Are you an Uber driver? Beware the tax side effects!
Uber drivers are considered to provide taxi travel services, so if you are an Uber driver please take the time to familiarise yourself with the tax & GST facts.
Uber has been active in Australia around 2014. Since that time there has been some uncertainty about how the ATO would treat Uber and ride-sourcing from a tax perspective.
However. in a recent case the Federal Court of Australia has handed down its decision that ride-sourcing is in fact treated as taxi travel.
For this reason the ATO are dedicating resources to ensure that taxpayers who earn income from ride-sourcing services, such as Uber, are correctly complying with their income tax and GST obligations. In particular, the ATO will be data matching information provided by banks etc, to detect those who are not properly declaring income from Uber.
It seems that there is still a great deal of confusion about the tax obligations of Uber drivers. In this article we will dispel any myths and answer the common tax questions we receive about Uber.
What is ride-sourcing?
Firstly, let’s have a look at how Uber’s ride-sourcing business model works.
- Drivers: you, as the driver, make your car available for public hire and use it to transport passengers for a fare with an intention to profit.
- Passengers: a passenger requests a ride to a set location using a website or smartphone app provided by a third party (facilitator) to request a ride, i.e. Uber, GoCar etc.
- Uber: facilitates the ride-sourcing service arrangements by linking passengers to drivers and collecting payments through a technology platform maintained by Uber.
- Payment arrangements: Typically, a website or mobile device application is used to facilitate a transaction between a driver and a passenger. Uber passes on the payment directly to the drivers’ bank account after deducting a set commission fee.
I’m an Uber driver; what do I need to do?
If you do not have an Australian business number (ABN) and are not registered for GST, you must get an ABN and register for GST as soon as possible.
It’s also important to know that if passengers request a tax invoice, not just an invoice, for a fare over $82.50 (including GST) you must provide one. If the facilitator cannot do this on your behalf, you’ll need to use a tax invoice book with your ABN on it.
You are required to lodge business activity statements (BAS) and pay any GST on the full fare received from passengers for each trip by the due date.
Are there GST consequences of Uber?
The short answer is yes.
Under GST law, if you carry on an enterprise and provide taxi travel services in that enterprise, you are required to be registered for GST regardless of your turnover.
Generally, a business is not required to compulsorily register for GST unless they anticipate a turnover of $75,000 or more. However, taxi travel services are governed by different rules which you can view here on the ATO website.
It’s important to note that the ATO regards an enterprise is an activity done in the form of a business. If you provide ride-sourcing services to the public you are likely to be carrying on an enterprise.
For more information about GST and how to best manage your GST obligations, please read our article Let’s Get Clear About GST.
How do I report Uber income in my tax return?
Unless you have purposely set up a separate entity to carry on your Uber ride-sourcing services, your business structure will be sole trader. When you operate as a sole trader, the income you earn is recorded under your personal tax file number (TFN) when it comes time to prepare your income tax return. That means any income from ride-sourcing services will be reported in a business schedule in your personal tax return. Expenses you incur in running the ride-sourcing business will also be deductible.
Please be mindful of the fact that if you incur an expense that is both related to your business and is private or domestic in nature, you can only claim a deduction for the work-related proportion of the expense.
As an Uber driver, can I claim car expenses?
Yes you can claim car expenses. However, the Australian Taxation Office (ATO) expects that most ride-sourcing drivers will use their car for both personal and business use. This means you will need to apportion any car expenses deductions between personal and business use.
The ATO uses data-matching to identify people who provide ride-sourcing services to ensure that they comply with the taxation law.