As you can see, the average profit from driving for Uber depends largely on your marginal tax rate. Your marginal tax rate is based on how much you make from employment and any other sources during the financial year. You can look up your marginal tax rate on the ATO website to see which of the charts above apply to you. (Note that in our charts we have added in the Medicare Levy of 2%)
So how do we interpret these charts? Here are two ways to look at them:
Average Hourly Earnings for Uber Drivers After Tax
To work out your average hourly rate after tax from driving Uber, take your gross fares per hour and multiply by the percentage of profits in the chart that applies to you.
- If you’re below the tax free threshold then multiply your gross fares per hour by 26% to give your take home pay per hour after tax.
- If you’re in the 21% tax bracket, multiply your gross fares per hour by 19% to give your hourly take home salary after tax.
- If you’re in the 34.5% tax bracket, multiple your gross fares per hour by 15% to show how much you’ll earn per hour after tax driving for Uber.
How Much of Your Uber Earnings Actually End Up In Your Pocket
Another way to read these charts is to say that for every $100 of gross fares, the profit segment of the chart tells you how many dollars you’ll actually take home.
- If you’re below the tax free threshold then for every $100 of gross fares you’ll take home $26.
- If you’re in the 21% tax bracket then for every $100 of gross fares you’ll take home $19.
- If you’re in the 34.5% tax bracket then for every $100 of gross fares you’ll take home $15.
Of course these charts are based on the results of other drivers, and your own figures, in particular your car running costs, may be different. So please use these percentages as a guide only.
Average Costs for Uber Drivers
Here we’ll break down the other expense sections of the charts in a little more detail.
Uber’s Service Fees
From your gross fares Uber will deduct 27.5% for their service fee. 2.5% of this is GST, which you can claim back on your BAS at the end of each quarter, so the net cost to you is only 25%. You can read more about this in our blog post on calculating GST on Uber fares and fees.
Car Running Costs
Car running costs for Uber drivers vary from driver to driver. They depend on things like fuel efficiency, insurance costs in your area, how expensive repairs and servicing are for your model of car, and whether you own your car, have a loan, or you rent or lease. Claimable car expenses usually equate to roughly 33% of gross earnings (before deducting Uber’s fees).
It’s important to note that some of these expenses are what we call ‘sunk costs’. This means that you would be paying these expenses regardless of whether you drive for Uber or not, so they shouldn’t be taken into account when evaluating how much money you’ll make from Uber driving. For example the interest on your car loan is payable regardless of how much or little you drive for Uber, so it’s a sunk cost. Most of your insurance and car registration fees will be sunk costs too, you should only take into account any additional costs over and above your regular private use policy. The 33% figure mentioned above is based on tax-deductible expenses, so it doesn’t consider sunk costs. This means your profit from driving for Uber will in reality be a little higher than what is shown in our figures.
For more information on claiming your car running costs, including the rules and requirements for keeping a logbook, check out our post on Tax Deductions for Uber Drivers.
Other Expenses for Uber Drivers
Uber drivers typically also claim deductions for their mobile phone, tolls, water and mints provided to riders, accessories for their cars (dash cams, seat covers etc), phone chargers and cables, medical checks, accounting fees, stationery and computer expenses. On average these costs account for another 7% of your gross earnings. Our post on Tax Deductions for Uber Drivers explains more.
GST for Uber Drivers
Yes, Uber Drivers do have to pay GST on their income, even if they earn less than $75,000. The GST on Uber income is easy to calculate, it will be 1/11th of your gross fares. You can then reduce this GST payable by claiming back the GST on your car and other expenses. Again, this varies from driver to driver. On average, after claiming expenses your GST bill will be around 7% of your gross fares. Our article on GST on Uber Fares & GST on Uber Fees explains more about how this is calculated.
Income Tax Rates for Uber Drivers
Income tax is the most difficult cost to calculate because it depends on your marginal tax rate. As we mentioned above your marginal tax rate is based on how much you make from employment and any other sources during the financial year. You can look up your marginal tax rate on the Tax Office website to see which of the charts above apply to you.
Here are some examples on how to calculate Income Tax for Uber Drivers:
- If Uber is your only source of income and your Uber profits are under $18,200 then you’ll be under the tax-free threshold and your profits will be entirely tax-free. You should refer to the first chart above.
- If you have employment income of $25,000 and drive Uber part time as well, then the marginal tax rate on your Uber income will be 21%. This means the second chart applies to you, so on average 6% of your gross Uber earnings will go to Income Tax
- If your employment is $50,000, then your Uber income will fall into the 34.5% tax bracket, so you should refer to the third chart. Roughly 10% of your gross Uber earnings will go to Income Tax
- If your Uber income straddles two marginal tax rates, the easiest solution is to assume your tax rate will be roughly halfway between the two relevant charts.
So Is Uber Driving Really Worth It?
That depends entirely on you. If the hourly rate you’ve calculated weighs up for you as a worthwhile use of your time, then yes, absolutely.
One of the most appealing aspects of driving for Uber is the flexibility to work on your own schedule, as often or as little as you like. We have clients who are single parents and drive during school hours. They can attend school events whenever they like, and stay home when a child is sick without worrying about job security. We also look after a great number of students who fit Uber in around their classes and study schedule. And many of our drivers don’t drive regularly, instead just jumping on the road when their family needs a top-up of cash for a holiday, unexpected bill, or Christmas presents for the kids. What other job offers that kind of flexibility?
The trade-off of course is that take-home pay tends to be lower than an employee job, with some drivers earning below minimum wage. The 7:30 Report recently ran a segment exploring this issue, you can watch it here. The segment features economist Jim Stanford who also published a detailed report on the topic.
Ultimately, the question you need to ask yourself as a prospective Uber driver is whether the trade-off between lower wages versus complete flexibility is worthwhile for you.
How To Get Started Driving for Uber
If you’ve decided that you’d like to get started driving for Uber, we can help. DriveTax can take care of all of your ATO registrations for free, and we’ll explain everything you need to manage GST and tax on your Uber income. Check out our post on the Seven Steps to Get you Uber Tax Obligations Sorted, our ultimate tax guide to getting started with Uber.