Buying A Car For Uber

Updated 28th of June 2024

As an Uber driver, your car is your most critical business asset, so the decision to buy a car for Uber is an important one.

Perhaps you’re looking to start driving but your current car doesn’t meet Uber’s requirements. Perhaps you see yourself driving for Uber longer term so it’s time to upgrade. Or perhaps you just need a new car, and driving for Uber is a fantastic way to help with the cost.

In all of these cases it’s important to understand the tax implications before you buy a new car for Uber.

Things are especially complex at the moment, as the ATO have recently changed the rules for claiming the cost of your new car. For the 2023 financial year we had the Temporary Full Expensing write-off, and for 2024 and 2025 we’ve switched back to the Instant Asset Write-Off and Small Business Depreciation. These write-offs sound great, but the eligibility rules are tricky, and many drivers don’t realise they come with a nasty sting in the tail when you sell the car or stop driving.  

With all these complex, ever-changing rules, it’s important to have a clear picture of how they work, and how much you’ll actually get back on tax, before you go ahead and buy a new vehicle for Uber, rideshare or delivery driving.  

This article aims to cover all the essentials of claiming GST and tax deductions when you buy a car for Uber, rideshare or delivery driving.

A quick note for UberEats, DoorDash, Menulog and Food Delivery Drivers – this article focuses on cars, but it all applies exactly the same to bicycles, ebikes, scooters and motorcycles as well. Just remember that if you are not registered for GST then you can ignore all the GST parts of this article.  

(Buying an Electric Vehicle? You may also like to check out our article on Buying a Tesla or EV for Uber)

 

First Considerations

A common misconception to clear up right away, especially with the 2023 Temporary Full Expensing write-off, is that you’ll get the cost of your new car back on tax. This is not the case.

When you buy a car you will get a tax deduction for the cost of the car, which is different from getting the money back. How much money the deduction actually puts into your pocket will depend on your marginal tax rate and on your business profit. For some people, the tax deduction may not actually give any money back at all. So it’s important that you understand how the tax deduction will apply in your circumstances. This is explained below under the heading ‘Claiming Tax Deductions On A New Car’.

Another important consideration is that many drivers don’t make as much money from rideshare or delivery driving as they first expect, especially after taking into account income tax, GST and car running costs. Be sure to evaluate whether you can still afford your car even if you make less than you expect from rideshare or delivery driving.

If you’re not sure yet whether you’ll drive Uber for the long term, but your current car doesn’t meet requirements, a great option is to rent a vehicle and try Uber first before committing to a car purchase or a loan. There are a number of rental companies that specialise in renting to Uber drivers. We highly recommend Splend for their exceptional member services, including driver training and strategic advice, fuel discounts, and networking opportunities with other drivers. Read more here about renting a car for Uber.

Here are a few more common questions about buying a car:

• New or Used? Tax-wise, it makes no difference. You’ll get the same tax deduction price regardless of whether the car is brand new or used. 
• Dealer or Private Seller? Buying from a dealer is usually a little more expensive because they provide benefits such as a statutory warranty, so you’ll need to decide if this is worthwhile for you. From a tax perspective, if you buy from a dealer the cost of the car will include GST, and if you are registered for GST you can claim this back from the ATO. So if you are GST-registered and you’re comparing a dealer car to a private sale car be sure to take into account the GST you’ll get back from the dealer car. More on how to calculate this below.
• Can I Claim The Write-Off?  If you bought your car between 6 October 2020 and 30 June 2023, yes, all Uber, rideshare and food delivery drivers who have an ABN are eligible for the Temporary Full Expensing write-off. Or, if you bought your car after 1 July 2023, you can only claim the Instant Asset Write-Off if your car cost less than $20,000. But with both the TFE write-off and the IAWO there are some traps to be aware of. Scroll down to read more about claiming depreciation and the write-off on your new car.

 

Financing Your Car

There are many factors to consider in choosing how to finance your car for Uber, including affordability of repayments, how long you plan to drive for, and whether your circumstances allow you to apply for a loan. These questions are best discussed with your finance broker, who should be able to provide you with calculations comparing options for financing your Uber vehicle, including a loan vs lease analysis.

