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Tax tips for rideshare drivers

Unlike other sole traders in different industries, such as freelancers or consultants, rideshare drivers must:

Have an Australian Business Number (ABN) and be registered for Good and Services Tax (GST)
Submit a Business Activity Statement (BAS) even when earning less than the regular GST threshold of $75,000
And like all individuals with BAS/GST obligations they must ensure they pay any GST liabilities to the Australian Taxation Office (ATO) by each due date
Given these additional requirements for rideshare drivers, we've got some handy tips to help you best manage your tax compliance.

1. Get set up correctly from the outset
To set yourself up as a sole trader for ridesharing purposes, you need to obtain an ABN and register for GST with the ATO.

2. Understand what you can and cannot claim as a deduction against your rideshare income.
You are entitled to claim a deduction for most expenses which directly relate to earning your income. These must be expenses that you paid for yourself and for which you weren't reimbursed.

You can claim a deduction for a percentage of expenses that represent the proportion related to you earning income (as opposed to private or domestic expenses). This is commonly referred to as your business use percentage.

The following are example of expenses which you might be able to claim as a rideshare driver earning income from rideshare activities:

• Costs of becoming a rideshare driver such as application fees and rideshare license
• Car maintenance expenses such as cleaning and servicing
• Petrol and oil
• Mobile phone usage
• Subscriptions to music services such as Spotify
• Parking and tolls
• Lease expense of a rented vehicle
• Remember, you can only claim the proportion of these expenses that related to your ride sharing activity. For example, if you use your car for rideshare driving 50% of the time, you can claim up to 50% of expenses incurred but no more.

3. How to manage your car related expenses
The ATO provides two methods of tracking car related expenses. These are the cents per kilometer method and the logbook method, both explained below.

Cents per kilometer method:

This option is only available to drivers travelling less than 5,000kms per year for their purpose of rideshare work. In this case you can claim 66 cents per kilometer traveled for business purposes.

Logbook method

If you are travelling more than 5,000kms for business during one financial year and planning on claiming car expenses the ATO stipulates that you must keep a logbook of distance traveled and purpose. This must be kept for a minimum of 12 continuous weeks during the year and can then be used to calculate the annual car expenses and business use percentage. Each 12 week log book period can then be used for up to 5 years.

Other expenses which might be possible to claim include car running costs and decline in value of the car (but not capital costs). And don't forget, you are required to maintain written evidence, such as receipts, of all expenses claimed!

Your log book must show:

1. The period start and end dates and odometer readings at these times
2. Total kilometers traveled during the 12 week period
3. Number of kilometers which relate to work travel during the 12 week period
4. Business use percentage for the period (this will be calculated using the figures from points 2 and 3 above).
The log book method requires a bit of work up front to keep track of your travel over the 12 week period but often provides a great deduction outcome if you are travelling a lot and can be used for a substantial period of time after you have made the upfront time investment.

4. Other things you might be able to claim
Being self-employed, rideshare drivers have GST obligations however they may also get the benefit of tax concessions for small businesses owners.

If you've purchased an asset related to your business operations (e.g. a vehicle) from 12 May 2015 you may be able to claim an up front deduction for the cost of the car if it was purchased for less than $20,000. Remember though, you can only claim the percentage of the asset which relates to business use.

5. GST may apply to the sale of your vehicle
It is important to note that if you sell a vehicle you've been using for the purpose of rideshare driving, you may be liable to pay GST on the sale. This will occur if you claimed a GST credit at the time you purchased the car or became registered for GST.
 

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Helpful thread - one question, when you're claiming for the GST Input Tax Credit, to you claim for the full amount or only the proportion which relates to your business kms only. So if you only drive for Uber 50% of the time do you only claim back 50% of your GST on expenses - or do you claim the full amount?
 

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Helpful thread - one question, when you're claiming for the GST Input Tax Credit, to you claim for the full amount or only the proportion which relates to your business kms only. So if you only drive for Uber 50% of the time do you only claim back 50% of your GST on expenses - or do you claim the full amount?
You can claim the business use only. If your business use is 50% and you purchased $110 worth of fuel, you'd be able to claim $5 as a GST credit, and $50.00 ($110 x 50% - $5) as an income tax deduction.
 

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You can claim the business use only. If your business use is 50% and you purchased $110 worth of fuel, you'd be able to claim $5 as a GST credit, and $52.50 (($110 - $5) x 50%) as an income tax deduction.
Hmm me thinks the income tax deduction is $50 ie
*50% business use ie .5*$110 = $55
*less GST credit on business use portion ie $5
Net income tax deduction $50. Thats how it works when I post it in MYOB!!

All a moot point if claiming the set mileage method.
 

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Hmm me thinks the income tax deduction is $50 ie
*50% business use ie .5*$110 = $55
*less GST credit on business use portion ie $5
Net income tax deduction $50. Thats how it works when I post it in MYOB!!

All a moot point if claiming the set mileage method.
Yep, you're correct lui, that's a mistake on my behalf. Had some issues with typing that up, so got distracted from the important bit: getting the info right! It should be: IncomeTaxDeduction = Price x BusinessUse% - GstCredit = $110 x 50% - $5. My apologies everyone and MrM.

The difference in the allowable income tax deduction between someone registered for GST and someone not registered for GST will always be the amount of the GST credit.
 
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