Tax is an unavoidable part of being in business, and saving for tax can be a slippery slope. Too often people find themselves in trouble with the ATO after tax bills accumulate. A set routine for saving as you go is essential to avoid any tax time panic.
This can be tough, as it’s easy to feel pressured by your other bills and expenses, it’s common to find yourself continually playing catch-up.
This article will help you stay on top of your tax obligations so you can head into tax time feeling confident.
Putting Aside GST
How Much Should I Put Aside For GST?
The easiest way to put aside for GST is to work on a ‘rule of thumb’ percentage, and put this aside whenever you get paid. We’ve found that Uber Drivers’ GST bills average roughly 8%-10% of their Net Uber income (i.e. the amount they receive in their bank account from Uber). Start with this, and once you lodge your first BAS, check whether you had enough saved up or whether you were under or over, and adjust your percentage accordingly.
How Is My GST Calculated?
If you’d like to work out more accurately how much you need to put aside, or if you drive for a rideshare company with different fees, you’ll need to actively keep track of your income and expenses each week with a spreadsheet. You’ll need to set up formulas to calculate your GST as follows:
- Gross Income (Fares before Uber’s commission is deducted)
- divided by 11
- = GST on Income
- less: GST on Vehicle Expenses X percentage of business use (more detail on this in a moment)
- less: GST on Other Expenses (bottles of water, mints, stationery, etc)
- = Net GST Payable
Its important to note that because Uber are not an Australian company, there is no GST on the commission they charge you. Make sure you don’t accidentally claim GST credits. If you drive for a different rideshare company you’ll need to check whether they’re based in Australia.
We’ve written an article on tax deductions for rideshare drivers that explains in more detail what expenses you can claim and how to calculate your vehicle deductions. Although the recordkeeping requirements are a little different, the list of what can and can’t be claimed will be similar.
How Is GST On Vehicle Expenses Calculated?
To work out the GST on your motor vehicle expenses, you first need to work out the percentage your vehicle is used for Uber/ridesharing:
- If you’ve kept a logbook for your end of year tax return, you should use that same percentage for your GST claims
- You can calculate your percentage based on other records. For example, your records may show your kms driven for Uber, and odometer readings or service records will tell you the total kms your vehicle has travelled. Rideshare kms divided by total kms will give you your percentage
- Alternatively, you can use percentages set by the ATO, based on how many kms you estimate you will drive for Uber over the whole financial year:
- 0-1,250km – 5%
- 1,250km-2,500km – 10%
- 2,500km-3,750km – 15%
- 3,750km-5,000km – 20%
- 5,000km+ – 33.33%
- More detail can be found on the ATO website here.
Note that there is no GST on depreciation or loan interest, so these are not taken into account on your quarterly BAS’s.
Putting Aside Income Tax
How Is My Taxable Income From Uber/Ridesharing Calculated?
The amount you’ll be required to pay tax on is calculated as follows:
- Gross Income (Fares)
- less: 1/11th GST paid to ATO
- less: Uber Fees
- less: Vehicle Expenses excluding GST (adjusted for private use percentage)
- less: Other Expenses excluding GST (bottles of water, mints, stationery, fees & charges etc)
- = Net Taxable Income
Again, our article on tax deductions for rideshare drivers contains more detail on what you can claim and how to calculate your vehicle deduction.
How Much Should I Put Aside For Income Tax?
Similarly to GST, the best approach for putting aside income tax is to work out a percentage rate that’s appropriate for your circumstances, and then put aside that percentage of your income each week. Here’s how:
- Work out what your taxable income will be aside from your rideshare driving (e.g. employment income, contracting work, investment income).
- Refer to the ATO’s tax tables to see what your marginal tax rate is (below).
- If you want to be very conservative, put aside this percentage of your rideshare income (gross fares less GST less fees). Alternatively, you can reduce it a little to allow for your car expense deductions.
- If you keep a log book, and have a reasonably high percentage of vehicle use for rideshare purposes, you might reduce your percentage by 10%
- If you have lower percentage in your logbook, or you don’t keep one but will do upwards of 5,000km (the maximum deduction without a logbook), reduce your percentage by 5%.
- If you haven’t kept any receipts and don’t drive too often, don’t reduce your percentage, stick to your marginal tax rate.
- If you usually have a high tax refund each year, perhaps due to lots of tax deductions from your main job, or negative gearing on an investment property, then you can take this into account and reduce your percentage further.
|2016 & 2017 Financial Years|
|Taxable Income||Marginal Tax Rate *|
|$0 – $18,200||0%|
|$18,201 – $37,000||21%|
|$37,001 – $80,000||34.5%|
|$80,000 – $180,000||39%|
|$180,001 and above||49%|
(* the above rates include the Medicare Levy and Temporary Budget Repair Levy)
Each time you get paid from driving, put that percentage aside. Your tax savings will grow, and at the end of the year when your accountant gives you your tax bill, the funds will already be there, ready to go.
Setting Up a Savings Account
To keep this tax aside, set up a separate savings account especially for saving up for your tax bill. Most banks offer free ‘online only’ savings accounts that are easy to set up, earn a decent interest rate, and don’t have keycards, which is perfect for making sure you don’t touch your savings.
Lodging your BAS’s and Tax Returns
When it comes time to lodge your BAS’s and Tax Return, DriveTax can help. As specialists in tax for Uber and rideshare drivers, we know what you’re entitled to claim to maximise your deductions.
But that’s not all we do. As a CPA firm and Registered Tax Agents, we offer the full spectrum of tax and accounting services. If you have a rental property, capital gains or any other tax complexities, DriveTax have the expertise and experience to help with those too.
You can read more about our services, view pricing, and browse our appointment booking calendar for a timeslot that suits you by visiting our website
For more information on managing your tax requirements as a rideshare driver, check out our post on the Seven Steps to Get your Rideshare Tax Obligations Sorted.
In the meantime, follow us on Facebook to stay up to date with tax news, tips and due date reminders for Uber drivers.
The information in this article is general in nature and does not take into account your personal circumstances. If you’d like to know how this article applies to you, please contact us to arrange a consultation, or talk to your accountant.