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Fact check: Does Uber need the law to change?


Technology company Uber is shaking up public transport markets around the world with a smart phone application that connects passengers with drivers of vehicles such as taxis, hire cars, passenger vehicles and in some countries even auto-rickshaws.

In Australia, the taxi industry says it is the victim of a "very uneven playing field", whereas Uber is pressing for what it says are "sensible" changes to the law.

The Uber service that causes the most controversy is uberX, which involves private drivers using their own cars to take passengers without obtaining a taxi or hire car licence.

On September 30, 2015, the CEO of the Victorian Taxi Association, David Samuel, told radio 3AW that "there is a set of rules in place and none of those rules inhibit Uber from providing the service they provide, they just don't want to bear the costs that we bear".

Do laws need to change, or is Uber just trying to dodge the fees that the operators of taxis and hire cars have to pay? ABC Fact Check investigates.

A national controversy

The laws and regulations governing passenger transport vary by state and territory.

Fact Check accepts that Mr Samuel's comments relate to the rules in place in Victoria.

However, the uberX controversy is a national one, with people in other states expressing similar sentiments.

For instance, on October 2, 2015, Russell Howarth, a Sydney-based hire car driver who founded the group Arresting Uber, told broadcaster Paul Murray that "[Uber] don't need to spend hundreds of thousands, they just need to pay the basic minimal regulatory costs..."

In this fact check, we will examine the regulations applicable in each of the states that Uber operates in.

Not just 'ridesharing'

Ride sharing service Uber promises to shake up the taxi industry
Uber produces an app which connects passengers with taxi and private drivers on demand.(ABC: The Business)

Uber does not own any cars or employ drivers.

It is a technology company, backed by big names such as Google and Goldman Sachs, offering a smart phone application.

Using the app, customers can request vehicles and Uber's "driver-partners" can accept jobs.

Fares are paid through the app, with Uber taking a percentage of the amount paid.

Based in the US, it operates in over 60 countries.

It began operations in Sydney in November 2012 and has since expanded to Melbourne, the Mornington Peninsula, Geelong, Adelaide, Perth, Brisbane and the Gold Coast.

According to a spokeswoman, Uber Australia now has over a million registered passengers and 15,000 drivers.

Uber offers different modes of transport depending on the market.

In Sydney, Uber users can request licensed taxis (UberTaxi), licensed hire cars (UberBlack, UberSUV and UberLux) and private vehicles through uberX.

In other Australian cities, Uber offers one or both of uberX and UberBlack.

What are the rules?

Across Australia, commercial passenger services can only be legally provided if certain requirements are met.

Usually this means that the vehicle needs to be properly licensed as a taxi or hire car, and the driver has to be accredited as a taxi or hire car driver.

In Victoria, the rules are set out in the Transport (Compliance and Miscellaneous) Act 1983, while in New South Wales the industry is regulated principally through the Passenger Transport Act 2014 and the Passenger Transport Regulation 2007.

Fact check: Does Uber need the law to change?
The taxi industry has been a vocal critic of the uberX service since its entry into the market.(ABC News: Kathy Lord)

Other states and territories have similar legislation.

The law makes a clear distinction between a taxi and a hire car (sometimes called a limousine or chauffeur car).

In short, a taxi can be hired by the public on demand by being hailed or hired from a taxi rank, with the fare determined by a meter.

By contrast, a hire car can only be used for pre-booked journeys, with rates agreed in advance.

The comparison is often made between uberX and taxi services, but as a spokeswoman for Uber told Fact Check: "ridesharing is a fundamentally different model from taxis."

No Uber service accepts street hails, uses taxi ranks or allows pre-booking.

Given this, Fact Check considers that the closest 'legal' service to uberX is a hire car.

Operating a hire car

In most states, there are no limits on the number of hire car licences the government will issue, but in states other than Victoria a hire car vehicle has to be a luxury car or some form of special vehicle (such as a people mover or vintage car).

In most cases the luxury requirement is satisfied if the new cost of the vehicle is greater than the luxury car tax threshold (currently around $63,000).

