Uber is a great way to make extra money, right? Seems like everyone else is! However, before you start there is some tax stuff you need to consider.
Uber can have a number of tax implications to know before getting started. It could mean the difference between some extra cash in your pocket and thousands of dollars in tax debts!
(1) Income Tax
“You CANNOT spend all you income! Save a portion to pay your tax!”
Individuals under the employed of a company are classified as an employee. The employer is legally required to withhold tax from the employee’s wages as a result. Employee’s personal income tax obligations can be subsequently met and the individual is not caught with large income tax bills at the end of financial year. NOT the case with Uber! Drivers are paid their wage without any income tax withheld because they are considered to be ‘contractors’. Consequently, it is up to the individual to make sure they keep a portion of their money to pay the income tax due on that income. Speak to an accountant or tax agent to ensure you keep enough money to pay your income tax as it can be tricky to work out!
“ALL Uber drivers must be registered for GST, which means BAS lodgements!”
In the new age of the sharing economy such as Airbnb and Uber, the ATO is having to address new tax questions. Subsequently, ALL Uber drivers must be registered for GST according to the ATO. So what does this mean? Every Uber driver must declare to the ATO the GST portion they collect on fares they have received. As a result, Business Activity Statements (BAS) must be lodged by each driver to the ATO summarising the fare sales they have made each quarter and how much GST they collected on those fares. A BAS Agent, Tax Agent or the individual themselves through an Auskey can lodge these BAS. Consequently, drivers are liable to pay to the ATO the GST they have collected. However, there is a plus side! Uber driver related expenses that are deductible as part of the service, the GST you pay on these expenses are claimable. The GST liability payable to the government can be reduced because of the GST you have paid on your expenses. Note: you can only claim the GST you have paid on expenses relating to your Uber driving.
Such GST claimable expenses/deductions are:
- Uber registration and all relevant formal checks required
- Motor vehicle registration, insurance and maintenance
- Motor vehicle fuel, part replacements and cleaning
- Amenities for passengers, any music subscriptions for the vehicle and parking fees
- Office supplies in the organising of Uber BAS lodgement requirements
- Mobile phone bills (at a percentage of business use)
Drivers must keep up to date with the changing laws surrounding all areas of the sharing economy.