When you drive for Uber, it’s important to know what your Uber driver tax obligations are. This driver got it right from the start. Here’s how:
Judah is a professional person working a professional job. He’s university-educated with a full time job in his chosen career. Judah is also an Uber driver, and he’s doing well at it. Before he started he stalked to a tax agent about Uber taxes so he saved himself a heap of ATO trouble.
Uber requires drivers to maintain a customer rating of 4.67 out of five. That keeps me thinking about good service.”
Judah’s positive approach to customer satisfaction is also fueled by his financial success driving for Uber.
Driving on Friday nights and weekends gives Judah a decent income. “Uber made it possible for me to save a chunk of money in the months leading up to my wedding.”
Newspapers and the Uber community have both been buzzing with news about the ATO’s “war on Uber”. The ATO announced that all Uber drivers are required to register for GST, even if their income is under the $75,000 GST income threshold applied to other types of workers. Uber, backed by big investment dollars, is taking on the ATO in court. Meanwhile, what is an Uber driver to do?
Playing it safe is the way to go – it’s not so hard, and I have no worries about my Uber Driver tax issues,” says Judah.
How did Judah set himself up so well?
He followed eight basic steps that set him up for Uber success:
- Open a new bank account ONLY for your Uber income and expenses:
“…this makes it way easier for me to keep track of everything for my tax return, ATO instalments and GST.”
- Get an Australian Business Number (ABN).
- Register for Goods and Services Tax (GST).
If you haven’t applied for an ABN yet, you can do that at the same time as registering for GST. Or if you already have your ABN, you can register for GST directly with the ATO. “A tax agent can do all that for you and it’s just a small one-time cost, so no big deal”, said Judah.
- Keep good records, all the time. Use a proper small business system. Judah said, “I’m going to start using Xero to manage my finances. Connecting that to my Uber bank account, plus saving all my receipts and the great reports that Uber provides – it is pretty easy to get Uber driver tax 100 per cent right.”
- Keep a logbook. This is how you prove a work-related percentage of your car use, letting you claim important ATO tax deductions to lower your taxes. It takes a bit of patience and you have to record your travels every time you get out of your car (personal use included!). But, you only have to do that for three months, then you’re set for five years. It’s well worth it at tax time each year! Here’s more info about car logbooks.
- Keep track of expenses. Judah had a great example that shows why keeping receipts plus using a logbook is important:
“My logbook shows that over eighty per cent of my mileage is from Uber driving. Last month, I had to get a piston replaced in the engine of my car and it cost over $2,000. Because of my logbook, I know I can claim eighty per cent of that expense, so I’ll get part of that money back when I use it as a tax deduction for car expenses.”
- Save for your tax bill. This is the hard part for some people to swallow, but it is absolutely critical.
“Because I also have a day job, my extra earnings with Uber would make my tax bill much, much higher.”
Judah is right. In the first year driving for Uber, a driver earning $50,000 for the year may need to save around $9,000 for tax time. But if the same person also works a day job earning, say, $70,000, then he or she will need to save over $19,000 to pay the ATO at tax time. Judah says, “I’m saving thirty-four per cent of my net Uber earnings to pay the ATO, just to be sure I don’t get caught with an ATO debt. But still, I make a good income from what’s left.”
- Use a tax agent and get your Uber driver taxes right the first time! Unless you’re an accountant, there’s no point in trying to do your own taxes as a sole trader. A tax agent, consulted early-on, can help you find eligible deductions plus help you plan your “weekly tax savings plan” to avoid a shortfall at tax time.
My tax agent helps me avoid ATO trouble – and the fee is tax deductible too!
Here’s an offer from Etax.com.au: We will handle GST and ABN registration at a discounted rate of $49.90, for any Uber driver clients. “Is that a trick to get you paying high fees later?” No, our fees for a typical sole trader Uber driver are about $168, lower than most tax agents.
It seems that driving as an Uber Partner may be quite an easy and practical way to make some extra income in Australia. Just be careful to follow the steps above to cover off Uber-related tax obligations and avoid unexpected tax bills!
We hope to get Judah next time we try Uber.