How to be Uber smart with your tax responsibilities
23/02/2017 The Hopkins Group
Australia may have been slow to take up Uber originally, but these days, it’s full steam ahead for the thousands of drivers who have signed up with the global ride provider.
The extra income is no doubt a drawcard, but if you’ve been quick to get behind the wheel, have you thought about what impact this bonus salary will have on your tax return?
We’ve looked at some common questions below and provided some helpful answers so that you don’t have to take the foot off the pedal when tax time approaches.
Do I need to declare my Income to the Australian Taxation Office (ATO)?
Yes. Any income you earn is required to be declared to the ATO.
Money made as an Uber driver is still ‘income’ – it should not just be considered ‘cash in hand’ or pocket money that can quietly be slipped under the mattress.
Declaring your income is important – now more than ever – as the ATO is receiving large amounts of soft data from sources such as Uber. If you fail to declare your income, you will not only be required to pay tax, you will also be charged penalties and interest.
What deductions am I able to claim?
You can claim the business use portion of the following:
- Passenger costs, i.e water, mints, etc
- Licensing or service fees paid to Uber
- Mobile phone bills
- Some costs associated with becoming an Uber driver
There may be other deductions available on a case by case basis, so it is important to keep all your receipts to discuss with your accountant at tax time.
It should be mentioned that you are not able to claim the following:
- Costs for your driver’s license
- Fines – parking, speeding, red light, etc
- Clothing or meals
What’s the difference between claiming cents per kilometre and logbook?
Cents per kilometre
- Can only claim up to 5,000 kilometres
- From 1 July 2016 the rate is 66 cents per kilometre
- Using cents per kilometre includes general car expenses such as, servicing, petrol, depreciation etc, therefore not able to claim any additional expenses for your car.
- Must keep a logbook over 12 consecutive weeks, which is required to be updated every five years.
- Your logbook must include the following:
- Date of travel
- Odometer reading at the start and end of the drive
- Number of kilometres travelled
- The reason for the travel
- You may be able to claim the following:
- Car insurance
- Car registration
- Loan interest
To find out more about the kilometre vs log book reporting options, read our blog post 'Get your motor running'.
Click here to download a log book template
Do I need to register for GST?
The short answer is yes. But it’s complicated.
The general rule is that a small business must be registered for GST, if it has a turnover of more than $75,000. Most drivers wouldn’t meet this threshold if they’re just working part time out of hours to supplement their main income. So you’d think they’d be exempt from GST rules? Incorrect.
In August 2015, the ATO announced that all Uber drivers will be required to register for GST – regardless of turnover. Uber recently challenged this in the Federal Court but lost with Justice John Griffiths maintaining that Uber is a taxi service under the law, and should be treated accordingly. So what does this mean? If you’re a driver who hasn’t been paying attention to your GST responsibilities, you could find yourself in a spot of trouble. Speak to an accountant who can help with your registration and make sure you do the right thing.
What do I need to consider in terms of tax when it comes to setting up my new Uber business?
- Open a new bank account that is purely for your Uber income and expenses; this will make it easier to determine what are personal and business related expenses.
- Make sure you keep aside between 30 to 40% of your business income to cover tax payable.
- Engage a Tax Agent such as The Hopkins Group; they will be able to provide advice and assist with completing your quarterly BAS and your Annual Income Tax Return.
- Look into using a software program such as Xero. It gives you the ability to allocate your income and expenses, you can save all your receipts, pull out reports, etc. An accountant at The Hopkins Group can provide you with a demonstration of this handy tool.
Life as an Uber driver does have its benefits, but you need to make sure you play by the rules so the extra work and earnings aren’t in vain. You need to treat your ‘side job’ as a driver the same way you would your ‘day job’ and be responsible with your record keeping and filing.
To discuss your tax responsibilities and make sure you stay on the straight and narrow with the ATO, speak to an accountant at The Hopkins Group on 1300 726 082 or send us an online enquiry.
General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.
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