Putting Aside Tax & GST

 

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.

 

Steering Wheel

 

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 Uber Fees (including split fare fees, booking fees and other amounts they deduct from your fares)
  • 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

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. Note that this method usually isn’t the best choice, you’ll usually get a better result by reasonably estimating your percentage as per the previous dot point:
    • 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 excluding GST
  • 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:

  1. Work out what your taxable income will be aside from your rideshare driving (e.g. employment income, contracting work, investment income).
  2. Refer to the ATO’s tax tables to see what your marginal tax rate is (below).
  3. 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.
    1. 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%
    2. 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%.
    3. If you haven’t kept any receipts and don’t drive too often, don’t reduce your percentage, stick to your marginal tax rate.
  4. 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.

 

 

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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. 

By | 2018-05-18T22:46:49+00:00 April 20th, 2015|Tax|34 Comments

About the Author:

Hi, I'm Jess. I'm a CPA Accountant and Registered Tax Agent, and I specialise in tax preparation and advice for Uber drivers. As a regular rider in Melbourne, I’ve chatted to many drivers who are facing their first ABN tax return, are confused about their tax obligations, or aren’t sure what to do at tax time. I'm on a mission to relieve the confusion and build a go-to service for Uber drivers across Australia.

34 Comments

  1. […] Putting Aside Tax & PAYG Instalments April 20th, 2015 […]

  2. […] Establish a system to put aside a portion of your Uber income to cover GST and Income Tax. We’ve provided some tips and strategies in our article on Paying Tax with Uber. […]

  3. Thai March 8, 2016 at 5:07 am - Reply

    Hi,
    Just a quick request for clarification:
    If the GST payable is 1/11 of gross fare (inc Uber fee)… What happens if, instead of 20%, Uber charges 90% commission on the fare? In that case, out of $100 I would have to pay the ATO $9.09 from my $10 share? (I realise that this is unrealistic but I’m trying to make a point that perhaps the GST should be 1/11 of my share only?)
    Your confirmation would be much appreciated.
    I have a feeling that as the ATO can’t make Uber pay the GST on their 20% commission, they’re trying to collect it anyway through us drivers… True?

    • Jess March 9, 2016 at 12:58 am - Reply

      Hi there,

      The ATO view this differently. In their eyes, the Gross Fares you earn are all your income, therefore all subject to GST. Then you can claim back the GST on all your expenses. There is GST on your fuel, so you can claim that back, but there is no GST on your Uber fees (since they’re a foreign company). Since you didn’t pay GST to them in the first place there’s nothing to claim back.
      In the scenario you described (Uber commission of 90%), the GST payable actually doesn’t change at all. You’ve still earned the same amount in Gross Fares, so the GST Payable is the same. You still paid no GST on the Uber fees, so there’s no GST credits to claim back.
      I can see why this is frustrating for Uber drivers, because one of your largest expenses has no GST credits to claim, making your GST bill seem larger. The best way to think of it is you didn’t pay any GST in the first place. On your fuel, you have paid GST to the ATO, so as a business owner you should get that back, but for expenses that don’t have GST on them, there’s nothing for you to claim back.
      I hope this clears it up a little!
      Jess

      • Justin January 31, 2017 at 5:35 am - Reply

        What is messed up about this, is that we are not receiving the gross fares. The 20%/25% Uber commission comes off first. We should only be paying GST on the net fares.

        • Jess January 31, 2017 at 9:19 pm - Reply

          Hi Justin,

          I understand where you’re coming from. The way the ATO see it is there are two separate transactions. First, you have your transaction with your rider, where they pay you the gross fare. Second, you pay a commission to Uber for putting you in touch with the rider and getting you that job. For the sake of convenience Uber net this off and just pay you the difference, but in the eyes of the ATO that’s irrelevant. There are still two separate transactions, and each one is taxed/claimed separately.

          The reason it seems unfair is because there is GST payable on the first, your gross fare received from your rider, because that transaction takes place in Australia. But there is no GST to claim back on the second transaction, the commission you pay to Uber, because they’re an overseas company. But remember since they aren’t Australian, they never charged you GST in the first place, that’s why there’s nothing to claim back, so you’re not actually out of pocket there. You can still claim those commissions as a tax deduction at the end of the year.

          So essentially the best way to think of it is that you receive your whole gross fares and pay tax/GST, then separately to that, you pay Uber their commission, and you claim that back on tax (but no GST to claim back because they didn’t charge you any in the first place).

          I hope that clears it up Justin. All the best!

