Ride share driving has become an increasingly popular way for Australians to earn extra income or even to make a full-time living. However, as with any other business or income-earning activity, there are tax obligations that ride share drivers need to be aware of. In this blog post, we will cover some of the key tax considerations for ride share drivers in Australia, whether it’s worth it, and what you can do to maximise your claims come tax time.
“You’re A Business, Harry”…”I’m A What?”
If you are a ride share driver (such as with Uber, DiDi, Ola etc) then you are considered to be operating a business and as such you must include any income and expenses earnt in the business and professional items of your tax return. Additionally, the Australian Taxation Office (ATO) has mandated that all ride share (and non-employed taxi) operators are required to register for Goods and Services Tax (GST), which has further implications and obligations. Normally a business is only required to register for GST once their turnover reaches (or is expected to reach) the $75,000 mark.
This can leave ride share operators at a potential disadvantage if they are only earning income casually through their respective platforms, especially if they also have other small-scale side hustles under their Australian Business Number (ABN). As a ride share operator, you are required to register for GST, which means that all other business activities under your ABN will also need to account for GST on your income and expenses. This is particularly common when individuals earn income from ride-sharing and also provide a food delivery service. It's important for individuals to be aware of their GST obligations and to seek professional advice if they have any concerns or questions.
Being registered for GST involves quarterly reporting of income and expenses and paying the relevant GST amount to the ATO through a BAS (business activity statement). If that isn’t enough acronym’s for one paragraph, then keep in mind that not lodging these statements every quarter puts you on the chopping block for FTL penalties as well as the GIC. Keeping records here is vital for your compliance as well as your tax minimisation strategy.
Being classified as a business isn't all doom and gloom. In fact, it entitles you to some special concessions and business incentives, such as the instant asset write-off. However, it's important to seek the right advice regarding the business and professional items on your tax return. This area can be a minefield of traps that can result in you paying more tax than necessary. With the right guidance, you can navigate these complexities and ensure that you're claiming all the deductions and incentives you're entitled to.
Log Book Requirements
While you are not exactly or explicitly required to keep a logbook for ride sharing activities, it is highly recommended (and I mean, highly highly recommended) that you keep one. As the owner of a commercial vehicle your car actually doesn’t fit within the framework of a regular vehicle and so the logbook requirements do not apply to you as they do to employees wishing to deduct a work-related motor vehicle expense claim. However, you are still expected to only claim the business-related portion of your car expenses and if you’re eyeballing these amounts (especially as a ride share operator), then you are lining yourself up for a rocky audit.
The logbook should cover a continuous period of 12 weeks and include all car-related expenses such as fuel, registration, insurance, repairs, and servicing. This logbook is essential for calculating a reliable and accurate business use percentage of the car, which is used to determine the deductible amount of car expenses for tax purposes. Never scrimp on getting a logbook for your car; the ATO means business here and you do not want to nullify your entire motor vehicle expenses.
Ride share drivers may receive income from a variety of sources, including fares from passengers, bonuses from ride share companies, and payments for referrals or incentives. It is important to keep accurate records of all sources of income, including any payment summaries or invoices received from ride share companies. Income earned through ride share driving is generally considered business income, and it is subject to income tax.
There are several deductions that ride share drivers can claim to reduce their taxable income. Keeping accurate records is the only way to ensure that you can claim everything you’re entitled to. Some of the common ride share deductions include:
- Car expenses: These include fuel, registration, insurance, repairs, servicing and rent fees. As mentioned earlier, the deductible amount of car expenses is calculated based on the business use percentage of the car, which is determined by the logbook.
- Other car-related expenses: These may include parking fees, tolls, and car wash expenses.
- Mobile phone and internet expenses: If you use your phone or internet for business purposes, you can claim a deduction for the portion of the expenses that relate to your ride share driving.
- Other business-related expenses: This may include items such as water bottles for passengers, cleaning supplies, and safety equipment.
As a ride share driver, you will generally be required to participate in the Pay As You Go (PAYG) instalments system. These instalment payments are essentially an estimate of the tax you will owe based on your business income, and they are paid in quarterly instalments through the BAS. The amount of PAYG instalments you need to pay will depend on your estimated business income and the tax rate that applies to that income.
- If you’re planning on driving somewhere, see if any passengers have a destination close to where you’re travelling. This will see your travel at least partly covered by the fare.
- When interacting with the passengers, read the room. If they don’t want to be talked to then leave them be. Help them feel as comfortable as possible.
- Schedule your driving around surge/peak periods.
- Download a virtual logbook app that allows you to log the kilometres you travel.
- Keep receipts for every purchase you make.
- Keep your car in good, working condition.
Ride share driving can be a lucrative way to earn extra income, but it is important to understand the tax obligations that come with it. Keeping accurate records of all business-related expenses and income is essential, as is understanding the deductions that you are entitled to claim. Some individuals find that ride sharing just isn’t worth the money due to the compliance cost of staying on the right side of the law; others love the flexibility and work-when-you-want lifestyle.
At Maurer Taxation, we understand the unique tax considerations for ride share drivers and can provide expert advice to help you navigate the tax system and maximize your tax savings. If you are with Uber, DiDi, Ola, Shebah, GoCatch, Bolt or any other ride share platform, then contact us today to have your questions answered by the professionals.
P: 0438 960 990