Uber, and ride-sourcing services like it, have taken Australia and the world by storm. It is not surprising that the ATO wants their cut of revenue. In fact, the ATO has recently launched a ‘data-matching’ program to identify Uber drivers who haven’t complied with their tax obligations. Therefore, while some drivers may think that they can ‘drive away with no more to pay’ this is unfortunately not the case. Uber and other ride-sourcing drivers have GST and income tax obligations they must consider.
The ATO’s position is that Uber drivers are providing ‘taxi travel’ services. This means that, if their activities are done ‘in the form of a business’, they will need to register for GST, regardless of the amount of income they earn. This puts Uber drivers in a different position to, say, Airbnb hosts who must only register for GST if their income exceeds $75,000. Only those Uber drivers who operate very infrequently or in a non-commercial manner may escape this requirement to register.
From 1 August 2015 driver’s must:
- Apply for an Australian Business Number (ABN). On the application driver’s should choose category 46239 ‘Road Passenger Transport’ and describe their business as ‘ride-sourcing’. Note that if a driver is already registered for an ABN as a sole-trader (for example if they are an IT contractor) they should use the same ABN for their ride-sourcing activities.
- Register for GST and
- Lodge Business Activity Statements (BAS)
It is also strongly advisable that drivers maintain a logbook and keep records to substantiate their income and expenses.
GST must be collected on the full fare, before any Commissions are deducted. For example if the fare was $55 and Uber took $11 the driver would need to pay $5 GST.
However, credits can also be claimed to reduce the net GST payable. These credits must be reduced for any private portion of the costs incurred. For example, if a driver uses their vehicle 10% for rise-sourcing and 90% for private purposes and incurs $110 for fuel, they could only claim $1 of the $10 GST paid.
Finally, drivers must provide passengers with a tax invoice for all fares over $82.50 if requested (note that Uber may do this on the driver’s behalf)
The income earned from Uber, exclusive of any GST paid, is assessable and must be reported in the driver’s tax return. Uber drivers should set aside some of the money they earn to ensure that they have enough left over to pay tax at the end of the year. Uber will not do this on their behalf (nor will they pay superannuation to drivers).
Expenses incurred will be deductible but must be reduced by any private portion. Deductible costs may include commission’s paid, fuel, registration, insurance, repairs and maintenance, cleaning, mobile phone costs and parking.
Uber has indicated that they will continue to fight the ATO and will take their case to the Federal Court. However, I am not optimistic about their chances of success. If I were their adviser I would be telling them that their case is weak and that the ATO are interpreting the law correctly. Their money would perhaps be better spent on convincing the government to either change the definition of taxi travel in the GST Act or repealing the requirement, in s 144-5, for suppliers of taxi travel to register, regardless of their turnover. Time will tell.
In conclusion, Uber is proving to be a nightmare for the taxi industry but with good preparation and record-keeping it doesn’t have to be a tax or administrative nightmare for its growing number of drivers.
Is the ATO correct? Is Uber? Should the law be changed? Let me know what you think.