TAX RETURN:: REPORTING YOUR UBER EARNINGS AND GST

Hello, this is your tax and super specialist, P&C Tax Professionals.

I'm sure many of you have ridden an Uber, Didi or Ola at least once in your lifetime. In fact, quite a few of our clients are carrying on an Uber, Didi or Ola business here in Australia and as you would expect, the profits that arise from these ride-sharing businesses are also subject to tax.

Uber, Didi and Ola are classified as a taxi business according to the Australian government and regardless of your annual income, those who run this business must register and report their GST at least on a quarterly basis (i.e. a total of 4 times each year) and you must lodge your income tax return once every year during the tax season period. This means that a total of 5 lodgments must be reported to the ATO each year. From now on, we will explain to you what a ride-sharing business is, how the income is calculated and how the tax deductions are reported to the ATO.

What is a ride-sharing business?

As explained above, businesses such as Uber, Didi and Ola are all classified as a ride-sharing business. Anyone can start this business as long as they meet the conditions that are required by each of the companies. A ride-sharing business basically receives requests from the customers through the web or the app and is similar to a taxi driver in the sense that the drivers would then pickup the customer and drive them to their destination.

How is the income from this business calculated?

In a ride-sharing business, profits from the customers are generally shared between the company (Uber, Didi or Ola) and the driver. For example, if the customer pays $100 in Uber fees, the $100 profit will be divided using a 50:50 ratio between the company and the driver, meaning that only $50 will be accounted as the driver's income.

Can I deduct work-related expenses from undertaking this business?

> Absolutely!

All expenses incurred while working as an Uber, Didi or Ola driver can be claimed as a tax deduction. However, please note that not all of those costs would be 100% claimable. As with your individual tax return, you must first calculate your work-use percentage of the expense and only claim for the percentage used for work purposes. In addition, you must also write and maintain a logbook for at least 12 continuous weeks.

To give you an example, if you assume that you have travelled a total of 1,000km during the 12 weeks of writing your logbook, and the work use proportion of the vehicle is 500km, in this case, only 50% (500km/1000km) of the total car expense can be claimed as a tax deduction.

What kinds of deductions are available?

If you are running a ride-sharing business in Australia and you purchase a vehicle to use for your work, as the vehicle wears out, the depreciation cost of the vehicle would be tax deductible. In addition, you can choose between the two methods: (1) Logbook or (2) Cents per Km when it comes to deducting your car expense. For more information on the two methods, please refer to our previous blog posts which deals with the two methods in detail.

How is the GST calculated for ride-sharing businesses?

Those who run a GST-registered business which also includes the ride-sharing business, are required to pay 1/11 of their income as GST each quarter.

To further enhance your understanding, let's take a look at an example on how to calculate the GST payment.

To begin with, let's say the income of an Uber driver in Australia for one week is as follows:

Total income for 1 week: $1,100 (inclusive of $100 GST)

Expenses:

> Uber Service Fees $330 (inclusive of $30 GST)

> Work-Related Fuel Costs $110 (inclusive of $10 GST)

> Uber-Related Insurance Fees $99 (inclusive of $9 GST)

> Accountant Fee $165 (inclusive of $15 GST)

> Other Work-Related Expenses (e.g. water, hand sanitiser, air freshner, etc.) $55 (inclusive of $5 GST)

Calculation of GST Payable:

= $100 (GST from your income) - $30 - $10 - $9 - $15 - $5 = $31

In this case, you would have to pay a total of $31 in GST to the ATO.

Can I claim a GST refund on the purchase of a new vehicle?

> The simple answer is, YES!

If you purchased the vehicle for your Uber business, you can apply for a GST refund. However, this is only possible if you have purchased it from a dealer as you need a proper tax invoice from the dealer to validate your purchase. Moreover, GST must also be registered under your ABN at the time of purchase in order to claim for a GST refund.

You can get a partial GST refund when you apply for your Business Activity Statement (BAS) each quarter but only for the relevant work-related percentage.

The process for getting your BAS ready is actually quite complicated and cumbersome than you think, so please make sure to consult with a qualified accountant beforehand.

If you have any further questions regarding this matter, please feel free to contact us at your earliest convenience through our Official Facebook Page (P&C Tax Professionals - Australia) or through our company's email address at: pnctax@naver.com.

Thank you and bye for now!