Uber is a unique and flexible business model of earning income in Australia for anyone with a car that is less than 10 years old. In other words, Uber is ride sharing platform for anyone who wants to earn additional income at your own flexible time. If you start driving for Uber without knowing the tax implication, you could soon land yourself in trouble with the ATO over income tax that you need to pay. But this can be easily solved with proper tax planning and you are fully equipped with basic tax requirement. Hence, it’s important to engage a tax agent to handle your tax affairs.
When you drive with Uber, you are NOT an employee. Instead you are an independent contractor. In other words, Uber does not withhold ay taxes. With this in mind, you as a contractor are required to register yourself with GST. Why do you require to register yourself as GST when driving with Uber? A simple explanation – ATO has confirmed all Uber drivers are required to register for GST. It means you must submit your GST portion from Uber fare to the ATO. And of course at the same time you are entitled to claim the GST portion from the expenses you incurred. This is in addition to the income tax that you need to pay at the end of the financial year 30th June.
The basic rule of GST registration is,
- when your business or enterprise has a GST turnover (gross income minus GST) of $75,000 or more
- when you start a new business and expect your turnover to reach the GST threshold (or more) in the first year of operation
if you’re already in business and have reached the GST threshold - if your non-profit organisation has a GST turnover of $150,000 per year or more
- when you provide taxi or limousine travel for passengers (including ride-sourcing) regardless of your GST turnover – this applies to both owner drivers and if you lease or rent a taxi
- if you want to claim fuel tax credits for your business or enterprise.
From August 2015, the Australian Taxation Office (ATO) ruled Uber drivers MUST register for the GST even though if they earn less than total income of $75,000 per year. What does this means? It means Uber drivers must pay 10% GST on a commision of about 25% to Uber from the first dollar they earn.
There are tax benefits being an Uber driver
As an Uber driver, you are able to claim a range of tax deductions. The following deductions are your running costs being an Uber driver,
- Registration or Rego
- Fuel such as Petrol, Diesel or Gas
- Insurance such as CTP, third party property damage, commercial insurance
- Car cleaning
- Car servicing such as car maintenance, repair, change or rotate of tyres, etc
- Parking expenses – claim up to $200 a year or keep your receipts and add them up
- Mobile phone charges
- Mints and water for passengers
- Subscriptions such as Spotify, Pandora Radio, Tidal Music, Apple Music, etc
- Uber ride service fee
- Other charges such as tolls, airport charges and government fee
- Stationeries – pens, note pads, etc
Important Notes
- Don’t spend all your Uber income. Set aside the 10% GST portion of your Uber income for your BAS. For example, if you earn Uber fare of $4,400 per month as per your Uber monthly statement. The $4,400 Uber fare includes 10% GST which is calculated to be $400 GST. Keep $400 aside for your BAS.
- Always keep your receipts for the above deductions.
- Although your Uber monthly statement shows the total distance travelled, you must also keep a logbook for 12 continuous week.
- You cannot hide your Uber income. The ATO is able to retrieve your actual total income earned as an Uber driver.
- Be honest and transparent with the ATO. The consequences for Uber drivers who under report or hide the income to the ATO attract penalties, compound interests.
Remember don’t get caught with the ATO tax legislations. If you want to be an Uber driver, consult a tax agent for Uber tax advice.
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