Uber and other ride-sourcing facilitators have become increasingly popular over recent years. From a driver’s standpoint, there are a number of tax issues potentially in play. See overleaf for the tax implications from a rider’s perspective.
Income from a driver’s ride-sourcing activities must be declared in their tax return irrespective of the amount they earn, and irrespective of whether they have another job. The amount to be declared is the full fare (including or “grossed-up” by the facilitator’s fee, less GST). The full fare amount must be declared in a driver’s personal tax return (or in an entity’s return if they are operating through a company, trust etc.).
Expenses (less GST) incurred by drivers in operating their ride-souring activities are deductible. However,
not all expenses will be deductible and may need to be reduced/apportioned to take account of any private use of the vehicle. The following common expenses are not deductible – fines (e.g. speeding or parking), cost of own meals and drinks during shifts, and clothing except if either compulsory or noncompulsory clothing that is unique and distinctive to the Facilitator you drive for.
In instances where a vehicle is being claimed in the driver’s personal tax return, the costs will be claimed using either of the following methods:
1. Cents per kilometre
Whereby you claim a set number of cents per kilometre travelled (currently 72 cents). The advantage of this method is very little record keeping is required.
only need to be able explain how you arrived at your calculation – you do not need any documentary evidence in the way of receipts or log books etc. Even where you travel more than 5,000 kilometres, you may still elect to use this method (and save the hassle on the record-keeping requirements that are required under the logbook method) by capping your claim at 5,000 kilometres. In summary, this method can be appealing to drivers who:
- Have travelled less than 5,000 business kilometres
- Have older vehicles (therefore depreciation and interest costs are low)
- Have not kept, or do not wish to keep, records of kilometres travelled. This method incorporates all car expenses including petrol, servicing, depreciation, etc. You can make no further car expense claim.
Under this method, your claim is based on the business use percentage of each car expense, which is determined by a logbook that must have been kept for a minimum 12-week period.
This logbook must be updated every five years or where there has been a change to the percentage of business use (by more than 10%). To ease the record-keeping burden, check out one of the innumerable logbook ‘apps’ on the market, either from the App Store or Google Play as the case may be.
In summary, under this method you can claim all expenses that relate to the operation of the car, at your percentage of business use, as established from your logbook. This method generally gives the best result where the vehicle has substantial business use. Drivers can calculate their claim and determine which method provides the largest deduction, by using the ATO’s Work-related car expenses calculator on its website.
Under general GST law, you are only required to register for where you are carrying on an enterprise and your annual turnover is $75,000 or more. However, where your enterprise involves providing ‘taxi travel’ you must register for GST irrespective of the level of turnover. The ATO adopts a broad interpretation of ‘taxi’ to include cars made available for public hire to transport passengers in return for a fare (but not including trucks and bike courier services). The Federal Court has confirmed this interpretation. Drivers therefore generally must register for, and charge, GST as soon as they commence operating.
Drivers generally speaking will always be ‘carrying on an enterprise’, and therefore should register for an ABN. The only instance where it’s conceivable that a driver would not be carrying on an enterprise would be where they are an employee of the facilitator. This is rare, however.
This article examines the tax implications from a rider’s perspective.
The same principles apply as per taxi fares. Where the fare is business-related, for example you are travelling from your office to a client’s premises, the fare will be deductible in full. However, where the travel is personal the fare is not deductible. This includes travel between home and work. That is, trips between your home and regular place of work can’t be claimed even if you:
- live a long way from your regular place of work
- work outside normal business hours – for example,
- shift work or overtime
- do minor work-related tasks – eg, picking up the mail on the way to your regular place of work or home
- go between your home and your regular place of work more than once a day
- are on call – eg, you are on stand-by duty and your employer contacts you at home to come into work
- have no public transport near where you work
- do some work at home.
To evidence the deduction, the rider will need documentation. The good news is that Uber, and we suspect other facilitators, will provide you with sufficient documentation to substantiate your deduction. You obtain this by logging back into their ‘app’ after the ride.
To claim GST on a fare, the trip must be business- related (see earlier), and the rider must be in possession of a valid Tax Invoice. For many fares however, a Tax Invoice will not be required as the total fare may be less than $82.50 (including GST). Where this is the case, any of a Tax Invoice, a docket, an invoice, or a receipt will suffice for your GST claim.
The question then arises, what actual documentation does Uber or the driver provide at the conclusion of the ride? In the vast majority of cases, the driver will not provide you with any documentation (e.g. invoice etc.). Rather, after the ride, if you visit Uber’s ‘app’ they will on behalf of the driver provide you with a tax invoice if the driver is registered for GST. Tax Invoices are provided
by Uber even where the fare is below $82.50. We can confirm that the standard Uber-provided Tax Invoices are in full compliance with the ATO’s requirements. You will need to check the documentation of other facilitators for compliance.
Another relevant tax issue is ABN Withholding. Under this regime, if a supplier of a good or service does not provide an ABN and the total payment for that good or service is more than $75 (excluding GST), the recipient generally has to withhold the top rate of tax (currently 45%) from the payment and pay it instead to the ATO. Having withheld from the payment, the recipient of the supply must then complete a PAYG payment summary
– withholding where ABN not quoted and give it to the supplier at the same time the net amount is paid to them or as soon as possible after. However there are various exceptions. In the absence of one of these exceptions applying, this then raises the question of whether the rider would be liable for penalties for failing to withhold.
The reality is that under a typical ride-sourcing model (and certainly with Uber), the Rider is not in a position
to withhold the 45% penalty as the payment they make for the fare is in the form of a direct debit of the Rider’s credit card. Therefore, it would be very difficult to imagine the ATO penalising Riders for not withholding when, in a physical sense, they have no ability to do so.
Welcome to the InterActive Tax Consultants’ news – part of our personal and easy to understand approach to taxation. We are committed to working with you to achieve the best results for your business. If you have any question or would like more information on any of the articles please contact us.