Understanding Your Ride-Sharing Tax Obligations | Income Tax & GST for Sharing Drivers

Introduction

Ride-sourcing, sometimes referred to as ride-sharing, is an ongoing arrangement where:

You (a driver) make a car available for public hire for passengers

A passenger uses a third-party digital platform, such as a website or an app, to request a ride (e.g. Uber, Hi Oscar, Shebah, or GoCatch)

You use the car to transport the passenger for payment (a fare)

Income tax and GST are applicable to your ride-sharing income, so it’s important to understand your tax obligations as a ride-sharing driver.

GST

You need an ABN and to register for GST from the day you start, regardless of how much you earn
You need to pay GST on the full fare
You need to lodge business activity statements (BAS) monthly or quarterly (you can’t choose to lodge annually)
You need to know how to issue a tax invoice (you need to provide one for fares over $82.50 if asked)

Overall, it’s important for ride-sharing drivers to understand the tax requirements and obligations and ensure they report their income correctly and claim any eligible deductions. Additionally, they are advised to keep records of income and expenses, as well as to register for GST if they are providing ride-sharing service and have ABN

Registration for GST and ABN

Ride-sharing is considered taxi travel for GST purposes. The standard GST registration rule of a GST turnover of $75,000 or more does not apply in this case – you have to register for GST regardless of how much you earn.

To get an ABN and register for GST at the same time, you can register online or through a registered tax or BAS agent. You may contact us for all your ABN and GST requirements.

When applying for an ABN

Type ‘taxi ride sourcing’ as your business description
Select ‘taxi driver’ (except owner/operator)’ or ‘taxi cab service’.

When registering for GST

Register from the date you intend to, or started, providing ride-sharing services
Choose to report your GST payments monthly or quarterly (you cannot choose to do so annually)

Historical Background – Why do Uber Drivers Have to Pay GST?

Ride-sharing drivers, like Uber drivers, have to pay a tax called GST. This is because the government says all taxi drivers have to pay GST, no matter how much they earn.

Many years ago, only big taxi companies that made more than $75,000 had to pay GST. But this created an unfair advantage over small, one-man taxi companies who did not have to pay GST. To fix this, the government made all taxi drivers pay GST, no matter how much they made.

When Uber first came to Australia in 2012, the government wasn’t sure if they should make Uber drivers pay GST or not. But in 2015, the government said that Uber is just like a regular taxi and so Uber drivers have to pay GST. Uber argued against this but in 2017, the court said that the government was right and Uber drivers do have to pay GST.

Today, the government makes sure that all Uber drivers pay GST by getting information from Uber and sending letters to drivers who are not paying GST. Even though it may seem confusing, the rules are now very clear, that all ride-sharing drivers need to register and pay GST.

Once you have registered for GST, you should provide your ABN to the platform you’re using, as they may issue tax invoices for you on your behalf.

If you already have an ABN but haven’t registered for GST yet, you have to register within 21 days from the time you start providing ride-sharing services. You can register for GST online, by phone, or through your registered agent.

If you’re already registered for GST, for example, as an IT contractor, you can use the same GST registration for your ride-sharing activities.

It’s important for ride-sharing drivers to have knowledge of these GST and ABN registration requirements and to get the necessary registration done and provide the platform ABN to avoid any penalties in future.

Fuel Tax Credits

As a ride-sharing driver, it’s important to understand the tax implications of your activity, including whether you are eligible to claim fuel tax credits.

Fuel tax credits are a valuable tool for many businesses, as they allow you to claim a credit for the tax paid on fuel used in your business operations. However, when it comes to ride-sharing, the rules are different.
The Australian Taxation Office (ATO) has stated that ride-sharing drivers are not entitled to claim fuel tax credits. This means that if you are operating as a ride-sharing driver, registration for fuel tax credits is not required.
It’s worth noting that fuel tax credits can only be claimed for eligible fuels and activities. Fuels used in light vehicles travelling on public roads, including for ride-sharing services, are not considered eligible for fuel tax credits.
It’s important for ride-sharing drivers to be aware of this and not to claim fuel tax credits on their activities which would be an issue with ATO as per their guidelines.
If there are any doubts or queries, It’s always best to consult a registered tax agent or visit the ATO website for more information on your specific situation.

Deductions

As a ride-sharing driver, it’s important to understand the tax implications of your activity, including the deductions you may be able to claim for expenses incurred while providing ride-sharing services.

Claiming Deductions:

Expenses you incur while providing ride-sharing services are deductible. This can include costs related to maintaining or operating assets, such as a car or mobile device.

If you claim a GST credit for GST paid on an expense, you can only claim the remaining amount (the total cost minus GST) as an income tax deduction.

