Ever thought of being an Uber driver?
An easy way to make some spare cash, right? Maybe, but there are a few tax considerations to keep in mind before you jump into business:
Generally, there’s no need to register for GST when your annual business turnover will be less than $75K.
But there are special rules for taxi travel and the ATO’s interpretation (supported by the courts) is that an Uber service is taxi travel.
What does this mean?
It means the $75K threshold does not apply to Uber services and an Uber driver should be registered for GST and prepare and submit quarterly Business Activity Statements to the ATO to report GST on both income and expenses from their Uber trips.
Maximise your deductions for income tax and GST
So, the income you earn from your Uber service will be assessable income for tax purposes and there will also be a 10% GST component that you’ll need to pay back to the ATO. Not good.
Bear in mind there will be plenty of expenses to offset this income.
The first step will be to keep a log book for three months (12 weeks) to document the business usage of your car. Once you have this, you can claim a percentage of your motor vehicle costs as an income tax deduction and as input tax credits for GST purposes.
Examples of the types of deductions claimable are as follows:
- Vehicle acquisition – If you’re already leasing a vehicle then the costs of financing may be deductible. If you purchase a vehicle, making sure it satisfies the Uber vehicle requirements, depreciation should be claimable. Also, keep in mind the small business immediate write-off rules for vehicles costing less than $20K.
- Operating costs – Costs like registration, insurance, repairs, car cleaning, tolls, parking, etc could all be deductible, but only to the extent you used the vehicle for business.
- Costs to improve your ride – An Uber trip is a service and so your goal should be to make your passengers feel as comfortable as possible. If you buy cushions or mints or water to do this, then these costs are deductible.
- Other costs – Costs such as commission fees paid to Uber, costs of becoming an Uber driver, mobile phone costs, costs incurred to satisfy the vehicle requirements should all be deductible.
All in all, being an Uber driver is a great way to make some spare cash. But do some planning first so you have all bases covered. And if you have any questions, please feel free to contact us to chat.