The Uber ride sharing service has been in the headlines a lot recently. If you’ve never tried Uber before I’d highly recommend you give it a go, even just to understand what all the fuss is about.
While this is an incredibly unique and innovative service allowing many people to earn a second income in a flexible manner, it is important to remember that signing up with Uber to provide ride sharing services to the public is a business. You are not an employee, Uber treats you as a contractor. As such, if you sign up with Uber without first seeking some professional advice regarding the tax implications of the income earned you could be heading for a number of unforeseen issues.
Do I need to pay tax on my Uber income?
Even if you stop reading this article right now please take note of this one important warning – Don’t spend everything you earn from Uber, some of it belongs to the ATO!
If you are an Uber driver you will need to declare all the income received from customers in your tax return for the year. By offering your vehicle to the public for a fee you are running a business and must report the income.
Do not try to hide the income earned from Uber, we cannot stress this point more strongly. The ATO’s data matching capabilities are far more advanced now than they have been in prior years. They are aware that you are working for Uber and that you have received payments in regard to the service. Failure to report the income will only result in fines, penalties and interest being applied on top of the tax you owe.
What deductions are available as an Uber driver?
As a business owner there are a range of tax deductions you can claim against your Uber income. Most of these deductions will relate to the cost of operating your motor vehicle. The best way to claim vehicle expenses is to keep records of all your expenses and complete a vehicle logbook. This will allow you to claim a percentage of all the expenses of owning and operating your car:
- Fuel & Oil;
- Registration & Insurance;
- Repairs & Maintenance (vehicle repairs, cleaning, new tyres etc);
- Interest (if your vehicle is financed).
Along with these vehicle expenses you can also claim a range of other costs if they directly relate to your Uber income, such as:
- Bank Fees;
- Costs of registering as an Uber driver (application fees, police checks etc.)
- Parking expenses;
- Water, snacks and the cost of other items provided to passengers;
- Mobile phone costs;
- Music subscriptions (e.g Spotify) for use in the vehicle
Uber and GST
In August 2015, the ATO confirmed all Uber drivers are required to register for GST. Which means Uber drivers will now need to complete and lodge Business Activity Statements. While most businesses are not required to register for GST until their annual turnover reaches $75,000, Uber drivers must pay GST on every dollar earned. This brings the ride sharing platform in line with the rules applied to taxi operators. The GST portion (10%) of every Uber fee you collect must be submit to the ATO.
Uber is currently challenging this decision in the courts and a decision is pending on this. However, for the time being the rules are in place and we strongly disagree with any advice being given to Uber drivers in regard to ignoring the new rules until the court decision has been finalised. This is not an appropriate manner in which to deal with the ATO. You must lodge your Business Activity Statements on time and make the required payments in full. If the court’s final decision is favourable for Uber then the documents can be amended and the payments refunded by the ATO if necessary. Better safe than sorry as they say.
Working with Panic Atax
Panic Atax is a Brisbane based Accounting and Business Advisory firm specialising in building strong relationships with clients and removing the stress and hassle many small business owners experience around financial reporting and tax. If you’re looking for an accountant to build a great, long term working relationship with we’d love to hear from you.