Expenses can sometimes be part business and part private use. You can only claim a deduction for the business portion of the expense – this is called apportionment. You need to show how you calculated the business and private use of your expenses.

Special rules for working out deductible car expenses:

You may be eligible for a range of concessions if you’re a small business entity, such as the instant asset write-off. To work out if you are eligible, first work out if you are a small business entity in an income year.

You cannot claim an instant asset write-off for your car if you owned it as a private-use car before starting your ride-sharing activities. You must review your eligibility each year.

You can keep records for deductions in hard copy or electronically. Keep all records for five years following the lodgment of your tax return.

It’s crucial for ride-sharing drivers to understand these deductions and keep records of expenses incurred during their activities. It’s also recommended to consult with a tax agent for specific queries about deductions and compliance related to their business.

Examples Of Expenses You Can Claim

Depreciation
Depreciation for assets you own, such as your car (you may need to be able to prove ownership)

Fees
Fees or commissions charged by the digital platform

Fuel
Expense on Fuel, Oil, Consumables and other running costs and maintenance

Rental
Lease payments for a car

Parking
Parking fees, entry fees etc.

Amenities for Passengers
Bottled water, mints, tissues, and newspapers that are provided for the use of passengers

Consumables
Wipes, sanitisers and anti-bacterial spray provided for passengers and used to clean your vehicle

Tolls
Tolls if the passenger didn’t pay for them (you may be entitled to claim a GST credit for GST included in the price of the toll)

License
State or territory commercial licenses and approvals such as driver accreditation, driver registration, and application fees, medical tests, and police checks. Please note that the costs of getting and maintaining a private driver’s license is considered a private expense and is not deductible.

Accounting, Bookkeeping, Taxes
Fees paid to Accountants, Bookkeepers and Tax Agents for their professional work

Working out the business/private portion of an expense

When claiming a portion of an expense as a business-related deduction, you need to be able to show how you calculated the business-related amount. This is known as apportionment.

Common ways to show how you apportioned expenses include:

Keeping diary entries of specific usage throughout the year
Claiming expenses from an itemised bill.
You can use the myDeductions tool in the ATO app to record your expenses. This includes expenses apportioned for both business and private use.

How to Calculate Car Expenses?

Calculating car expenses for ride-sharing services can be a bit tricky, as you’ll likely use your car for both work and personal use. To make things easier, there are two methods you can use to calculate car expenses as a sole trader:

Cents per kilometer traveled: This method allows you to claim a set amount of cents per kilometer traveled for business purposes. The current rate for the 2021-22 financial year is 68 cents per kilometer.

Keeping a logbook: This method involves keeping a detailed record of all car-related expenses and usage over a 12-week period. You can then use this information to calculate the percentage of business use and claim that percentage of your car expenses.

When choosing a method, you should consider the following:

You can use our work-related car expenses calculator to help determine which method will result in the highest deductions for you.
You can use different methods for different vehicles or change methods from year to year.
You must keep appropriate records, such as receipts and logbooks, to support your claims.
Please note that these methods can only be used to claim expenses for a car that you own or lease. You will be considered the owner of the car if you held it under a hire purchase agreement. However, you cannot claim expenses for a car that is owned or leased by someone else, such as your employer or another member of your family.
If you use someone else’s car for ride-sharing purposes, such as borrowing a friend or family member’s car, you will only be able to claim the direct costs (such as fuel) that you paid as a deduction. You will not be able to claim the costs of ownership, such as depreciation.
The easiest way to keep track of your car expenses is by using the ATO app’s myDeductions tool. This tool allows you to easily record and track your expenses, including car expenses, and generate reports for tax time.

The cents per kilometer method

The cents per kilometer method is a simple way to calculate your car expenses when using your car for ride-sharing services. Under this method, you base your claim on a set rate for each business kilometer traveled.

Here’s how it works:

The set rate per business kilometre covers the general running costs of your car, including depreciation, fuel, servicing and insurance. This means you don’t have to claim these expenses separately.
You can claim up to a maximum of 5,000 business kilometers per car per income year.
You do not need written evidence to show how many kilometers you have traveled. However, the tax office may ask you to show how you worked out your business kilometers, for example by producing diary records of ride-sharing kilometers traveled.
It’s worth noting that if you and another joint owner use the car for separate income-producing purposes, you can each claim up to a maximum of 5,000 kilometers.
Please also note that if you use the cents per kilometer method, you can’t make a separate claim for depreciation of the car’s value.
It’s important to keep in mind that the cents per kilometer rate can be subject to change each year and you can check with ATO website for the updated rate.

