Uber has become a popular way for Australians to earn additional income. However, drivers can find themselves potentially getting into serious tax related problems unless they do it right.
The concept of being an Uber driver is unique and gives drivers a flexible opportunity to earn additional income for anyone who owns a good quality car.
When driving for Uber there are important things to consider regarding how you manage your taxes.
If you start to drive for Uber without some good tax planning, you could soon have an ATO tax debt in the thousands, even tens of thousands of dollars.
There is no need to worry, if you spend a bit of time planning and you stay organised you will be able to ensure you’re on track for a friendly relationship with the ATO.
Uber tax and GST
When you drive for Uber you are not an employee. You’re a contractor. Here’s why that is important: When you’re not an employee, you have to be careful that your tax affairs are managed correctly. That’s why most Uber drivers should use a tax agent.
From Uber themselves:
All Uber partners are independent contractors, so we do not withhold any taxes and partners are entirely responsible for their own tax obligations.”
The ATO’s Uber tax implications are straight-forward at a basic level:
- Any money you make driving for Uber counts as income, meaning you must declare it on your Tax return.
- Even if you earn less than the $75,000 GST income threshold, as an Uber driver you need to register for GST.
Uber and GST
Drivers need submit the GST portion of your Uber fares to the ATO in addition to the tax you pay for the income you earn as a driver.
So, right from the start Uber drivers should:
- Register for GST and pay GST on fares
- Lodge quarterly a BAS statements
If you fail to 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’re an Uber driver, you’ll need to declare the income you’ve generated in the financial year on your tax return.
It’s important to avoid spending all of your Uber income.
Especially if you drive for Uber in addition to another job, it’s important to save a good portion of your Uber earnings.
Why? Because as your income is boosted by your Uber driving, your tax bill is boosted as well. If you don’t save for that, it can be a nasty surprise at tax time. During your first year driving for Uber, you should put aside at least 30, even 40 per cent of what you earn from Uber.
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.
The tax benefits of being an Uber driver
There are a range of tax deductions you are eligible to claim as an Uber driver. Here are just a few work-related expenses that become tax-deductible when you drive for Uber:
- 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:
- Work-related parking expenses (keep receipts and add them up, or claim up to $200 a year for your parking charges less than $10 each)
- Mints and water for passengers
- Special cleaning costs (car washes, carpet washes etc.)
- Relevant Spotify, Pandora or Apple subscription fees
- Mobile phone costs
Keep a record of all Uber driving expenses
If you are wanting to claim any of the previously mentioned deductions, you’ll need to be vigilant. When it comes to claiming costs directly related to your vehicle, you’ll need to keep a record just like you would for any other job.
To keep track of all the kilometres you’ll be driving, you should keep a logbook. This allows you calculate the work-related portion of your car use, in a way that the ATO respects. Then, you can properly claim a wide range of vehicle-related expenses.
Popular second-income sources like Airbnb, Ebay and Uber make some people wonder, can I just spend my extra income, and leave it off of my tax return? There’s a very simple answer to that is “No, don’t do that”.
Your activity as an Uber driver is very much “out there” for the world to see. Your name and plate number are shown right on the Uber app. The ATO can easily determine your actual income from Uber. The ATO can even see your bank accounts if they really wanted to.
It will be simple for the ATO to find Uber drivers who don’t declare (or who under-report) their income. The likely consequences for people who hide their Uber income: Huge tax repayments, fines and interest charges. The ATO does not play games with this sort of thing and it is not taken lightly.
Be honest and transparent with the ATO. You’ll be better off in the end and you will sleep well at night.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)
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