If you’re thinking about driving for Uber, it can be hard to figure out how much money you’ll actually make.
Fares can vary, there will be busy times and quiet times, Uber may offer a guaranteed hourly minimum, and you may earn extra from surge pricing and other bonuses. But then Uber take their take 20%, the ATO will take GST and Income Tax, and of course there’s fuel and running costs…
So how much actually ends up in your pocket?
Update February 2017: We’re hearing word from drivers that Uber’s fee has gone up to 25% in some parts of Australia. If that’s the case for you, you’ll need to decrease the profit estimates in the article a little further.
Estimated Profit Based on Uber Driver Data
We’ve done the calculations, and gathered data across a range of Uber drivers. The following charts give a rough idea of where each dollar you earn from Uber ends up:
As you can see, the big difference between these two graphs is your marginal income tax rate. To put it another way, the amount you earn from other sources (e.g. employment, investment etc) will change how much tax you’ll pay on your Uber income. This will therefore affect how profitable Uber driving is for you.
The majority of Uber drivers will fit into one of the two graphs above, but if you’d like to work out more precisely what profit you’ll make from Uber, we’ve included a full calculation guide later in this post.
How Much Profit Will I Make Per Hour?
This depends on a few things. The most obvious factor is how much you earn in fares per hour. This will depend on your location, the time of day or day of the week you drive, and a bunch of other variables. Many drivers have told us they were able to boost their average gross fares per hour by driving at strategic times, or by travelling to a different suburb before switching on their app. If you’re just starting out, try keeping records of your hourly earnings at different times of day and days of the week to find the most profitable times to drive that fit your schedule.
Once you know or have estimated your gross fares per hour, our figures above can be used as a rough guide to what profits you can expect. Take your Gross Fares per Hour, multiply by 37% if Uber is your secondary source of income, or 52% if Uber is your only income, and this will give an estimate of your after-tax hourly rate.
In some areas Uber guarantees a minimum $30 per hour. If this applies to you, you’re guaranteed an absolute minimum after tax income of $11 per hour if Uber is your secondary source of income, or $16 if Uber is your only income. Of course you’ll be aiming to earn more than this by taking advantage of peak times, busy locations and surge pricing periods. So to work out your take home profit per hour you’ll need to estimate your gross fares per hour and use the percentages above.
So Is Uber Driving Really Worth It?
Well that depends. If the hourly rate you’ve calculated weighs up for you as a good value 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. What other job, part time or full time, offers that? So even if you earn less than if you worked a structured part time job, the flexibility is valuable, and may offset the lower wages. It’s just a question of whether that trade-off is right for you.
How To Get Started
If you decide to go for it, DriveTax can help with all your registrations and 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.
In the meantime, follow us on Facebook to stay up to date with tax news, tips and due date reminders for Uber drivers.
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*ABN’s are issued immediately about 90% of the time. Occasionally the ATO decide to review an application manually, and will post your ABN in the mail instead. However you don’t need to wait, you can still start driving right away.
Don’t have your ABN and GST Registration sorted yet?
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Bonus: How Do I Calculate My Exact Projected Profit?
Well… it’s complicated!
If the graph above doesn’t quite match your circumstances and you’d like to work out a more exact figure for yourself, we’ve provided a sample calculation below to work out your own projected Uber profit.
Here’s the overall principle: Your tax bill is calculated as your Uber Net Profit (Gross Fares minus Uber Fees minus Car Expenses minus Other Expenses = Net Profit) multiplied by your marginal tax rate. If you’re not sure what your marginal tax rate is, see the ATO’s website here.
Now let’s take a look in detail:
|Cash Received From Uber:|
|GROSS FARES||$1,000||These are the fares your passengers pay, before Uber deduct their Fees.|
|Less Uber Fees||$1,000 x 25% = $250||Uber deducts their 25% fee.|
|NET INCOME||$1,000 – $250 = $750||You receive the net amount into your bank account|
|Fuel, Car and Other Expenses||$750 x 20% = $150||As a rough rule of thumb, your car expenses, rider amenities (water, mints etc), mobile phone usage and other expenses will be around 20% of your net income. Of course this will vary by the type of car you own, how much you drive and a number of other factors, but it’s a handy approximation for our purposes.|
GST is paid quarterly to the ATO by lodging a BAS. On the BAS, you’ll report how much income you earned and the amount of your expenses, and then calculate the net amount of GST you owe. Your BAS is usually due three weeks after the end of each quarter (30 Sept, 31 Dec, 31 Mar, 30 June), or you’ll get a few extra weeks if you lodge through a tax agent. More on this here.
