Uber has become very popular in Australia with around 20,000 new drivers signed up since last year. Uber offers flexible opportunity to earn a side income for almost everyone with a good car. And, low price commute options to the community making the taxi industry more competitive.
But there are few important tax things to consider when you register and start driving Uber. If you do not consider these tax points, you might end up accumulated huge tax debts.
Uber tax and GST – Introduction
When you drive for Uber you are not an employee. You’re a contractor. In simple words, you run your own small business on part time or full time basis.
From the Australian Taxation point of view, any income earned with an intention to make profit is considered as assessable income and must be reported in your tax returns.
Therefore, when you sign up for Uber, you should apply for the ABN (Australian Business Number) and must register for GST immediately.
Please see below link if you wish you to apply for ABN and GST Registration for free.
Do Uber drivers pay GST?
From August 2015, the ATO confirmed all Uber drivers are required to register for GST. This means you submit the GST portion of your Uber fares to the ATO which is 10% of your income earned. This is in addition to the tax you need to pay for income you earn as a driver.
Uber Inc has challenged ATO regarding GST and the case is still in dispute. But to be on the safe side, it is recommended to follow ATO Guidelines.
Uber drivers should register for GST then start to lodge quarterly a BAS statement and pay GST obligations. If you don’t do this, you’re asking for trouble with the ATO and Uber is unlikely to help you out of your personal ATO troubles – it’s not like the State Transport fines that Uber sometimes covers for you.
How do I pay the ATO’s Uber tax?
If you are making extra income from Uber, it must be declared when filing your tax return for the financial year.
Warning and Precaution for Uber Drivers: Make sure that you do not spend all your Uber income as you might end up having huge tax debts and will not like your Tax Accountant.
Especially if you drive for Uber in addition to another job, it’s important to save a good portion of your Uber earnings
Being Uber experts, we recommend saving up to an average of 30% of your Uber Income to pay 10% GST and 20% of Income Tax. These ratios are only average and will vary depending upon individual circumstances
You will also be required to lodge a business activity statement (BAS).
Need help predicting how much you should save? It’s not simple, so talk to a tax agent. And when in doubt, save a bit extra; it’s much nicer to get a tax refund than to find you owe money to the ATO.
Tax Deduction you can claim as Uber Driver
There are a range of tax deductions you can claim as Uber drivers.
Your car is regarded as an asset for your small business and in simple words anything related to your car is tax deductible expense. Examples are
- Car maintenance
- Car cleaning costs
Along with these expenses, you can claim additional costs that are directly related to becoming and operating as an Uber driver, such as:
- Costs of registering as an Uber driver (application fees, medical and police checks etc.)
- Work-related parking expenses
- Cleaning Expenses for Car (car washes, carpet washes etc.)
- Mints and water for passengers
- Mobile phone costs
- Apple or Android subscription fees
Maintaining a Logbook and record of expenses
To claim your car related expenses, it is very compulsory to maintain a logbook for a continuous period of 12 weeks.
Mainly this is because ATO does not want you to claim your personal kilometres such as driving to IGA or Coles for grocery shopping or visiting a friend.
A logbook can be maintained on a simple notebook sold at Officeworks or using ATO or Logitfleet Care App.
A part from Logbook, it is also important to maintain records of your business expenses which can be done on excel sheet, handbook or a software.