          Jess

  4. Charlotte Haskett March 10, 2016 at 9:45 pm - Reply

    Hi Jess,

    Thanks for the very useful information. How much do you charge for a consultation ?

    Thanks

    Charlotte

    • Jess March 11, 2016 at 3:07 am - Reply

      Hi Charlotte,

      Our standard consultation fee is $99 per half hour. We also have specific rates for BAS Consultations at $165 and End of Year Tax Consultations at $220 which includes preparation and lodgment of returns. All our consultations are via phone or Skype, so we can look after you no matter where you are in Australia. You can read more about our pricing and book a consultation here: https://www.drivetax.com.au/pricing/
      I look forward to chatting with you Charlotte!
      Jess

  5. Amelia December 7, 2016 at 10:18 pm - Reply

    Hi Jess,

    I am loving these questions! I have only started off as an ubereats driver with the thought of moving into becoming a uber driver.
    As I am delivering food at the moment and not people would you suggest still getting GST registered?

    • Jess December 8, 2016 at 12:06 am - Reply

      Hi Amelia,

      Thanks for your feedback! UberEats driver’s don’t have to register for GST, as those rules only apply to drivers who carry passengers, not food! So, should you register voluntarily? Without knowing your personal circumstances, my general answer would be no, for two reasons. Firstly, this would mean handing over 8-10% of your income to the ATO (based on an average Uber driver, after taking expenses into account), and no-one wants to pay more tax than they have to. Secondly, lodging BAS’s is a pain, and unless you DIY it will cost you extra in accounting fees. Avoiding BAS’s means one less thing on your to do list each quarter, and one less deadline to worry about. Note that if you do choose to register voluntarily you must stay registered for 12 months. I hope this helps Amelia, good luck with your driving!

      • Billy January 11, 2017 at 8:56 am - Reply

        Hi Jess, I am very happy with the explanations.
        Currently I am working as Ubereats delivering food as well using biycle, not car.
        So it means I don’t have to register ABN, GST and BAS? This also includes that I don’t have give financial year end reports? Because rules only state to drivers who carry passengers.

        • Jess January 12, 2017 at 2:58 am - Reply

          Hi Billy,

          You’re partly correct! If you’re transporting food, not passengers, then the GST rules don’t apply, which means you don’t need to register for GST or lodge BAS’s. However, as for any small business, you must still have an ABN, keep records of your income and expenses, keep a logbook if using your car, and declare your income on your end of year tax return. I hope that clears it up for you! Keep an eye on our website and blog in the coming month for more information for food delivery drivers!

  6. Joseph June 1, 2017 at 2:10 am - Reply

    What about expenses incurred directly in collecting Gst for the govt. I.e. 25% commission payed/collected by uber on Gst component added to uber fare!!
    So on a $1.00 Gst collected (minus 25% commission $0.25) $0.75 is net Gst collected that is owed to govt. Isn’t this a fair consideration!!!!

    • Jess June 2, 2017 at 7:08 am - Reply

      Hi Joseph, Thanks for your comment. I know it’s frustrating, but the ATO don’t look at it that way. In the eyes of the ATO, the gross fare is your income, and the Uber Fee is a business expense, just like fuel or mints. You have to pay GST on all of the Gross income you earn, which means before Uber deduct their fees. Then you can claim back any GST you have paid on your business expenses. There is GST on fuel, so you can claim that back, but there is no GST on Uber fees, so there is no GST to claim (because you didn’t pay any in the first place). This is the way GST works for all small businesses. It seems confusing for Uber drivers because you only receive the 75% into your bank account but you are paying GST on the whole 100%. But in the eyes of the ATO they are two separate transactions, the gross fares are your income and the Uber fee is a business expense, and that’s the way the calculate GST.

  7. Peter July 23, 2017 at 1:15 pm - Reply

    Hey Jess thanks so much for this information its been so useful for me. I drive full time and its paying all the bills but the delay for me in playing catchup with my gst and first annual tax is daunting!
    If we look at the Uber “commission” as tax deductable at the end of the year, is that commission then 100% deducted from the annual income to reduce the entire taxable income….

    • Jess July 23, 2017 at 2:28 pm - Reply

      Hi Peter,
      The tax obligations are significant aren’t they? It’s frustrating that uber drivers have to get caught up in all this tax compliance when most small businesses don’t have to!
      The deductibility of your Uber fees against your other taxable income depends on your scenario. Your Uber Fees are a tax deduction against your Gross Uber Income. Once you’ve claimed your Uber Fees, car costs and other business expenses, you’ll end up with either a profit or a loss.
      – If you have a profit, this is taxed at your marginal tax rate.
      – If you have a loss, and your Gross Uber Income (gross fares and other income items before Uber deduct their fees) is less than $20k, then you can’t claim that loss against your other taxable income. Instead the loss is carried forward, and can be offer against any Uber profits you make in future years.
      – If you have a loss, and your Gross Uber Income is more than $20k, then you can claim that loss against your other taxable income.

