Working as an Uber driver is a great way to be your own boss, but there are a few tax implications drivers need to understand. Read on to ensure you’re not hit with any nasty surprises come tax time.
Whether you drive for Uber or any other ride-sharing service, you will incur a specific set of tax obligations related to your industry. These obligations apply regardless of whether you work for Uber full-time, part-time, or casually. It’s also important to note that the Australian Tax Office (ATO) wants to know about your full income, including fares, tips, and bonuses.
The first crucial thing to understand is how the ATO classifies your work for Uber.
Are Uber Drivers Contractors or Employees?
The ATO classes Uber drivers as contractors running their own business, not direct employees of Uber. As a contractor, you’ll be able to claim certain expenses on your tax that employees aren’t eligible for. However, you’ll also have a couple of extra obligations. Namely, you will need to register for and collect GST. You’ll also need to lodge BAS forms.
Pro tax tip: Confused about Business Activity Statements (BAS)? ITP’s certified tax agents can help. Contact your nearest ITP branch to speak to a friendly accountant today. We can help you understand your obligations and can even lodge your BAS on your behalf.
Goods and Services Tax (GST)
In Australia, the general rule is that businesses earning over $75,000 per annum need to register for GST and lodge a Business Activity Statement (BAS) each month or quarter. However, Uber drivers must register for GST and lodge their BAS forms even if they’re earning less than $75,000 per annum. Note that you will need to collect the GST on both fares and fees.
New to this whole GST thing? Take a look at our complete guide to the Goods and Services tax for beginners.
Collecting GST on Uber Fares
Ride-share drivers need to collect GST on the money passengers pay for their rides. This includes Split Fare Fees, Airport Fees, City Fees, Booking Fees, and Referral Fees.
Collecting GST on Uber Fees
Uber is considered a service that you use to source passengers, making it a business expense. As such, you’ll need to pay GST on the fees Uber charge to supply passengers.
Between the fees and the fares, calculating how much GST you have to pay can be confusing. Uber calculates this as one transaction and pays you the difference, but in the eyes of the ATO, two separate transactions have occurred. If you’re having any trouble working this out, it’s important to contact an accountant for help. The last thing you want is to get something wrong on a BAS form or make a mistake on your tax return. So it pays to seek support and ensure you understand what you’re doing when you lodge these documents with the ATO.
GST Claims and Credits
In order to claim GST credits, you will need to apply for an Australian Business Number (ABN) and register to collect GST.
You should collect GST from the start of your time as an Uber driver, regardless of how much you earn. And you should charge the full rate of 10% on each fare. Note that, if asked, you’ll need to supply a Tax Invoice for rides over $82.50.
You’ll have to lodge your BAS forms monthly or quarterly as there is no annual option for rideshare drivers. When you lodge your BAS forms, the income stated should only cover the business proportion of your earnings. Remember to keep clear and accurate records of all expenses for at least five years.
Tax Deductions for Uber Drivers
When you lodge claims on your BAS forms or as part of an annual income tax return, they should only include the business related portion of your income. You cannot claim personal costs. However, there are plenty of Uber driver tax deductions you can claim, including:
- Licensing, commission, or service fees paid to Uber
- The cost of becoming an Uber driver, including medical checks and Uber fees
- Water and mints for passengers
- Fuel, tolls, and parking
- Vehicle registration and licensing
- Safety equipment
- Mobile calls
- Costs associated with cleaning, repairing, and servicing the vehicle
- Tax agent fees
- Bank fees (on business accounts)
- Car washes
- Lease payments
- Home office expenses
- Music apps
As you can see, there are plenty of tax deductions for Uber drivers. However, most drivers end up with a few expenses they want to claim that are not legally tax deductible. Particularly when you’re starting out, it pays to have a registered tax agent help you double-check that your tax deductions are accurate.
Claiming fuel and car costs
There are two methods for claiming tax deductions for your vehicle as an Uber driver:
The cents per kilometre method
Using this method, you can claim the following on distances of up to 5,000 kilometres:
- 85 cents/kilometre for the 2023–24 financial year
- 78 cents/kilometre for 2022–23
- 72 cents/kilometre for 2020–21 and 2021–22
- 68 cents/kilometre for 2018–19 and 2019–20
- 66 cents/kilometre for 2017–18
This covers all car expenses including petrol, servicing, depreciation. If you surpass the maximum 5,000 km distance, you can’t make any additional claims.
The logbook method
To use this method, you’ll need to keep a logbook for 12 consecutive weeks, then average it out across the year. For each entry, you’ll need to record the date and the odometer reading at the start and end of the shift. You can include the kilometres you travel from your home to the location of your first ride. Just don’t record your private journeys.
When using this method, you can claim all business expenses related to the operation of the vehicle.
Instant Asset Write-Off
Small business owners have access to the $30,000 instant asset write-off for capital expenses. This means you can instantly deduct the cost of a vehicle used for business purposes. This is one of the most important Uber driver tax deductions to know about and may come in handy when purchasing a new or secondhand car for rideshare driving.
Driving for Uber, Lyft and other ride-sharing services has become popular in Australia, offering an easy way to earn money on a flexible schedule. However, it’s crucial that you understand the tax implications described above before accepting your first ride. if you’re not 100% confident that you know what you need to do to stay on the ATO’s good side, contact ITP today. Our skilled tax professionals have a deep understanding of the rules surrounding the Uber and ride-sharing economy. They can guide you through the process of setting up your business and fill you in on everything you need to do in order to maximise your tax claims. Speak with a Tax Professional today.