The way you choose to buy and finance your car will also affect the way you claim tax deductions. For example, the timing of tax deductions for a loan vs a lease or rental are very different: 

• Buy Car & Take Out a Loan: If you purchase your car directly and take out a loan, the interest deductions will be larger in the earlier years and gradually tapering off over time. Also, if you buy a car you’ll be able to claim depreciation on the cost of the car itself, and those deductions are also larger in the first year and taper off over time (or all up front, if your car is under $20k and you’re eligible for the Instant Asset Write Off). Finally, if you are GST-registered and you purchase your car from a dealer (i.e. a GST-registered seller) you’ll also receive a lump sum refund of your business portion of the GST on your next BAS.
• Lease or Rent a Car: If you lease or rent a vehicle, your tax deductions and GST claims are spread evenly over the life of the lease, rather than being ‘front-loaded’. You’ll claim the GST back on your lease/rental payments quarterly, and claim a tax deduction for your lease repayments for the year (excl GST) on your tax return. Since you don’t own the vehicle directly you won’t be eligible to claim depreciation or Temporary Full Expensing. Here’s more on Renting a Car for Uber.
• Salary Packaging: If you salary package a vehicle through your employer, you’ll receive all of your tax benefits through your pay. This means you cannot also claim tax deductions for those expenses in your tax return, as this would be ‘double-dipping’. You can still claim GST and tax deductions for any expenses that are not packaged (i.e. paid out of your own pocket), but you must keep a logbook to be eligible.

(Note that you must have a 12-week logbook to claim all of the above tax deductions, more detail on logbooks below).

As you can see, from a tax perspective the biggest difference is that with a loan your tax benefits are ‘front-loaded’, while if you lease/rent a car the tax benefits are spread evenly over the lease/rental period. So when choosing which of these suits you best consider how long you expect to drive for, your marginal tax rate over those years, whether you plan to upgrade the car in few years or car or keep it long term, and your immediate cashflow needs.

Claiming GST on a New Car For Uber

If you purchase your car from a dealer, the purchase price will include GST. If you are registered for GST on the date of purchase you can claim back the GST on your Uber vehicle on your next Business Activity Statement (BAS).

The amount of GST you’ll get back will be a little less than 1/11th of the price of your car (because some on-road costs don’t include GST) multiplied by your business-use percentage. Note that a logbook isn’t required for GST claims, instead the ATO allows you to make a reasonable estimate of your business use percentage. The logbook is required for your end of year income tax though, more on this below.

There is a maximum limit of GST that you can claim on the purchase of any car, which is calculated in reference to the ATO’s Car Cost Limit.  To calculate your limit, take the car cost limit for the year you purchased the car in, and divide by 11. Then apply your logbook percentage to the result, and this is the maximum GST credit you can claim on the purchase of your car.

• 2022-2023: Car cost limit = $64,741, so the GST limit is $5,885 x your logbook %.
• 2023-2024: Car cost limit = $68,108, so the GST limit is $6,191 x your logbook %.
• 2024-2025: Car cost limit = $69,674, so the GST limit is $6,334 x your logbook %.

Remember that to be eligible to register for GST, you must have actively started the Uber application process to prove that you are ‘running a business’. If you plan to purchase a car and you haven’t yet registered for GST, we recommend that you start the Uber driver application process BEFORE buying your car in order to prove your eligibility for a GST Registration. Then download our free Uber Tax Info Pack in order to access our free GST Registration service. We’ll submit your GST Registration application to the ATO for you for free. 

Other Situations:

• Purchase from Private Seller: If you purchase a car privately, there is generally no GST on the purchase price, as the seller will usually not be registered for GST. This will mean there is no GST to claim back on the purchase of the car, because you did not pay any GST on the car purchase in the first place.
• Lease or Rent: On your quarterly BAS you’ll claim back the GST on your lease/rent payments multiplied by your business use percentage. There is no up-front deduction for GST, instead you claim it quarter by quarter over the life of the lease
• Salary Packaging: In a salary packaging arrangement your employer owns the car and pays the expenses, so they are the ones to claim the GST credits. However this is taken into account when working out the amount that is deducted from your pay, so you still indirectly receive the benefit of the GST credits. If you pay for fuel, cleaning or any other running costs out of your own pocket (i.e. outside of the salary packaging) you can claim the GST on these expenses on your BAS.

