Ride Sharing’s Tax Treatment

6 years ago
judge
Accounting

What is Ride Sharing?

Have you or someone you know considered taking up ride-sharing (also called ride-sourcing) to earn extra income, or even as an alternative form of employment? Or maybe you’re already a ride sharing driver? If so, do you know your tax obligations? There are things you need to know and we have it summarised for you.

First, let’s define Ride-Sourcing or also known as Ride Sharing.

Ride-sourcing, is an ongoing arrangement where:

you (a driver) make a car available for public hire for passengers
a passenger uses a website or app provided by a third party (facilitator) to request a ride, for example Uber, GoCatch and others
you use the car to transport the passenger for payment (a fare).

There are now a lot of facilitators currently competing in the market. There is Uber which is the biggest competitor in this field. We also have GoCatch which is a local company that launched an app that connects users directly with taxis and GoCar. Then we have Taxify which is just recently stepping into the ride-sharing market in Australia. A lot of choices for you right?

Now let’s talk about the tax obligations of the drivers.

GST

Ride-sourcing is taxi-travel for GST purposes. If you have a ride-sourcing enterprise, you need:

an ABN
to register for GST from the day you start
pay GST on the full amount of every fare
keep records of income and expenses for both GST and income tax purposes.

You can then claim GST credits for expenses associated with your ride-sourcing enterprise.

As a ride sharing driver it is a requirement that you register for GST, regardless of how much (or how little) you earn. Meaning the GST rule with regards to turn over is not applicable to you. You are self-employed for these services so regular reporting in the form of Business Activity Statements (BAS), is essential.

Income Tax Return

The payments you receive through the ride sharing economy are assessable income and are subject to income tax.

This means you:

must declare the income in your tax return
can claim deductions for associated expenses.

You can claim income tax deductions relating to income you earn. To claim a deduction:

you must have spent the money and not been reimbursed
the costs must relate to doing your job and can’t be a private expense (such as travel from home to the job)
work out how much of the total expense is for your business and how much for personal use
you must keep appropriate records to prove your claim.

You can use cents per kilometre or logbook method as deductions depending on which is more favourable to you. We have listed some of the deductions you may claim:

commissions, licensing or service fees paid to the ride-share facilitators
Car running costs
Car rego and insurance
Repairs and servicing
mobile phone bills
fines (parking, speeding, etc)
clothing other than safety clothing, and
meals, drinks, etc purchased while on shift.
Depreciation
Interest (on car loan)

You will need to keep a logbook to claim all these running expenses and you can claim only the ride sharing percentage. We can help you work out on how much you can claim if you’re not sure.

Ride sharing can be very profitable and it’s easy to fit it into your schedule and lifestyle but you also need to be aware of the consequences and tax obligations of investing in this kind of business/work. If you’re considering adding this as an extra source of income, Please contact (02) 4732 3844 or visit www.judgeaccountants.com.au.