The Logbook method

The logbook method is a way for small business owners and self-employed individuals to claim the business-use percentage of their car expenses on their taxes. This method can help you save money by allowing you to deduct a portion of your car-related expenses, such as running costs, depreciation, and interest, from your taxable income.
To use the logbook method, you will need to maintain a logbook and record odometer readings for a minimum continuous period of 12 weeks. This logbook will be used to calculate your business-use percentage, which is the percentage of time that your car is used for business purposes.
It’s worth mentioning that there are some limitations, the logbook method does not include capital costs such as the purchase price of the car or an amount borrowed to buy it, so it will not help in these expenses.
Each logbook you keep is valid for five years, but you can start a new logbook at any time. If you establish your business-use percentage using a logbook from an earlier year, you must keep that logbook and maintain odometer readings in the following years.
For fuel and oil costs, you can either claim actual expenditure or estimate the expenses based on odometer records that show readings from the start and the end of the period you had the car during the year. And for any other car expense you will need written evidence to support your claims.
By keeping accurate records, you can use the logbook method to claim a significant portion of your car expenses on your taxes, which can ultimately save you money and benefit your business in the long run.

Expenses That cannot be claimed

As a small business owner or self-employed individual, it’s important to understand what expenses you can and cannot claim on your taxes. While the government does offer tax deductions for many types of expenses, there are some that are not allowed to be claimed.

One expense that cannot be claimed is the cost of getting and maintaining a private driver’s license. This includes the cost of taking the test, obtaining a permit, and renewing your license. These costs are considered personal expenses, and are not tax-deductible.

Another expense that cannot be claimed is fines, such as speeding or parking fines. These are penalties imposed by the government for breaking the law, and they cannot be written off as a tax deduction.

Fuel tax credits, which are intended to offset the fuel excise paid on fuel used in certain types of vehicles and business activities, also not allowed to claim if you’re not in eligible criteria.

Another category of expenses that cannot be claimed are personal or private expenses. This includes things like meals purchased while on a break, or the private use of a car used for ride-sharing activities.

It’s important to note that these restrictions are not exhaustive and might vary based on local and regional laws, it’s always recommended to consult with a tax professional or the relevant tax authority for more details.

It’s important to keep accurate records of all of your expenses to ensure that you are able to claim the deductions you are entitled to and avoid claiming deductions that are not allowed under the law.

Non-commercial losses

As a ride-sharing driver, you are considered to be carrying on a business for tax purposes. This means that you have the ability to claim deductions for expenses incurred in the course of operating your ride-sharing business. However, there are restrictions on your ability to use a yearly loss from your ride-sharing business against other income.

Under the non-commercial loss rules, a loss from a business can only be offset against income from the same business in the current or future income years. This means that if your ride-sharing business makes a loss in a particular year, you can only use that loss to offset income from the same business in future years, and not against other income such as salary or wages.

It is worth noting that it would be considered unusual for ride-sharing drivers to have deductions greater than their income for a tax year. In these circumstances, you would need to consider the non-commercial loss rules and carefully keep track of expenses related to your ride-sharing business.

It’s also important to note that even though ride-sharing drivers are considered to be carrying on a business, they are still subject to other tax rules and regulations such as the GST/HST registration and filing requirements, etc. As such, It’s important to keep accurate records, consult tax professional or the ATO to understand more about tax obligations and how to claim deductions effectively.

Record Keeping

As a ride-sharing driver, it’s important to keep accurate records of your income and expenses in order to claim deductions and ensure compliance with tax regulations. Here are some records you should keep:

Statements from ride-sharing platforms that show your income
Receipts of any expenses you want to claim deductions for, such as fuel, car maintenance, insurance, etc.
Logbooks and odometer readings to track business use of your car, to make sure you are claiming the right amount of deductions.

The Australian Taxation Office (ATO) has provided an easy way to keep records for ride-sharing using the myDeductions tool in the ATO app. Here are some features of this tool:

The ability to include your income from ride-sharing and record how much GST is included
The ability to take a photo of receipts and enter details
Indicating a percentage for private use
The ability to use the ‘add trip’ function to set up a logbook and record your trips.

It’s important to note that the myDeductions tool does not track personal information entered in the app, so your information is safe. Tax time, you can share your records from myDeductions with your tax agent via email or upload them to the ATO, it will pre-fill your myTax tax return or your tax agent’s SBR-enabled software.

It’s always best to consult a tax professional or the ATO if you have any questions or need further guidance on keeping records and claiming deductions as a ride-sharing driver.

Tax Invoice

As a ride-sharing driver, it’s important to understand the requirements for providing tax invoices to passengers. Under Australian tax laws, if a passenger requests a tax invoice (not just an invoice) for a fare over $82.50 (including GST), you must provide one within 28 days of their request.

The ride-sharing platform you’re using might do this on your behalf if they have your GST registration details. However, if they don’t, you will need to provide a tax invoice that includes your ABN, for example, by using a tax invoice book with your ABN on it.