Claiming Depreciation on a New Car For Uber

If you have bought a car during the financial year, we strongly recommend having your tax return prepared by DriveTax or another tax agent.

The tax legislation behind car depreciation is more complex than it’s ever been before, the tax return form itself is confusing, and there are traps that could mean you end up with a less-than-optimum tax result. 

When we prepare your tax return, we’ll explain how the Temporary Full Expensing rules or Instant Asset Write-Off rules will apply to your specific tax circumstances. We’ll run all the calculations and analyse your options to make sure your tax deduction for your new car is maximised.

2024 Financial Year – Simplified Depreciation for Small Business

For cars purchased from 1 July 2023 onwards, the Temporary Full Expensing write-off we’ve had for the past few years will no longer be available. Instead, car purchases can be claimed under the Small Business Depreciation rules, which is the system we used before the TFE write-off was introduced in 2021.

The basic principle is that cars costing under the Instant Asset Write-Off threshold can be written off, while cars costing over the IAWO threshold must be depreciated over a number of years, meaning you receive your tax benefit over a longer period of time instead of up-front.  

For the 2023-2024 financial year, the Instant Asset Write-Off threshold is $20,000. For the 2024-2025 financial year the threshold is also proposed to be $20,000, but this hasn’t been passed into law yet. 

Here are the key things to know about Small Business Depreciation:

• Assets costing under the IAWO threshold can be claimed in full (i.e. ‘written off’) in the year of purchase
• Assets costing over the IAWO threshold can’t be written off. Instead, the tax deduction must be spread over a number of years. Here’s how it works:
  • 15% in the first year (there is no adjustment for timing, so it’s 15% whether you purchased on the first or the last day of the year)
  • 30% of the remaining depreciation balance in each subsequent year
  • Once the remaining depreciation balance drops below $20,000, the balance is claimed in full (i.e. written off) in the following financial year 

For example, take a car costing $30,000 on the 1st of April, with a 100% logbook (we’ll ignore GST): 

• Year 1 – 15% of $30,000 = $4,500 deduction this year. Remaining balance = $25,500
• Year 2 – 30% of the remaining balance of $25,500 = $7,650 deduction this year. New remaining balance = $17,850
• Year 3 – The remaining depreciation balance was below $20,000 at the end of last year, so this year we can write off the balance. $17,850 deduction this year.

Alternatively, you may choose not to use the small business depreciation rules, and instead claim traditional diminishing value depreciation of 25%. There is no eventual write-off with this option, it just continues on indefintiely. Also note that the timing of your purchase has a big impact on the amount of the deduction in the first year.  

• Year 1 – 25% of $30,000 x 3/12 months timing adjustment due to 1st of April purchase =  $1,875 deduction this year. Remaining balance $28,125
• Year 2 – 25% of the remaining balance of $28,125 = $7,031 deduction this year. New remaining balance = $21,094
• Year 3 – 25% of the remaining balance of $21,094 = $5,273 deduction this year. New remaining balance = $15,821
• Year 4 – 25% of the remaining balance of $15,821 = $3,955 deduction this year. New remaining balance = $11,866
• … and so on indefinitely

Note that the Instant Asset Write-Off is only available if you bought the car during the same financial year that you commenced, or continued to run, your Uber business. In other words, if you bought your car in a prior financial year before starting as an Uber driver, you won’t be eligible for the Instant Asset Write-Off. Instead, your only choice will be to follow the ‘15%/30%/balance under $20k’ depreciation rules.     

These following rules apply to all types of depreciation:  

• The car can be new or used, and can be bought from a dealer or private sale
• If you are registered for GST then you must subtract the GST you claimed back on your BAS from your purchase price. If you are not registered for GST (i.e. food delivery drivers) then you can ignore the GST and claim the whole cost of your car
• The Car Cost Limit sets the maximum amount you can claim, more on this below
• You MUST have a valid 12-week ATO-compliant logbook, and you can only claim your logbook percentage

2023 Financial Year – The ‘Temporary Full Expensing’ Write-Off

For the 2021, 2022 and 2023 financial years, the ATO introduced the Temporary Full Expensing write-off, which allows all businesses to claim an up-front deduction for the whole purchase costs of new assets. The main difference with the TFE Write-Off was that there was no maximum limit, assets of any value could be written off. Alternatively, it was possible to opt out of the write-off, and instead claim 25% diminishing value depreciation as explained above. 

