Tax Office investigating Foodora before exit over millions in unpaid … – The Australian Financial Review

An Australian Tax Office investigation into Foodora over millions of dollars in unpaid taxes and superannuation was the cause behind the on-demand food delivery company going into administration this month.
Documents provided to creditors last week reveal that the ATO and Revenue NSW had been auditing Foodora for the past two years over concerns that its riders were employees and not independent contractors and were preparing claims over unpaid superannuation, payroll taxes and Pay As You Go taxes.
Foodora was notified of the NSW Revenue investigation as far back as March and of the ATO audit on August 2, after the company announced its exit from Australia.
The NSW Revenue office has deemed that Foodora riders are in fact employees, not independent contractors. Eddie Jim
The ATO's claims would have meant Foodora was liable for millions of dollars in unpaid taxes and came on the back of a landmark legal action against the company over "sham contracting", which could have made it liable for three years of minimum wages and conditions.
Foodora announced on August 2 it would exit the country on August 20, claiming its German-based parent company, Delivery Hero, wanted to focus on other markets.
The company then unexpectedly went into administration mid-August, appointing Worrells Solvency and citing "significant external challenges" in exiting the country solvent.
Administrator documents reveal that Foodora engaged Worrells back in July 26 to oversee a "closure plan" and plan for a "solvent winding up".
Worrells said "it later became apparent that a solvent winding up to facilitate the company's closure of its operations became untenable, due to further claims that arose from audits conducted by the ATO and Revenue NSW surrounding the basis upon which the delivery riders were engaged by the company".
"We understand that these further claims then resulted in the parent company, Delivery Hero SE, indicating its intention to withdraw financial support to the company," the document said.
Despite the ATO auditing Foodora since 2016, the company's current directors and its external accountant told the administrator they had not been aware of the audit until August 2.
The ATO has since notified the administrator it is preparing an assessment against Foodora for outstanding taxes from July 1, 2015 through to June 30, 2016 with penalties and interest, and is completing an audit for subsequent years.
"Whilst we have not received confirmation in writing to date, their advice appears to suggest that they have now deemed the subcontractors to be employees," Worrells Solvency said.
Further, the administrator said Revenue NSW has "now determined" Foodora riders are common law employees and these contracts attract payroll tax.
A creditors meeting will take place on Wednesday afternoon, with the Transport Workers Union representing Foodora riders over payments for final shifts.
But according to the administrator's report, Foodora has just $501,271 in the bank and Delivery Hero is claiming its subsidiary owes it more than $28 million. Tax liabilities are yet to be determined.
TWU national secretary Tony Sheldon said "not only were Foodora ripping off riders for years it has now been confirmed they were ripping off taxpayers".
"Instead of paying its taxes the company decided to cut and run, potentially leaving millions of dollars unpaid," he said.
The TWU has written to new Industrial Relations Minister Kelly O'Dwyer to call for the government to require Foodora to set up a fund to compensate riders for "stolen entitlements and unpaid wages", ensure it pays taxes before departing Australia and protect other workers in the gig economy.
Revenue NSW and the ATO declined to answer questions about the audits or determinations due to "obligations of confidentiality".
However, the ATO said the Tax Office was "reviewing the sharing – or gig – economy and engaging with the industry to confirm how the law applies and the resulting tax and super obligations for businesses and workers in the sector".
"We plan to issue guidance about the taxation implications for the gig economy delivery driving industry later this year, noting that each case is different and will turn on its facts."
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