The Sharing Economy and the Legalities of Ridesharing App, Uber

Services like Uber and Airbnb are disrupting industries by connecting suppliers and consumers through a new, affordable platform. These companies have attracted controversy Australia-wide as to whether the sharing platforms can exist in our legal framework. With the innovative and rapid surge of these services, the law is struggling to keep up.

The Sharing Economy

The sharing platforms are quickly becoming a major player in Australia’s economy. From the ride-sharing service, Uber, to the room-sharing platform, Airbnb, all the way to meal-sharing apps, like Foodora and Deliveroo, the sharing economy is becoming the fashionable way of doing business.

These platforms reduce transaction costs and individual contracts, offer low barriers to market entry and make life easier for the consumer.

As current laws were introduced to comply with the traditional economy, it is not surprising that some uncertainties surround these platforms. The sharing economy is not illegal in itself. However, Uber provides the perfect example of how each service attracts its own legal concerns.

The Legal Issues

1. Employment Rights

Uber’s business model raises the subject of employment rights due to the difficulty of characterising the drivers as employees or independent contractors. There are several criteria to consider to identify a worker’s employment status, including:

•    The degree of control over the work performed;
•    Hours and mode of remuneration;
•    Allocation of annual leave and sick leave;
•    How the equipment is provided to complete work; and
•    Who assumes the responsibility of paying tax.

Arguably, the relationship between Uber and its drivers is more characteristic of an employment relationship, as the drivers pay commission for each ride and Uber controls the way in which they do business. However, each driver chooses their hours, provides their own car and is covered by their own insurance policy, in addition to Uber’s insurance policy. Evidently, the lines are blurry, demanding the need for a clearer determination.

2. Tax

The primary concern regarding the legalities of Uber is the potential for tax avoidance. In response to this concern, the Australian Tax Office (ATO) confirmed the following tax implications:

• All Uber drivers must declare any income earned in their Tax return; and
• Since the 1st of August, all Uber drivers are required to register for GST as a “tax travel” service under GST law.

3. Insurance

Currently, taxis and hire cars are insured as a separate vehicle class to ride-sharing services, such as Uber, which have been considered as private passenger vehicles. Consequently, there is a disparity between insurance laws, and a significant cost difference for compulsory third party (CTP) insurance. The states to combat this inconsistency are considering new CTP schemes for ride-sharing platforms.

Uber and Ride-Sharing Laws in Australia

Ride-sharing laws never existed in Australia – enter, Uber. Uber has been the most controversial of all the sharing economy industries. In 2012, Uber introduced the new service of ride-sharing. With its increasing popularity, Australia has been forced to create a set of laws and regulations for ride-sharing services. While there have been no steps towards Federal laws, some states have demonstrated their support of the sharing-economy by legalising Uber.

The ACT became the first Australian jurisdiction to legalise ride-sharing services, in October 2015. NSW followed shortly after in December and Western Australia and South Australia earlier this year. Victoria is the latest Australian state to announce the legalisation of ride-sharing, while Tasmania and Queensland are taking small steps to follow suit.

Each state has introduced various laws to regulate the ride-sharing service. For example:

• In the ACT, Uber drivers must pay $100 per year for a Public Vehicle Driver Authority Card and obtain regular police character checks, driver history checks and health checks;
• In NSW, Uber drivers are required to apply for a one-time private hire vehicle accreditation at $45;
• Victoria has imposed a $2 booking levy for every Uber customer. This has been said to even the playing field, promoting fair competition between Uber and other taxi services.

Key Takeaways

Although these services are the perfect fit for our digital, entrepreneurial, collaborative era, they are somewhat alien to our traditional laws and regulations. Therefore, unsurprisingly there has been a call for legal development to control these new services.

In a society that promotes innovation and new ways to advance the economy, sharing platforms appears the way forward. But before you rush off to create your new sharing platform, make sure that you understand the legal implications. Get in touch with our startup lawyers on 1300 544 755.