Here are the key things to know about the Temporary Full Expensing write-off:

• The car could be new or used, and can be bought from a dealer or private sale
• If you were registered for GST then you must subtract the GST you claimed back on your BAS from your purchase price. If you are not registered for GST (i.e. food delivery drivers) then you can ignore the GST and claim the whole cost of your car
• The Car Cost Limit set the maximum amount you could claim, more on this below
• You MUST have had a valid 12-week ATO-compliant logbook, and you can only claim that percentage
• You must have taken delivery of the car and completed your first business trip on or before the 30th of June to be eligible to claim the write-off in that financial year.

Traps To Look Out For

It’s important to note that claiming the Instant Asset Write-Off or Temporary Full Expensing write-off is not always the best outcome tax-wise. Depending on your circumstances, sometimes it’s actually better NOT to claim the whole cost of the car upfront and instead to spread the deduction over a number of years. This was especially true for the years where the TFE write-off was in effect, because it was often quite a large deduction, as opposed to the IAWO that is capped at $20k. 

For example, if claiming Temporary Full Expensing for your car will push you below the tax-free threshold, then the tax-free part of your car deduction would be wasted, you would get no tax benefit from it at all. At the end of this blog post I’ve created a series of example scenarios where Temporary Full Expensing may or may not be beneficial, depending on your business gross income, business net profit, employment income and logbook percentage.

It is possible to opt-out of either of the Write-Offs and instead use the traditional 25% diminishing value depreciation method mentioned above to spread your car claim over a number of financial years. This would push more of your car deduction forward to future financial years where your taxable income and marginal tax rates might be higher.

However, opting out is not easy. It requires a number of extra steps in your tax return, and comes with a number of traps to look out for. If you think this might apply to you, I would strongly recommend having your tax return prepared by DriveTax or another tax agent. We can work out the optimum strategy for claiming your new car based on your income and circumstances, and can complete the opt-out process if that’s the most tax-effective option for you.

Car Cost Limit

The ATO’s Car Cost Limit sets the maximum amount that you can claim on the purchase of any car. If your car purchase cost is more than the relevant limit, then you can only claim up to the limit. The rest of your car purchase cost is not deductible. Note that if you are registered for GST then you must subtract the GST that you claimed from the purchase price when calculating your limit.

• 2022-2023: Car cost limit = $64,741 x your logbook %.
• 2023-2024: Car cost limit = $68,108 x your logbook %.
• 2024-2025: Car cost limit = $69,674 x your logbook %.

So as an example, let’s say you purchase a Tesla for $90,000 (incl $8,182 of GST) during the 2025 financial year, you have a logbook of 80%, and you’re registered for GST.

• On your BAS you’ll get a GST credit of $6,334 x 80% = $5,067
• On your tax return you’ll be able to claim depreciation on $69,674 x 80% = $55,739

Logbook Requirement

Also remember you MUST have a 12-week ATO-compliant logbook in order to claim depreciation/the Instant Asset Write Off fuel, insurance or any other car deductions. You can start your logbook any time before 30 June in the year you buy your car and it will be valid once it has run for 12 weeks. You can read more about this in our blog post How To Keep A Logbook For Uber.

To answer a common question, if you purchase your car less than 12 weeks before 30 June that’s okay. Under the IAWO and Small Business Depreciation rules, as long as the first logbook entry is on or before 30 June, you can use it for that financial year. You’ll just need to wait until your 12 weeks is complete before you can lodge your tax return. To take this one step further, what if you pick up your car on 30 June, but don’t start Uber until July? That’s okay too, you can put a private use entry into your logbook on the 30th and that will count as the start of your logbook.

(Note that for previous years under the TFE rules, the write-off occurred on the date of the first business trip. So to be eligible to claim in a given year, you must have done at least one Uber trip before 30 June.)   

If you have already kept a logbook within the last five years, as long as your pattern of usage is still roughly the same you can continue using that logbook percentage for your new car, no need to keep a new logbook. However, if your pattern of usage has changed significantly (we usually say +/- 10%) then your old logbook becomes invalid, and you must start a new one.

Visit this article on our blog for more detail about the ATO’s rules on Keeping A Logbook For Uber.

