Internet based business – Uber (part 2)
Uber receipts inclusive of GST?
Uber drivers must provide a tax invoice to passengers for fares over $82.5 (incl.GST) where requested (Uber do not issue tax invoices however, the driver is able to use a tax invoice book).
Note that Uber have applied to the Federal Court to challenge the ATO’s view regarding the application of GST to Uber income, at this stage, the more prudent position to adopt is to adhere to the ATO view, unless and until the ATO view is successfully challenged. The ATO view is set out below.
Note that, it is technically possible for an Uber driver to argue that they are not carrying on an enterprise (and, this, are not required to be registered for GST) on the basis that the activity being carried on without a reasonable expectation of profit or gain, or because the driving activity is a recreational pursuit or hobby. However, be cautious relying on this argument where the driver’s
Uber income exceeds their Uber expenses as, given the formality of the Uber arrangement the ATO are likely to challenge it. Refer from paragraph 180 of MT 2006/1.
Based on the ATO view, GST applies as follows to Uber income:
GST payable on a trip: 1/11th of the gross fare (i.e., before deducting the Uber commission)
For example, if a passenger pays a $55 fare, and Uber forwards on payment of $44 (i.e., after deduction of an $11 Uber commission fee), the GST payable is $5 (i.e., 1/11th of $55), not %4.
Of course, being registered for GST, the driver is able to claim input tax credits (‘ITCs’) where applicable. For example, ITCs may be able to claim in respect of certain expenses such as car running expenses (refer below) and other expenses (refer below) and other expenses. However, there are a number of issues to keep in mind in relation to claiming ITCs:
a. No ITC claim for some expenses – No ITC can be claimed if the supply to the driver did not attract GST. For example, as there is no GST embedded in the Uber commission fee, no ITCs can be claimed for this expense.
b. Claim may need to be reduced – The amount of the ITC must be reduced if the acquisition is only partly for a creditable purpose. Refer to S.11-25 of the GST Act and below.
c. Attribution – the Uber driver may be on a cash or accruals basis for GST purposes. The cash method is generally more common for Uber drivers. This method is not compulsory but an entity can choose to adopt this method where, for example, the entity or where no business is being carried on but ‘GST turnover’ is $2 million or less. If the cash method is adopted, GST is paid when the driver receives the fare and ITCs are claimed when the expense paid.
d. Valid tax invoice – before an ITC can be claimed, Uber drivers must hold a tax invoice to substantiate entitlement to claim an ITC for GST included in the price of the acquisition if the price exceeds $75 excluding GST.