As a rough rule of thumb, your GST bill will be around 8-10% of your net Uber Income (the amount you receive in your bank account from Uber after they deduct their fees). You should put aside 10% of what you earn from Uber into a savings account ready to pay your GST bill.
|GST on Income||$1,000 / 11 = $91||You pay GST on your Gross Income. To calculate the amount of GST, take your Gross Fares (before Uber deduct their fees) and divide by 11.|
|Less GST on Uber Fees||$25 / 11 = $2||As of 1 December 2017 Uber will charge you GST, and you can claim this GST back from the ATO.|
|Less GST on Other Expenses||$150 / 11 = $14||You can claim back any GST you have paid on any other expenses. This includes fuel and other car running costs (but only the percentage that you use your car for Uber).|
|Net GST Payable||$91 – $16 = $75||This is the amount you’ll pay to the ATO on your BAS at the end of the quarter.|
|Less Income Tax:|
Income tax is paid at the end of the financial year on your tax return. You’ll fill in an extra schedule within your tax return that declares your income and expenses, and then the ATO calculate the amount of tax payable based on your marginal tax rate.
The amount of tax payable depends on your marginal tax rate, which depends on how much you earn from Uber, and how much from other sources. If your taxable income is between $37k and $80k, your marginal tax rate will be 34.5% (incl Medicare Levy). If it’s below $37k, your tax rate may be 21% or lower. The ATO’s tax rate table can be found here.
You should be putting a portion of your Uber income into a savings account throughout the year to cover your end of year income tax bill (this is in addition to your GST savings above).
|Taxable Income||$1,000 – $91 = $909||Your Taxable Income is your Gross Income (Gross Fares) excluding GST. This means you don’t pay tax on the GST you gave to the ATO, only on the fares that were credited to you.|
|Tax Deductions||$250 + $150 – $156) = $384||You can claim Uber fees as a deduction, plus all other expenses (less the GST you’ve already claimed back from the ATO). Don’t forget that any claims that are partly private use (such as your car or mobile phone) will have to be apportioned.|
|Net Taxable Profit||$909 – $384 = $525||Income minus expenses equals taxable profit.|
|Income Tax Payable||$525 x MTR (assume 34.5%) = $181||As mentioned earlier, the actual tax rate will depend on your taxable income and general circumstances. As a very rough rule of thumb, based on the income and expenses above, your income tax bill would be 25% of your Net Uber Income (cash deposited into your bank after Uber deduct their fees) if your marginal tax rate is 34.5%. Or if your taxable income is lower, your income tax bill would be roughly 15% of your Net Uber Income.|
|Less Uber Fees||– $250|
|Less Expenses||– $150|
|Less GST||– $75|
|Less Income Tax||– $181|
|NET PROFIT||$344||This works out to be 34% of your Gross Fares (assuming your total taxable income is over $37k). This is slightly lower than the 37% ‘rule of thumb’ we suggested you put aside, which is perfect because it allows for a small safety margin.|
Notes About Claiming GST and Expenses:
- Logbooks: Your deductions for your car need to be adjusted for private use. For GST/BAS purposes, you can make a reasonable estimate of your car’s ‘Uber Use Percentage’ based on any records you have. However for income tax purposes, you must keep a formal logbook according to ATO requirements (12 weeks, all odometer readings recorded etc) in order to claim deductions for fuel, rego, insurance, depreciation and interest on your end of year tax. Otherwise you will be restricted to the cents per km method, and a maximum deduction for the year of $3,300.
- Timing of GST Claims: You can only claim GST on expenses you actually pay for during the quarter. For example, if you pay your car registration annually, you’ll claim the GST on the whole amount in the quarter that you pay your rego, and claim nothing in the other three quarters. You cannot claim GST on expenses you pay for or assets you purchased before the date you registered for GST with the ATO. If you plan on buying a car for Uber driving and you want to claim part of the GST back, make sure you register for GST before the date you buy your car.
- Depreciation and Interest Claims: There is no GST on the depreciation on your car, or on the interest on your car loan (if you have one), so these expenses are not relevant for your BAS’s. They only come into play on your end of year tax return.
The data in this blog post is based on averages of other Uber drivers, and may not necessarily match your circumstances. The marginal tax rates used in the calculations are based on two example scenarios that may not match your own marginal tax rates. For personalised calculations, please book a consultation on our website.
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.