Business Losses

Many Uber drivers who purchase and claim a new car on tax end up making an overall taxable loss on their sole trader business. This was especially true for years where the TFE write-off was available (the 2023 and earlier financial years).

If you do end up with a loss, the ATO’s ‘non-commercial loss rules’ determine what happens to your loss in your end of year tax return.

In the vast majority of cases you’ll be referring to the ‘assessable income test’, which looks like this:

• If your assessable income is over $20,000 (or pro-rata) you can claim your loss as a tax deduction against your employee and other taxable income
• If your assessable income is under $20,000 (or pro-rata) then your loss must be ‘carried forward’. You will only be allowed to claim that loss as a deduction against rideshare/delivery profits in future financial years

Your assessable income is your gross income from rideshare or delivery driving, before deducting any expenses (e.g. Uber fees). If you’re GST-registered then you must exclude GST. If you’re using the DriveTax Delivery spreadsheet it’s the total at the top of Column B of the expenses spreadsheet, or if you’re using the DriveTax Rideshare Spreadsheet it’s the total at the top of Column D.

If you started driving partway through the financial year then you can make a ‘reasonable estimate’ of what your gross income would have been for a full 12 months. The best way to prove your estimate is to calculate your pro-rata income from when you started driving up until 30 June.

So for example:

• If you started driving on 1 January and you made $11,000 gross income for the 6 months up to 30 June, then you could reasonably estimate your income for a full 12 months would have been over $20,000. Therefore you can claim your business loss as a tax deduction against your employee and other taxable income, which is likely to substantially boost your tax refund.
• If you started driving on 1 January and you only made $8,000 gross income for the 6 months up to 30 June, then you could not say your 12-month income would be over $20,000. Therefore your business loss cannot be claimed against your other taxable income. This means you won’t pay any tax on your business income this year which is great, but the remainder of your business loss will roll forward and can only be claimed against future business profits. 

As you can see, your gross business income has a huge impact on the tax deduction you’ll get for your new car. It’s important to factor these rules into your car purchase decision, and into your expectations for your end-of-year tax return.

One more tip: if you think you will have a business loss this year, AND you have employee income that you want to claim your loss against, AND you think you might be close to the $20,000 threshold, then I recommend keeping a close eye on your gross income throughout the year. As 30 June approaches, if you’re almost to $20,000 but not quite there, you may like to squeeze in some extra driving before the end of the financial year to get you over the line and make sure you can claim your business loss in the current year.

Claiming an Existing Car

If you start doing rideshare or food delivery, and you use a car that you already own, you can claim under the Small Business Depreciation rules (15%/30%/write-off balance under $20k in the following year), but you cannot claim the Instant Asset Write-Off. 

You will first need to find out your opening depreciable value, by calculating how much the car has depreciated between the date you bought it and the date you started using it for business purposes.

This is calculated using the diminishing value method and an effective life of 8 years. The calculation is too complex for me to explain in full here, so if this scenario applies to you I recommend having your tax return prepared by DriveTax or another tax agent and have it calculated for you. From there, you can claim the write-off on the remaining value of your car. 

Claiming Deductions For Other Ownership Options

• Lease or Rental: You can claim a tax deduction for the cost of your lease/rental repayments (excl GST) for the year multiplied by your logbook percentage. You cannot claim the cost of buying the car itself, because technically it is the lease/rental company that purchased the car, not you. Here’s more on Renting a Car for Uber.
• Salary Packaging: You cannot claim a tax deduction for salary packaged expenses, because you have already received the tax benefit through the salary packaging. You can claim any expenses you pay for out of your own pocket (i.e. outside of the salary packaging) as long as you have kept a logbook.

In all of the above situations, you MUST keep a valid ATO-compliant logbook to claim these deductions, even if your use is 100%. Otherwise you cannot claim the instant asset write-off, depreciation, loan interest, fuel or any other car running costs, and you’ll instead be limited to just the cents per kilometre method, which for 2025 is a maximum tax deduction of $4,400. See our blog post on Keeping A Logbook For Uber for more detail on this topic.

