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AJML Accountants Update – May 2018

Internet based business – Uber (part 6)

Summary of Income tax and GST Implications

There are some of the key income tax and GST issues to be mindful of when dealing with an individual tax payer who drives for Uber.

General Issues

  • Be aware that, regardless of whether or not Uber is legal in the state/territory in question, the profits made by the Uber driver are subject to tax as normal.
  • In relation to pricing matter, Uber sets the price for all fares, collects payment from the passenger and passes the payment on to the driver less a 20% commission. Under this arrangement, the driver is entitled to the gross fare and, as such, it is the gross fare that is subject to income tax and GST.

Income tax issues

  • According to the ATO, Uber does not employ Uber drivers. Further, Uber has no obligation to pay superannuation guarantee on driver’s behalf and nor do Uber withhold PAYG for drivers.
  • The gross Uber fare is assessable income for tax purposes (it is generally income from carrying on a business) and the driver can claim appropriate deductions. The most significant deductions include the 20% Uber commission and car expenses (note: claiming deductions for car expenses has changed with effect from the 2016 income year, as discussed above). Note that apportionment may be required where an expense is partly private in nature.
  • Be careful if the driver has a loss for tax purposes as the loss may be reduced or deferred for income tax purposes.

GST Issues

  • The ATO take the view that Uber drivers are providing taxi-travel services and, as such, the GST rules that apply to taxi drivers also apply to Uber drivers. As a result, Uber drivers are required to register for GST and pay GST on every dollar of their driving income (i.e, the driver is not entitled to apply the $75,000 turnover test). The ATO has enforced this view from 1 August 2015. GST payable on a trip is equal to 1/11th of the gross fare.
  • Uber drivers must provide a tax invoice to passengers for fares over $82.50 (incl. GST) where they are requested to do so.
  • Being registered for GST, the driver can claim ITCs for creditable acquisitions relating to the driving enterprise. Note however that any claim must be reduced if the acquisition was only partly creditable and where the driver did not pay GST on the acquisition (e.g., for this reason, no ITC is available in respect of the 20% Uber commission).
  • The most significant ITC claim is likely to be in respect of the driver’s car. This could be on the acquisition of the car or in relation to running expenses. The ATO provide a number of methods that can be used to determine the ICT amount. Refer to GSTB 2006/1 and above.
  • Be careful with record keeping requirements for GST as they are more onerous than is required for income tax purposes.