There’s no doubt the need for ride sharing has grown in Australia since its inception. It’s both a convenience for a traveller as well as a great way to earn an income. It’s important to remember, that being an Uber or drive share driver is more than just getting in your car and picking up fares. In effect, you’re operating as a sole trader and as such you’re responsible for registering your business, your bookkeeping and paying your taxes.
It’s not all doom and gloom. There is a wealth of tax deductions that Uber drivers are uniquely placed to claim. You don’t want to miss out on any, because each tax deduction will lower your taxable income and reduce your overall tax bill.
Pro Tax Tip: It’s always a good idea to chat with a tax professional before you start your own ride sharing business. That way, you know exactly what and how you can claim each precious deduction.
There are registrations that need to be opened when you start any small business in Australia. First of all, you’ll need to apply for an Australian Business Number (ABN). Registration is easy. You can use your own name to apply for an ABN if your business is ride sharing. Make sure you have a separate bank account for your business that can be linked to your ABN. You’ll need your ABN to be able to apply for and collect the Goods and Services Tax (GST).
Pro Tax Tip: It’s best not to use your private bank account for your business. That way you can separate your work income from your private income easily.
Unlike other sole traders who need to register for and collect GST when their business turns over $75,000 per annum, ride share and Uber drivers will need to apply to collect GST credits straight away – even on your first fare. If you don’t, you’ll still need to pay the GST, but it will come out of your pocket. As a Uber drive, you’ll need to collect, submit and claim GST credits with your quarterly BAS statement, in addition to your personal income tax you earn as a driver.
Pro Tax Tip: When you collect GST, make sure you calculate GST on the full fare, not the amount you receive after deducting any fees or commission.
GST credits can be claimed back on any fees you receive, including Uber service fees, booking fees, split fare fees and airport fees.
There are a range of tax deductions you can claim as an Uber driver. Tax deductions are work-expenses you’ve incurred as a part of generating an income. These expenses can be used to lower your total taxable income enabling you to reduce the tax you’re obligated to pay.
In order to calculate your tax deductions, you’ll need to know your total earnings, excluding GST credits, list your work expenses, then deduct the amount of expenses from your total income to calculate your taxable income.
Total earnings (excl GST) – work expenses (excl GST) = total taxable income
Pro Tax Tip: When you lodge your BAS, you can claim back the GST credits you’ve incurred, lowering the GST you’re liable to pay. Make sure your accounting software can calculate this for you.
What Tax Deductions Can Be Claimed?
Generally, you can claim expenses for most fares. Deductions include both running and capital costs as long as the expenses directly relate to earning your income.
Pro Tax Tip: To claim any tax deduction, make sure you have proof of the expense, only claim the business portion of the expense and that you have already incurred the expense before you claim.
Running costs are expenses you incur while you’re earning an income. Running costs for Uber drivers include:
- Tolls – you can claim road tolls while on trips or driving to take a fare
- Parking – you can claim each fee, or make a bulk claim of $200 a year for a total of your parking fees if each of the fees were below $10
- Fuel – you can claim the work portion of your fuel. Fuel includes oil costs for your car
- Insurances – before you start any business, it’s best to take out your cover to protect both yourself, your car and your client should anything happen
- Rider amenities – you can claim expenses that make the ride comfortable for your clients. This include water, mints, tissues, and a portion of your spotify account or any other music account
- Repair and maintenance of your car – you can claim the work percentage of costs to keep your car on the road, including exterior and interior cleaning, tyres and necessary repairs
- Lease fees – you can claim lease and rental fees
- Phone and internet – mobile phone, internet and any home office expenses can be claimed, as well as computers, Laptops, tablets and software you may need to run your business
- Vehicle licensing and registration – make sure your apportion your expenses between business and personal use of your car
- Tax agent and bookkeeping fees – professional fees can be claimed and are 100% tax deductible, as are any advertising and marketing costs you incur to promote your business
- Uber fees – these ongoing fees you pay for to Uber for fares are a claimable tax deduction
- Bank fees – fees on bank interest, or bank fees on loans can be claimed, including international bank transaction fees
- Self education – you might feel the need to do a first aid course should something happen to a passenger, or obtain a certificate pertaining to your ride sharing job that will help you do your job better
Capital costs are your tools and equipment, including the cost of your car (should you purchase one) specifically needed for your job.
- The cost of becoming an Uber driver – the fees you pay for your application and police checks can be claimed
- Depreciation – A portion of the capital cost of purchasing your car can be claimed each year. The Australian taxation Office (ATO) has a schedule to work out the useful life of your car and the amount of allowable depreciation
Fuel will be one of your biggest ongoing expenses. It will pay to work out how you’re going to claim before you start. There are two methods and you should work out which method best suits your needs and reaps the most tax deductions for your circumstance.
- Cents Per Kilometre – using this method, you can claim a cost of 72 cents per kilometre up to 5,000 per year per car for each person using the car. This cost covers fuel, depreciation and maintenance expenses. If you use this method, you can’t claim any more running costs for your car
- Logbook – this method is used to calculate your exact work costs to claim a percentage of your running costs on your Uber trips
Pro Tax Tip: The cents per km method requires you to keep a log book or diary of the amount of kms travelled for work. The log book method requires a more comprehensive log book as well as receipts to prove your claims. You’ll need to keep your log book for 12 consecutive weeks then average this data throughout the year. A log book must be kept for each car and can be used over a five year period. The odometer readings at the beginning and end of each financial year must be recorded in order for your original log book to be valid for the 5 year period. If your circumstances change, its best to keep your log book updated.
To keep a logbook that stands up to ATO scrutiny, make sure you write down the date and odometer reading from the start to the end of the shift, and each trip. This can include the kilometres you’ve travelled from your home to pick up for first fare, as well as driving home after your last fare of your shift.
Claiming all of your tax deductions for Uber or drive-sharing can get tricky. It’s worthwhile to chat with a tax agent to make sure you’re claiming everything you can to avoid paying too much tax. Phone 1800 367 487 and chat with a friendly professional today.