tax guide for Uber drivers

Tax Guide for Uber Drivers in Australia – What You Need to Know

Uber and OLA offers drivers with a reliable
car a flexible way to earn an income.

Whether you take advantage of the
ride-sharing service for your main salary or as an additional income, there’s
potential to make good money.

However, if you want a friendly
relationship with the ATO as an Uber or OLA driver in Australia, it’s important
you keep your finger on the pulse with the latest tax information.

The tax requirements for Uber or other
rideshare driving such as OLA can be confusing. To maximise deductions,
minimise the amount of tax you pay and avoid being flagged by the ATO,
understanding the system is critical. Without good Uber tax management, you could
soon have a debt in the thousands.

To avoid driving away from your ATO taxes
(and the penalties that come with it), here’s what you need to know if you want
to make rideshare driving part of your New
Year business plan

Uber Drivers are Contractors, Not Employees

As an independent contractor for Uber (a
non-employee running your own business), it’s your responsibility to ensure
your tax affairs are correctly managed. Uber do not withhold any taxes or offer
any employee benefits, such as annual and sick leave.

This means that any money you earn from
Uber driving is accessible income and therefore must be declared in your annual
income tax return.

Yes, Uber and Ola Drivers are Required to Pay Tax and GST

Regardless of what your Uber or OLA income
is, all drivers are still required to pay tax. Both ridesharing services have
the same tax and GST responsibilities.

Since August 2015, the ATO has also confirmed drivers must register for GST and submit a portion of Uber fares to the ATO. This is in addition to the tax paid on any income you earn.

To help manager your Uber tax and GST correctly
as a contractor, it can be worthwhile engaging with a tax agent. However, if
you choose to do it yourself, remember:

  • Even if you earn less than the $75,000 GST income threshold, you must still register for GST as an Uber driver
  • Lodge a quarterly BAS statement to pay for GST obligations – the ATO will backdate your GST registration to when you started Uber driving if you didn’t set this up from the beginning
  • Keep records of essential documents including weekly Uber statements, expense or purchase records (fuel, vehicle servicing/repair), GST records, tax deductions and other claiming costs
  • Keep a logbook of the work-related hours you drive

Tip: Don’t spend all your income! Especially if you’re
using Uber as a secondary salary, it’s important to save a small portion of
your earnings so you don’t get stung come tax time. As your income is boosted
by Uber driving, so is your tax bill. Putting down 30-40% of your earnings can
help significantly.

What Happens if I Don’t Pay Uber Tax?

The ATO can determine actual Uber income
against bank accounts at any time. To avoid getting flagged, it’s imperative
all your records and expenses are up-to-date.

They do this by data-matching, which involves collecting information from banks, employers and government bodies to match against your account. Undeclared income that is discovered by the ATO will result in penalties that can be severe.

How do Uber Drivers Estimate Tax Owed?

As a contracted Uber driver, you owe quarterly
taxes on your earnings.

To give an estimate on how much tax is owed, there are online income and tax calculators you can use. Alternatively, speak with your tax agent or financial advisor.

What’s the Best Tax Strategy for Uber Drivers?

If you manage your Uber taxes correctly,
there are some decent tax benefits of being an Uber driver.

Typically, the best strategy would depend
on how much you spent on your vehicle during the tax year compared to how many kilometers
you drive.

Tip: If you want to increase your Uber earnings, consider the type of Uber vehicle tiers and what car you’ll need for each.

The ridesharing industry has exploded over the last few years and become one of the easiest ways to make money on a flexible schedule. But the tax and paperwork can be a challenge. Fortunately, through effective planning and organisation, rewarding careers can be found in Uber driving. A

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