Uber – ride sharing or running a business?

After months of discussion, Uber has launched its ride sourcing service in Bendigo. While it may seem a simple way to earn some extra cash, it is important to understand the tax implications of running a ride sourcing business. If you ignore your registration and tax compliance obligations, it is likely that the ATO won’t!

Tax

As an Uber driver, you are technically running a business. The income you earn will need to be included in your income tax return for the relevant financial year. However, you will only pay tax on your net business income (total income minus allowable deductions) at your marginal tax rates.

Registrations

Australian Business Number (ABN) – Before you can start your business, you will need to apply for an ABN. An ABN will help identify your business from others and can be applied for through the Australian Business Register website for free.

Goods and Services Tax (GST) – If you have received an ABN, you must also register for GST. Unlike other types of businesses, ride sourcing is not exempt from registering for GST if your turnover is under a certain threshold. Therefore, as Uber is considered ‘taxi travel’ GST registration is mandatory regardless of GST turnover.

You will be required to register for GST from the day that you start ride sourcing services. It is important to charge GST on the full fare you receive. This is the amount you receive before deducting any fees or commissions that may be payable to Uber.

Registering for GST may also require you to lodge a Business Activity Statement (BAS) and remit any GST that may be payable to the ATO by set deadlines.

Compliance

Keeping accurate records of your income and expenses relating to your business activities is vital. You should also keep a logbook of the distances you have travelled to ensure that you can correctly apportion the use of your car between your Uber business and your private use.

The ATO has developed a useful app to assist in managing your tax affairs. More information on this app can be found in the link below:

https://www.ato.gov.au/General/Online-services/ATO-app/

Uber: is it worth it?

The ATO receives information from Uber directly and from financial institutions within Australia. Just because Uber is new to Bendigo, the ATO has been working through ways to track and tax Uber drivers for over 5 years now so has sophisticated ways of finding those who may either flout the system or simply be unaware of their obligations in running a business.

Ensuring your registrations are accurate and declaring your income correctly is important to help your venture be profitable and remain on the right side of tax authorities.

For further information or help in setting up your business, contact your AFS & Associates representative on 03 5443 0344.