Selling Your Uber Vehicle

One last thing to keep in mind when claiming depreciation, the Instant Asset Write-Off or the TFE write-off. When you eventually sell your car or stop using it for business purposes, you’ll be required to declare the sale price or market value, multiplied by your logbook percentage, as taxable income. This is called a ‘balancing adjustment’.

The balancing adjustment is calculated as being the difference between the depreciated value of the car in your tax return,  and its actual sale price, or if you didn’t sell and just stopped driving, then its market value at the time it stopped being a business asset.

Balancing adjustments can be especially tough if you previously claimed a write-off for your car, meaning its depreciated value is now $0. They can also be tough if you sell the car for close to the same price you bought it, or you stop driving not long after you buy the car, whereby your car’s value hasn’t dropped by much. In these cases, you’ll essentially have to pay back nearly all the tax benefits you received from the write-off claim.

If you’re planning to continue Uber driving, and you’re trading in a previous car for a new car, the depreciation claim for your new car may soften the blow a little. But since the ATO have removed the TFE write-off from 2024 onwards, the deduction for your new car is unlikely to cover the balancing adjustment of the old car, so there will likely still be some tax to pay. 

To help cover these costs, if you claim the write-off on your new car purchase, I always recommend putting aside some of the tax refund you receive from your write-off to help you cover the future tax bill when you sell or stop doing Uber.

One more thing to note, if you claimed GST when you purchased the car, then you must also declare the sale of the car on your next BAS and pay GST of 1/11th on the sale price (even if you sell the to a private buyer). Or, if you don’t sell the car but just stop using it for business, you must pay GST on the market value, just like we discussed above. Again, if you sell one car and buy another these two will mostly cancel each other out, but if you stop doing rideshare then you will need to plan ahead for this tax liability.  

Other FAQ’s

• Name and ABN on the Invoice: For GST purposes, for a purchase over $1,000 your ‘identity’ must appear on the invoice. This can be either your name and address, or your name and ABN. Otherwise you cannot claim GST on the purchase of your car.
• Invoice for a Private Sale: The ATO understands that when buying a car privately you won’t get a formal tax invoice. You should instead write your own receipt for the purchase of the car, showing the name, address and contact details of both you and the seller, the purchase date, price, and registration number or VIN number. Both of you should sign and date the receipt. You should also keep copies of bank statements or bank cheques or other proof of payment.
• Buying in a Spouse’s Name: The ATO’s rules are inconsistent on this. For income tax the ATO accepts that spouses often register assets or pay expenses on behalf of each other or in each other’s names for various reasons. So as long as the vehicle is genuinely for your Uber driving and you have a logbook to prove this, you can still claim depreciation in your tax return. The same is true for any running costs that your spouse pays for. GST is different, for expenses over $1,000 you can only claim GST credits if your name appears on the invoice, as mentioned above. Therefore if you are purchasing a car from a dealer and wish to claim for GST you MUST make sure the tax invoice for the car purchase is in your name. This only applied to purchases over $1,000, so for expenses under this amount it doesn’t matter what name appears, you can claim the GST either way.
• Business or Private Registration and Insurance: The ATO doesn’t care whether you register or insure the car as business or private, you can claim tax deductions either way. You should find out the requirements of your insurance company and the road traffic authority in your state to determine how you should register and insure your car.

What Next?

• Make sure you can afford the car even if you earn less from Uber than you expect
• Decide whether a loan, lease or rental is best for you, and chat to a finance broker if you need help
• If you need to register for an ABN or GST (or you just want to learn more about your tax obligations), download our free Uber Tax Info Pack
• Start a logbook. Read our blog post on Keeping A Logbook For Uber for more information
• See our BAS Services Page for help lodging your BAS’s to claim back the GST on your car purchase
• If you’d like to learn more about buying a car for Uber, including how to calculate depreciation, and how to lodge your own BAS and tax return, check out our online course Understanding Uber Taxes.

 

Thoughts? Questions? Leave a comment below and I’ll respond shortly!    – Jess

About the Author – Jess Murray CPA – Uber Accountant

Jess Murray is a CPA Accountant and registered tax agent. She’s been working in personal and small business tax for 15 years, and has been specialising in tax for Australian Uber Drivers for the last 7 years as the Director of DriveTax. She also teaches an online course called Understanding Uber Taxes.

Jess is on a mission to make taxes straightforward and manageable for Uber drivers across Australia.

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. 

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