Uber and other Rideshare platforms present a unique opportunity for anyone with a car to earn some extra income or to work part time, but they also present a unique set of challenges when it comes to managing your taxes. Here’s everything you need to know in the lead-up to tax time.
Any driver who uses a car to transport paying passengers with a view to profit is engaging in Ridesharing or ‘ride sourcing’. Typically, a website or smartphone app managed by a third party, like Uber, facilitates the transaction.
If this sounds like you, then to operate legally, you need to apply for an Australian Business Number (ABN), register for GST and charge GST on every fare. This will also allow you to declare your earnings, pay the tax you owe and GST.
Applying for an ABN and registering for GST is relatively straightforward.
Provide your tax file number (TFN) and follow the online prompts at the Australian Business Register to get your ABN. Then you can register for GST via the Australian Taxation Office’s (ATO’s) online Business Portal, by phone or through your registered tax agent.
How do you charge GST?
Now that you have an ABN and you’re registered for GST, you’re ready to ride.
To charge your customers GST you need to calculate it on the full fare, not the net amount after fees or commissions are deducted. GST is charged at 10% so, say you earn $100 on a fare and your facilitator charges a $10 commission, then the GST payable is $10.
How do you pay GST?
The GST you pay to the ATO will be the total GST charged to your customers, which you will need to pay quarterly when you lodge your business activity statement (BAS).
You can lodge and pay your BAS online, by mail or in person at Australia Post.
Can you claim GST?
You can claim GST credits on any purchases related to your business, including buying or leasing a car, and operating costs associated with running it, like servicing, repairs and fuel.
The GST credit you claim will depend on whether your purchase is used for business, or privately or both, in which case it will be need to be calculated and divided accordingly. So, if you bought a new car to use for your business 50% of the time, you can claim 50% of the total cost less GST. If in the above example your new car cost $28,000 including GST, you could claim $1250.
The simplest way to work out the proportion of business for personal use, and prove it to the ATO, is by keeping a logbook. Accounting software tools, like QuickBooks Self-Employed automatically tracks and logs your trips to save you the time.
What about other expenses?
You can also offset any legitimate expenses you incur running your Uber or Rideshare business against your taxable income. These include:
- Uber or Rideshare facilitator service fees
- Vehicle depreciation
- Vehicle licensing and registration
- Mobile phone bills where your mobile is used for business purposes
- Vehicle cleaning
- Vehicle insurance
- Accountant/tax agent and bank fees
To claim these deductions, you’ll need to prove each purchase was for business use, or that it’s apportioned correctly, so keep detailed records. Accounting software tools make managing your expenses quick and simple, with the option to connect your business bank account, save your receipts and generate expense reports as you need them.
Do you need to pay income tax?
If you make an income from Uber or another Ridesharing platform, you will need to declare your earnings for the financial year in your tax return.
To calculate your taxable income, calculate your total earnings before any deductions or GST credits you may be entitled to. The Rideshare that facilitates your business may be able to provide you with a record of your total earnings. Then work out the expenses you’ve incurred and deduct these from your earnings. This is your taxable income.
Most Rideshare drivers operate as sole traders and thus pay income tax at the same rates as individual taxpayers.
How do you pay your income tax?
Declare your earnings and taxable income in your normal tax return. If you earn a regular income from Ridesharing, you can choose to pay your income tax in smaller instalments to avoid a larger bill at the end of the year.
If you try to hide how much you’ve earned, or don’t declare at all, you could face hefty penalties from fines and interest charges.
QuickBooks Self-Employed takes the sweat and hassle out of lodging your BAS and preparing your tax return. You can snap and store receipts electronically and easily log your business mileage. With the right information and tools to manage your income and expenses, you can make sure you don’t pay a cent more tax than you need to.