It’s important to note that the tax invoice must contain certain information, including your ABN and the GST amount for the fare. If the platform will issue tax invoices on your behalf, you should advise them of your GST registration details.

It’s worth noting that fares under $82.50 (including GST) do not require a tax invoice. So, in these cases, you can just issue an invoice.

It’s always a good idea to keep accurate records and consult a tax professional or the ATO if you have any questions or need further guidance on providing tax invoices as a ride-sharing driver.

Reporting and paying GST

As a ride-sharing driver, it’s important to understand that GST applies to every dollar you earn from providing ride-sharing services.

GST is charged on the full fare that passengers pay you for the ride-sharing services. The full fare, which includes GST, is generally calculated by the platform you’re using.

As a ride-sharing driver, you need to register for GST and report and pay the GST your business has collected using a Business Activity Statement (BAS). The BAS is the form used to report and pay GST, as well as other taxes like PAYG withholding and fringe benefits tax (FBT).

Once you have registered for GST, you can also use a BAS to claim a credit for any GST included in the price of any goods and services you buy for your business. This is known as input tax credits and allow you to claim the GST you have paid on your expenses back.

It’s important to remember that you need to report your GST payments monthly or quarterly on a BAS, you cannot choose to report annually. Failure to report and pay GST can result in penalties and fines, so it’s important to stay up-to-date with your reporting obligations.

If you have any questions or concerns, it’s always best to consult a tax professional or the Australian Taxation Office (ATO) for guidance on your GST obligations as a ride-sharing driver.

Faq

Do I Need to Pay GST for Uber Eats?

Whether you will have to pay GST when delivering for Uber Eats depends on whether you also drive for a ride-sharing service.

Driving for Uber and Uber Eats, Do I need to pay GST?

If you drive for both Uber and Uber Eats, you will need to be registered for GST and pay GST on both your rides with Uber and food deliveries.

If I only drive for Uber Eats, do I need to pay GST?

If you only deliver for Uber Eats, you do not have to register or pay GST unless your turnover is more than $75,000 a year.

Can I claim GST credits while delivering for Uber Eats?

Yes, you can claim GST credits on business expenses such as fuel, tolls, and service fees charged by the Uber platform if you are registered for GST. However, you need to keep in mind that these credits only apply to business expenses and any personal use of the car must be accounted for accordingly.

How do I register for GST for Uber Eats?

To register for GST, you will need an Australian Business Number (ABN). If you’re earning more than $75,000 per year from Uber Eats, or also driving for a “ride-sharing” service, you need to register for GST with the Australian Taxation Office (ATO).

I am not sure if I should register for GST

If you have doubts, it is always best to consult with a tax professional or the ATO to get further guidance on your GST obligations as a ride-sharing driver.

Can I count the kilometers I travel when my ride-sharing app is on but I don't have any jobs as business-related expenses?

No, if you are using your vehicle to commute to your main job and have the ride-sharing app on, but do not have any jobs or reject them, you cannot count those kilometers as business-related expenses. The main purpose of the travel is for you to get to your main job, which is considered a private expense.

When can I count the kilometers, I travel as business-related expenses while providing ride-sharing services?

You can only count the kilometers as business-related expenses when you are driving to collect a passenger and taking them to their destination. These are the kilometers associated with providing the ride-sharing service and earning income. Once you drop off the passenger, you can no longer count any further travel as a business expense.

Can I count the kilometers I travel from dropping off a passenger to my main job as business-related expenses?

No, once you have completed a ride-sharing job and dropped off the passenger, you are no longer travelling for the purpose of providing the ride-sharing service. The main purpose of the travel becomes getting to your main job, which is considered a private expense and not eligible for deductions.

Can I count all the kilometers I travel while looking for ride-sharing jobs as business-related expenses?

Yes, if your only intention for the trip is to find ride-sharing jobs and earn income, you can count all the kilometers traveled as business-related expenses, from the time you leave your home until you return.

What happens if I decide to change the purpose of my trip from business to personal?

If at some point during your trip, you decide to change the purpose of your travel from business to personal, for example, you decide to meet up with friends, you can no longer count any further travel as business-related expenses. The change in the purpose of the travel means that it is no longer considered business-related and is now considered a personal expense.

Can I claim parking fees that I incur while running errands as a business-related expense?

No, if the main purpose of your trip is for private activities such as running errands, you cannot claim parking fees as a business-related expense, even if you have your ride-sharing app turned on.

Can I claim parking fees incurred while looking for ride-sharing work as a business-related expense?

Yes, if you drive to a specific location with the intention of finding ride-sharing work and earning income, and you incur parking fees in that location, you can claim those fees as a business-related expense. In this scenario, Gina can claim $5 parking fee as deduction.

It’s important to keep the receipt or a record of parking fee along with the date, location, and the reason for the parking.