If you have any clients who have taken up ride sourcing and are providing services through Uber or GoCatch and other facilitators for a fare, there are things they need to know, and tips they will appreciate from you as their tax agent. Tips and traps your ride sourcing clients need to know
What they need to do
If your client has already started offering ride-share services without tax planning, one thing to write into your own diary is to check at financial year’s end if they have perhaps racked up a tax debt.
Some drivers can be former salaried workers who don’t always realise how small business works (they may not even realise they are a small business now), and many think of sharing-economy services as “money on the side” without realising that tax rules still apply.
For now, the items that should be brought to your Uber client’s attention include:
- Income earned from their ride-share activities is assessable income and must be reported in their income tax return.
- Deductions can be claimed for expenses that directly relate to providing ride-share services. This applies even if they operate their ride-share activities on a casual basis to supplement income from another job or other business activities.
- Ride-share services are deemed to be taxi travel for GST purposes, so they will have to register for GST regardless of how much is earned from offering ride-share services. The $75,000 threshold does not apply.
Entering into an enterprise offering ride sourcing means your Uber client will be required to get an Australian business number. They should register using the following categories:
- 46239 Road passenger transport
- 46231 Taxi services
- use “ride-sourcing” as the business description.
Registering for GST can be done at the same time as getting an ABN.
Remind your Uber client (let’s use that term for convenience, but all ride sourcing is covered here) that they will be required to pay GST on the full fare but only claim credits related to transporting passengers for a fare. Obviously activity statements are required to be lodged.
Ride sourcing GST
GST must be calculated on the full fare, not the net amount your Uber client receives after deducting any fees or commissions.
If a passenger pays $55 for a fare:
- the GST payable is $5
- the ride-sourcing facilitator pays you $44 after taking out their commission ($11)
- the $11 fee paid to the facilitator is a tax deduction your client can claim.
GST credits on their business purchases can be claimed, but the percentage that is business use (and not private use) must be worked out, and they should only claim this amount.
If they use their car 10% for ride sourcing and 90% for private purposes, and, for example:
- they buy a new car to use for ride-sourcing activities for $33,000 (including $3,000 GST) – they can claim the business portion of the GST credit of $300
- they pay $110 for fuel (including $10 GST) – they can claim the business portion of GST ($1)
- they pay $220 to have the car serviced (including $20 GST) – they can claim the business portion of GST ($2).
There are other business purchases you may be able to claim a portion of GST credits for, but of course records need to be kept.
The easiest way for an Uber driver to keep track of their deductions is by using the ATO app. They can take a photo of receipts and log it in the app, then send a report to your office. You could also suggest that they use the ATO app’s “Add trip” function as their logbook to keep their records. They can use their GPS or odometer to calculate the distance travelled while they’re driving passengers to their destinations to accurately record such trips.
Income deductions allowed or not
For income tax deductions, there is the cents per kilometre or logbook methods, which you can run over with your Uber client, noting that these methods can change from year to year depending on which is more favourable. It also can’t hurt to emphasise that the business use proportion is key.
Possible deduction inclusions are:
- commissions, licensing or service fees paid to Uber or the other ride-share facilitators
- costs associated with business use of car (petrol, servicing, depreciation, etc.)
- vehicle registration
- mobile phone bills
- safety equipment (such as high visibility vests)
- your fee
- bank fees (if they maintain a separate account for ride-share work)
There are however a few non-deductible expenses you could alert your Uber client to. These include:
- costs incurred before becoming a ride-share driver, or before the application process starts (such as attending information nights) are not deductible
- costs of a normal drivers licence
- fines (parking, speeding, etc)
- clothing other than safety clothing
- meals, drinks, etc purchased while on shift.
If one of your Uber client’s passengers requests a tax invoice (that is, an invoice that includes the amount of GST) for a fare over $82.50 including GST, they must provide one. If the facilitator they are going through:
- can’t do this on their behalf — they can use a tax invoice book with their ABN on it. You may need to advice your client about the sort of details every tax invoice is required to display.
- does issue tax invoices on their behalf — make sure your Uber client finds out the process well before a passenger asks for a tax invoice.
Tips and traps your ride sourcing clients need to know Tips and traps your ride sourcing clients need to know Tips and traps your ride sourcing clients need to know Tips and traps your ride sourcing clients need to know Tips and traps your ride sourcing clients need to know Tips and traps your ride sourcing clients need to know Tips and traps your ride sourcing clients need to know Tips and traps your ride sourcing clients need to know