The operator of a hire car vehicle needs to obtain the appropriate insurance coverage and premiums are usually higher than those for a private family car.

It is also necessary for a hire car driver to get the appropriate accreditation, which varies between states.

In Victoria a hire car driver needs to take and pass the relevant modules of a knowledge test.

The table below sets out the availability and requirements for a hire car licence in the Australian states in which Uber operates.

The fees below apply to metropolitan areas in each of the states.

StateAvailabilityLicence FeeVehicle type
  • Unrestricted
  • $40,000 licence fee
  • $232.70 application fee
  • $152.40 annual fee
  • Any vehicle less than 2.5 years old at start (maximum 6.5 years old in metro area)
  • Older vehicles can be used if they fall within luxury or other special categories
  • Unrestricted
  • $8,235
  • Luxury vehicle
  • Unrestricted
  • Varies depending on car type
  • Maximum $1,912 annual fee
  • Luxury vehicle
  • Unrestricted
  • Market price
  • Luxury vehicle with long wheel base

  • Unrestricted
  • Varies depending on seats
  • $210 annual fee (5-14 seat vehicle)
  • Luxury vehicle

uberX breaks the rules

Uber does impose some requirements on potential uberX drivers before they start taking passengers.

Drivers have to undergo a criminal history check and a driver history check, and the car needs to have four doors and must be less than 10 years old.

But this does not change the fact that the laws of state governments need to be complied with.

Governments have issued fines to uberX drivers and in New South Wales have sought to suspend the registrations of vehicles being used for uberX services.

The NSW Taxi Council has suggested that Uber has been paying the fines on behalf of the drivers, and there have been reports that Uber will provide rental cars to drivers who have their car registrations suspended.

Uber wants governments to change the rules.

So far only the ACT has announced changes that will legalise uberX and other ridesharing services, although Uber does not yet operate there.

Other states have launched enquiries and reviews, the most recent being Queensland's taxi, limousine and ridesharing review which was announced in October 2015, but is not expected to issue its final report and recommendation until August 2016.

It appears that the Queensland government will continue to receive fine revenue in the meantime.

A spokesman for the Queensland Department of Transport and Main Roads tells Fact Check that "while the review is underway the Queensland Government will continue to uphold the current regulatory framework".

More than $1.4 million in fines have been issued to providers of "illegal passenger transport services" in Queensland since August 2014.

Can uberX operate under the existing rules?

In theory, uberX drivers in Victoria using a car that is less than 6.5 years old can operate legally if they become hire car drivers.

The driver would need to pay a licence fee of around $40,000, pass the knowledge test and pay the higher premiums on their insurance.

However, in practice it is doubtful that uberX's model would survive the higher costs.

Fact check: Does Uber need the law to change?
Uber has established itself in many markets around the world.(Reuters: Kai Pfaffenbach)

Uber's spokeswoman suggests that many UberX drivers only "drive on the platform for a few hours a week to supplement their income", noting uberX drivers include students, retirees and people saving for a special occasion such as a wedding.

By contrast, hire cars are usually in active revenue service for most of the day.

The position is clear in the other mainland states, where hire cars need to be luxury or special vehicles.

It is unlikely that uberX vehicles would meet that requirement.

Uber's spokeswoman told Fact Check that the "top cars used on the uberX platform in Sydney include Toyota Camry, Corolla, Prius and Yaris; Honda Civic and Accord; Holden Commodore and Cruze", the standard models of which all fall below the luxury car tax threshold.

So, regardless of the additional licence cost, uberX cannot fit in within the existing hire car rules in states other than Victoria.

The verdict

Mr Samuel has a point, at least in theory.

Most uberX drivers in Victoria would be able qualify as hire car drivers within the existing legislation.

In practice, the significant additional cost in Victoria is likely to make the uberX business model unviable.

Outside of that state, uberX drivers using non-luxury vehicles cannot qualify as hire car drivers even if they are willing to pay the higher charges.

Ultimately, the existing uberX business model can only operate legally in Australian states if governments change the law.

There is more to the story.