      Jess.

  8. John Freeman August 23, 2017 at 4:18 am - Reply

    Hi Jess, Uber weekly statements are showing Tax on Fee: Tax withheld by Uber on its fee?

    However, in the monthly statements it does not show this.
    I can sort of understand why it is not showing on the monthly statement as Uber add it into the Drivers payout

    Should we be able to claim this GST fee back?

    Or do we just ignore this “Tax on Fee”

    • Jess August 23, 2017 at 12:47 pm - Reply

      HI John,

      The monthly statements give the clearest picture, so we recommend using those to prepare your BAS & tax returns. You should declare all of the income in the income part of your BAS (G1 and 1A), including split fare fees, tolls and booking fees. Then, in the expenses section (G11 and 1B) you can claim these amounts as an expense as well (plus Uber Fees of course). So the net result is still zero, because of course you shouldn’t pay tax when it’s just a reimbursement, but the ATO wants to see both sides of the equation.

      The ‘Tax on Fee’ amount isn’t really tax, it’s just Uber reimbursing you for the GST you’ll pay on the booking fee in the income part of your BAS. We can confirm that their method of calculating this is correct, and so by filling in your BAS the way I’ve mentioned here you will not end up out of pocket or paying any tax on reimbursed items.

      – Jess

  9. Scott August 28, 2017 at 10:55 pm - Reply

    Hi Jess, if I currently work part-time as a sole trader with my abn, will I pay more income tax as uber would be a second job? Thanks

    • Jess August 29, 2017 at 12:59 am - Reply

      Hi Scott,

      Yes and no. As far as the ATO is concerned your employment and Uber income get lumped in together as one total figure, which is then taxed at marginal rates. One is not taxed higher than the other, all your income is treated the same.

      However your employer is most likely claiming the tax-free threshold to themselves, meaning they are taking a lower rate of tax out of your pay to save for your end of year bill. Therefore you’ll need to put aside a higher amount of your Uber income as savings to compensate.

      – Jess

  10. BEN November 22, 2017 at 5:11 am - Reply

    Jess… there is a section on the ATO website which deals specifically with ‘Bonus or top-up paments’. My reading of this is that Uber’s surge pricing would come under this, and would therefore not accrue gst? I have tried to clarify this with the ATO, and they seemed to be in agreement? Can you comment at all on this?https://www.ato.gov.au/general/ride-sourcing-and-tax/fares/

    • Jess November 22, 2017 at 5:29 am - Reply

      Hi Ben,

      You’re right that bonus payments paid outside of Australia aren’t subject to GST, but the surge pricing doesn’t fall into this category. The surge pricing is paid to you by your riders in order to incentivise you to pick them up in busy times. The customer is in Australia and the service/activity takes place in Australia, so it is subject to GST. Remember that as per their terms and conditions, Uber is just a software platform that you use to find, charge and receive payment from riders, and all of that occurs in Australia.

      The only type of Uber payment that falls in to the category of offshore ‘bonuses’ is when you receive a referral fee or incentive payment, such as signing up another Uber driver, from an overseas company*. Essentially, when you do something for a rider (i.e. anything connected to a ride) it’s GST, and when you do something for Uber directly (i.e. their marketing and promotion) it will be non GST. An easy way to tell is by looking at your monthly summaries from Uber. Anything on the left hand side is subject to GST and anything on the right hand side is GST free.

      *Note that this may change from 1 Dec 2017, as Uber are changing much of their service provision to an Australian based company. We don’t have all the details yet, so keep an eye on correspondence from Uber.

      Jess

  11. Bradley November 29, 2017 at 12:24 am - Reply

    Hi Jess,

    How do I claim my GST payments back if I earn under $75k?

    • Jess November 29, 2017 at 3:04 am - Reply

      HI Bradley,

      The $75k limit is only used in deciding if a business must register for GST, once they go ahead and register the $75k has no further bearing, they must pay GST regardless of whether they are over or under the $75k limit.

      HOWEVER the $75k does not apply to rideshare drivers. Rideshare drivers must register for GST and pay GST regardless of their turnover. The $75k limit is completely irrelevant.

