Whether you are currently an Uber driver, or considering becoming an Uber driver, there are important things to consider regarding how you manage your taxes.
When you drive for Uber you are not an employee, you are a contractor and you must have an ABN. Uber do not withhold any taxes and individual drivers are responsible for their own tax obligations. This means that any money you make from Uber counts as income, meaning you must declare this income on your tax return.
During your first year as an Uber driver, it is important to put aside some of your income to pay your taxes. Depending on your situation, you may need to set aside as much as 30-40% of your income to cover your tax obligations. After your first year in business as an Uber driver, the ATO may ask you for quarterly tax instalments in advance (based on the income you earned during your first year).
A driver earning $50,000 for the year will need to save around $9000 for tax if this is their only income. However, a driver who also works a day job earning, say, $70,000 from wages, will need to save around $19000 to cover the tax on the $50,000 earned through Uber.
From August 2015, the ATO confirmed all Uber drivers are required to register for GST (Uber is currently challenging this). Being GST registered means that you collect GST on all of your Uber income and remit the GST portion of your Uber fares to the ATO on a BAS (Business Activity Statement) each month or quarter.
It is important to remember that the GST is not your money and you should put it aside so you can pay your BAS obligations.
Steps for Uber Success
- Set up a bank account you use only for Uber income & expenses (making it easy to keep track of Uber related transactions)
- Get an ABN
- Register for GST
- Keep good records so you can declare the correct income and claim maximum deductions
- Keep a logbook for your vehicle (must be kept for 12 consecutive weeks and record all trips)
- Save for your tax bill and your GST obligations
- Use a tax agent and get your Uber driver taxes right! A tax agent can help to maximise your deductions and help you to plan a weekly tax savings plan to avoid a shortfall at tax time