get where they need to go safely. But at the back end of all of this are some unclear rules around which travel services trigger FBT, and in which situations an FBT exemption may apply. Thankfully, the ATO has now clarified these issues, so if your employees are soon to be travelling in a taxi or ride-share service, make sure you’re aware of the following:

Taxi Travel

According to the ATO, “taxi travel by an employee is an exempt benefit if the travel is a single trip beginning or ending at the employee’s place of work”. They have also pointed out that taxi travel is also exempt from FBT if the journey is made because the employee is sick or injured, and all or part of the journey is directly between the employee’s place of work; the employee’s home; or any other place that is necessary, or appropriate, for the employee to travel to in that situation (e.g. hospital or a General Practitioners clinic).

Uber (and other ride-sharing services)

The exemptions above apply to taxi travel, and are therefore limited to travel undertaken in a vehicle that is licensed as a taxi in the relevant State or Territory. The ATO has confirmed that the exemptions do not extend to travel undertaken in a ride-sharing service (e.g. Uber, Ola, Lyft) or other services where a taxi license is not required to be held.

What does this mean for employers?

It is worth noting that business-related trips will not be impacted, whether using a taxi or ride-share. These will generally be treated as a deductible expense and therefore not subject to FBT. However, for travel between home and a place of work, the trip will not qualify for an FBT exemption if a ride-sharing service is used, irrespective of the reason for the trip (e.g. sickness); unless it falls within the ‘minor benefits’ exemption. For that to apply, it has to be both less than $300 in notional taxable value, and unreasonable to be treated as a fringe benefit, for example if it is a particularly infrequent occurrence. The more frequently and regularly a benefit is provided, the less likely it is that the benefit would qualify as an exempt benefit. Also, any amounts exempt from FBT under the ‘minor benefits’ exemption are not tax deductible.

Not for Profit (NFP) organisations may receive concessional treatment from FBT for certain benefits that they provide to their employees, depending on the type of NFP organisation.

Employers may need to consider if the potential cost savings using a ride-sharing service rather than a licensed taxi service are not outweighed by the exposure to FBT. If you need assistance with your employee benefits, and the tax obligations surrounding them, don’t hesitate to get in touch with expert tax accountants in Joondalup at McKinley Plowman today on 08 9301 2200 or visit www.mckinleyplowman.com.au/contact-us/.

written by:

McKinley Plowman