Uber has taken Australia by storm as a new way of earning additional income. But there may be serious Uber tax problems ahead unless you do it right.
Uber is a unique, flexible opportunity to earn a side income for almost anyone with a good car. But there are important things to consider regarding how you manage your taxes. If you start to drive for Uber without some good tax planning, you could soon have an ATO tax debt in the thousands, even tens of thousands of dollars.
Don’t worry: Just a bit of planning and organisation can help ensure you’re on-track for a friendly relationship with the ATO.
Uber tax and GST — the basics.
When you drive for Uber you are not an employee. You’re a contractor. Here’s why that is important: When you’re not an employee, you have to be careful that your tax affairs are managed correctly. That’s why most Uber drivers should use a tax agent.
From Uber themselves:
All Uber partners are independent contractors, so we do not withhold any taxes and partners are entirely responsible for their own tax obligations.”
The ATO’s Uber tax implications are straight-forward at a basic level:
- Any money you make driving for Uber counts as income, meaning you must declare it on your Tax return.
- Even if you earn less than the $75,000 GST income threshold, as an Uber driver you need to register for GST. (More on that below…).
Do Uber drivers pay GST?
From August 2015, the ATO confirmed all Uber drivers are required to register for GST. This means you submit the GST portion of your Uber fares to the ATO. This is in addition to the tax you need to pay for income you earn as a driver.
Uber challenged this “ATO GST Uber tax” issue in the courts for 18 months, however lost in 2017:
Uber drivers should register for GST then start to lodge quarterly a BAS statement and pay GST obligations. If you don’t do this, you’re asking for trouble with the ATO and Uber is unlikely to help you out of your personal ATO troubles – it’s not like the State Transport fines that Uber sometimes covers for you.
How do I pay the ATO’s Uber tax?
If you’re an Uber driver, you’ll need to declare the income you’ve generated in the financial year on your tax return.
Here’s an important warning: Don’t spend all of your Uber income.
Especially if you drive for Uber in addition to another job, it’s important to save a good portion of your Uber earnings.
Why? Because as your income is boosted by your Uber driving, your tax bill is boosted as well. If you don’t save for that, it can be a nasty surprise at tax time. During your first year driving for Uber, you should put aside at least 30, even 40 per cent of what you earn from Uber.
You’ll also be required to lodge a business activity statement (BAS).
Need help predicting how much you should save? It’s not simple, so talk to a tax agent. And when in doubt, save a bit extra; it’s much nicer to get a tax refund than to find you owe money to the ATO.
The tax benefits of being an Uber driver
There are a range of tax deductions you can claim as an Uber driver. Here are just a few work-related expenses that become tax-deductible when you drive for Uber:
- Car maintenance
- Car cleaning costs
Along with these expenses, you can claim additional costs that are directly related to becoming and operating as an Uber driver, such as:
- Work-related parking expenses (keep receipts and add them up, or claim up to $200 a year for your parking charges less than $10 each)
- Special cleaning costs (car washes, carpet washes etc.)
- Mints and water for passengers
- Mobile phone costs (here’s more about claiming work-related phone use)
- Relevant Spotify, Pandora or Apple subscription fees
Keep a record of all Uber driving expenses
In order to claim any of the above mentioned deductions, you’ll need to be vigilant. When it comes to claiming costs directly related to your vehicle, you’ll need to keep a record just like you would for any other job.
And with all the kilometres you’ll be driving, you should keep a logbook. This lets you calculate the work-related portion of your car use, in a way that the ATO respects. Then, you can properly claim a wide range of vehicle-related expenses.
We’ve got a blog post covering how to use a car logbook, here.
Don’t try to hide any of your Uber income
Popular second-income sources like Ebay, Airbnb and Uber make some people wonder,
Can I just spend my extra income, and leave it off of my tax return?
Can I hide income from the ATO?”
Don’t do it! Your activity as an Uber driver is very much “out there” for the world to see. Your name and plate number are shown right on the Uber app. The ATO can easily determine your actual income from Uber. The ATO can even see your bank accounts if they want to.
It will be simple for the ATO to find Uber drivers who don’t declare (or who under-report) their income. The likely consequences for people who hide their Uber income: Huge tax repayments, fines and interest charges. The ATO does not play games with this sort of thing and it is not taken lightly.
Be honest and transparent with the ATO. You’ll be better off in the end and you’ll sleep well at night.
Stay on top of fast-changing ATO rules for Uber drivers
As Uber is new in Australia, make sure you follow the ever-changing tax issues that apply to Uber drivers.
If you are thinking about driving for Uber as a side business, we’d say go for it (based only on what we’ve seen as accountants re the potential to earn, the quality of the business systems in place, and feedback from Uber drivers).
However, consult a tax agent for personalised Uber tax advice and be sure you follow the right procedures to keep everything accurate for next tax season.
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