UBER / Ride Sharing, GST & You
Thinking of earning money with UBER / Ride Sharing Read this first…
For GST purposes, the word taxi means a car (vehicle) made available for public hire that is used to transport passengers for fares.
State and territory laws regulating transportation of passengers contain specific definitions of the term taxi. It is possible for a vehicle to be a taxi for GST purposes, but not for state and territory regulatory purposes.
This information clarifies how the tax laws the ATO administers apply to ride-sourcing.
The ATO expresses no views about whether ride-sourcing vehicles are taxis within the state and territory specific definitions, or on the legality of ride-sourcing arrangements.
What is ride-sourcing?
Ride-sourcing is an ongoing arrangement where:
you (a driver) make a car available for public hire
a passenger uses, for example, a website or smart phone app provided by a third party (facilitator) to request a ride
you use the car to transport the passenger for payment (a fare) with a view to profit.
Ride-sourcing arrangements can be enabled by a technology platform maintained by a third-party facilitator. Typically, a website or mobile device application is used to facilitate a transaction between a driver and a passenger.
Ride-sourcing is one example of collaborative consumption in the sharing economy.
This guidance does not apply in some situations
This guidance does not apply to:
non-commercial car-pooling arrangements where passengers contribute petrol money or other arrangements where there is no view to profit
car sharing arrangements where multiple users have access to a car which they use to drive themselves from one location to another
arrangements that use vehicles other than cars, for example motorised tricycles
arrangements where a car is used only to transport passengers for a particular purpose, for example a wedding or a funeral procession, and which is not made available more generally to transport members of the public from one place to another.
This guidance focuses on the tax implications for drivers providing ride-sourcing services as they are the most affected.
GST consequences in providing ride-sourcing services
If you provide ride-sourcing services, you are providing taxi travel services. This is because you make a car available for public hire and use it to transport passengers for a fare.
Under GST law, if you carry on an enterprise and provide taxi travel services in that enterprise, you are required to be registered for GST regardless of your turnover.
Are you carrying on an enterprise?
An enterprise is an activity done in the form of a business.
If you provide ride-sourcing services to the public you are likely to be carrying on an enterprise. This is particularly the case if you operate in a business-like manner where, for example, you provide invoices to your customers.
What you need to do
If you do not have an Australian business number (ABN) and are not registered for GST, you must get an ABN and register for GST as soon as possible.
You should advise your facilitator that you are registered for GST. Your facilitator may issue a tax invoice for you or assist you with your GST and income tax obligations.
If a passenger requests a tax invoice, not just an invoice, for a fare over $82.50 (including GST) you must provide one. If the facilitator cannot do this on your behalf, use a tax invoice book with your ABN on it.
You are required to lodge business activity statements (BAS) and pay any GST by the due dates.
Note: You may be subject to penalties if you do not comply with any of the above GST obligations and requirements.
Income tax consequences in providing ride-sourcing services
If you provide ride-sourcing services you are likely to be running a business, as you are providing your services:
for a commercial reason
with an intention of making a profit
in a regular and repeated manner
in a business-like manner including, for example, by issuing invoices to customers or engaging a facilitator to issue invoices on your behalf.
However, if you operate infrequently or your activities are otherwise non-commercial, you may not be running a business.
The income you earn or have earned from your ride-sourcing business is assessable income and must be reported in your income tax return. You can also claim deductions for expenses that you incur in relation to providing ride-sourcing services.
This applies even if you run your ride-sourcing business on a casual basis to supplement your income from another job or other business activities.
There are a few different business structures under which you can run your business. These include:
Unless you have made other formal arrangements in relation to your business structure you will be a sole trader, ie providing ride-sourcing services.
As a sole trader the operation and provision of your services are under your control. This is the case even when you source your business through a technology platform maintained by a third-party facilitator.
As a sole trader you use your tax file number (TFN) when lodging your income tax return and you pay tax at the same income tax rates for individual taxpayers.
How to avoid large bills for income tax
If you are earning regular income from your ride-sourcing business you may want to enter into the pay as you go instalment system. This will allow you to pay small amounts throughout the year which will be offset against any income tax you need to pay once you have lodged your return.
Expenses you incur in running the ride-sourcing business will also be deductible. This may include expenses that relate to holding, maintaining or operating any assets used to provide the ride-sourcing services.
If you are able to claim a GST credit for the GST you paid on an expense, you can only claim the remaining amount (the total cost less GST) as an income tax deduction.
If you incur an expense that is both related to your business and is private or domestic in nature, you can only claim a deduction for the work-related proportion of the expense. Any expense claimed must not be private or domestic in nature.
For example, if you buy a meal to eat while on a break from providing ride-sourcing services it is not a business deduction; it is a private expense and cannot be claimed as an expense. If you use a mobile phone for personal use as well as to be notified of ride-sourcing work, you will be able to claim a proportion of the expenses for the mobile phone as a deduction against your business income, but only the amount that relates to its business use.
Claiming car expenses
The ATO anticipates that most ride-sourcing drivers will use their car for both personal and business use. This means you will need to apportion any car expenses deductions between personal and business use.
To be able to claim a deduction on car expenses, you must own or be named as the lease or hire purchaser of the vehicle.
If your spouse or de-facto partner is the owner of the car we will accept that the car is a joint asset and will allow you to claim deductions for the car in those circumstances.
If you are operating as a sole trader or in a partnership there are two different methods available to you for claiming car expenses. These include either:
cents per kilometres travelled
keeping a logbook to calculate a proportion of car expenses claimed.
The cents-per-kilometre method is only available to you if are claiming less than 5,000 kilometres for the year. The rate that you are paid per kilometre will cover claims for all the general running costs of your car including petrol and oil, insurance, servicing and maintenance costs and depreciation. You don't need to show written evidence of how you calculated the number of kilometres that you are claiming less than 5,000 kilometres, but we can still ask how you calculated the kilometres you have claimed.
If you are claiming for more than 5,000 kilometres you must keep a logbook for a 12-week period to calculate the proportion of business expenses that you can claim in relation to your car expenses. You must keep a logbook for a 12-week period in the first year of business, recording all trips taken, kilometres travelled (odometer readings) and details of whether the trip was for personal or business reasons.
Regardless of which method you use to claim car expenses, when calculating kilometres travelled for a journey you need to remember that you cannot claim kilometres that are for personal or domestic travel. You can only claim for the kilometres travelled that are related to providing ride-sourcing services and earning that income.
Simply turning on the ride-sourcing technology platform or application while driving to places for a personal or domestic purpose does not mean that you will be able to claim all the kilometres travelled in those journeys.
Bridge and road tolls and parking fees
You can only claim a deduction for a bridge and road toll where you have incurred the expense while producing ride-sourcing income. You will need to be able to allocate the claim for a bridge or road toll to driving for a ride-sourcing purpose. You can do this by keeping a diary entry noting the charge and allocating it to a specific ride-sourcing service, which may include driving to pick up a ride-sourcing job.
You can only claim a deduction for parking fees where you incur the expense while doing ride-sourcing activities.
Car expenses that cannot be claimed
There are some car expenses that cannot be claimed as car or business expenses because they are personal expenses or not allowed under the law. This includes things like:
cost of getting and maintaining a driver licence
any fines, for example speeding or parking fines. If you require any further information on this or need to Register for an ABN and /or GST please call us on 07 5502 6673 to meet with one of our Qualified Accountants