      – Jess

  12. Muammad December 18, 2017 at 3:38 pm - Reply

    Hi Jess..
    thanks for your wonderful support.
    Quick Question.. I am working on TFN as well as Driving uber on ABN. I have not registered for GST yet but planning to apply soon. Will my uber income affect my TFN income ? I mean if I earn 15K AUD from UBER and earn less than 18K AUD from my TFN job, will I be able to claim all the tax back from TFN ?

    Secondly, working on both ABN n TFN increases Tax deductible ?

    Sorry, I am noob at this. Did my TFN tax returns my self but that was simple and easy. With Uber GTS, everything complicated now

    • Jess December 19, 2017 at 7:28 am - Reply

      Hi Muhammad,
      Your Uber income and Employment/TFN income are added together to work out your end of year tax bill. So you will have tax to pay overall. If you only earn a little from your TFN job then they may not be taking tax out, so you may need to save extra from your Uber income to cover your tax bill. Your tax deductions are for money you spend while working/earning your income. So your deductions aren’t higher just because you earned more, they will be higher if you had more expenses. If you’d like personalised advice on this please feel free to book a consultation. – Jess

  13. Tamra January 6, 2018 at 9:12 am - Reply

    This is a great post and the questions too. I’m considering signing up in a few months, but given your comment about Uber becoming Australian based am wondering if it’s better to wait.

    Look forward to a update explaining the difference.

    • Jess January 8, 2018 at 8:20 pm - Reply

      Hi Tamra, The change has already completed effective from the 1st of December 2017. There’s no need to let this delay you from joining Uber. The only difference is that they will now charge GST on the 25% service fee they charge you. However you can claim the GST back on your BAS, which means there’s no out of pocket cost or difference to you. – Jess

  14. Glenn Stoneham April 28, 2018 at 4:21 am - Reply

    Hi Jess I’m an uber driver but I work for a gentleman under blackcat chauffeurs and I understand uber get 25% and we share the remaining 75% and he pays for petrol and maintenance. The question I’m asking is when I purchase items such as laptop, clothing,and other purchases do I subtract the total amount of my purchase and then pay the balance to the ATO I’m just a bit confused about it because I’m just starting out as a subcontractor and loving you website and information it has on

    Kind regards Glenn Stoneham

    • Jess April 28, 2018 at 4:44 pm - Reply

      Hi Glenn, when you fill in your BAS’s and tax return you need to separately declare your income and expenses. In other words, you enter your income in the income section, then in the expenses section you can enter your car expenses, computer expenses and any other related expenses. The BAS/tax return will then ask you to subtract your expenses from your income to give your net taxable income. It’s still the same outcome, but the ATO want to see the breakdown. Note that clothing is not deductible unless is has a logo of the company you work for. Even if you’re required to wear a black suit or other distinctive clothing that you bought especially they are not deductible, only logo items can be claimed. – Jess

  15. Shaun May 22, 2018 at 12:47 pm - Reply

    Hello Jess, Nice helpful article. If I do Uber as my only job, and earn only $18000 profit after uber 25% fee. I would pay no tax?

    My goal was to earn $25000 net profit after the uber fee. (I’m not calculating any other costs like fuel, service etc) but that would leave me with around $20k after tax.

    So if I only do $18000, is that more beneficial than doing $25000?

    Please answer, I’ll do my tax with you 🙂

    Shaun

    • Jess May 22, 2018 at 1:04 pm - Reply

      Hi Shaun, you’re correct that if you earn $18,000 after expenses and have no other taxable income then you won’t pay any tax. If you earn more profit than that then you will pay a little tax. But it is always better to earn extra money and pay a little tax, than to have no money at all. To put it another way, once you cross into the 21% tax bracket, for every dollar you earn, 21 cents goes to the ATO, but 79 cents still goes in your pocket. You still have more money than if you didn’t work at all. – Jess

  16. Elias June 13, 2018 at 7:57 am - Reply

    Hi can you please clarify how much can you claim back from the uber fees or you can call it uber commission which is now 27.5%, for example gross was 41000 and my uber fees was around 9000.
    What amount would be deducted from my tax?

    • Jess June 14, 2018 at 4:24 am - Reply

      Hi Elias, our blog post on GST on Uber Fares and Fees will answer this question. To show the calculation, $41,000 / 11 = $3,727 GST so $41,000 – $3,727 = $37,273 taxable income. Then for the expenses, $9,000 / 11 = $818 GST, so $9,000 – $818 = $8,182 tax deduction. So the net taxable income would be $37,273 – $8,182 = $29,091. A quicker way to do this calculation is ($41,000 – $9,000) / 1.1 = $29,091. – Jess

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