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Saving For Your Uber Tax Bill
Tax is an unavoidable part of being in business, and putting aside savings for your Uber tax bill can be a slippery slope. It can be challenging to figure out how much tax to put aside from your Uber income, and too often people find themselves in trouble with the ATO after tax bills accumulate. A set routine for putting aside tax 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. Once you fall behind you’ll find yourself continually playing catch-up.
This article will help you work out how much tax to put aside from your Uber income, and the best methods of saving for your tax bill, so that you can head into tax time feeling confident.
Saving For Your Uber GST Bill
The Rule of Thumb Method
The easiest way to work out how much you should put aside for your Uber GST bill is to work on a ‘rule of thumb’ percentage, and put this aside whenever you get paid. From processing thousands of Uber BAS’s, we’ve found that on average your Uber GST bill will be roughly 5%-7% of your Net Uber income (i.e. the amount you receive in your 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.
The Manual Calculation Method
If you’re not a fan of the percentage method and would prefer to work out exactly how much you need to put aside, 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
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
- If you haven’t kept a logbook, you can make a reasonable estimate of your ridehsare percentage instead. You just need to be able to show the ATO how you made your estimate. For example make a mini-logbook for a few weeks. Note that using an estimate is only allowed for your BAS’s, for your end of year tax return you still need a formal 12 week logbook.
Note that there is no GST on depreciation or loan interest, so these are not taken into account on your quarterly BAS’s.
If you’re looking for an easier option, the DriveTax Bookkeeping Spreadsheet can do all your GST tax calculations for you, and make it simple to lodge your own BAS’s and tax return. You can download a free copy as part of our free Uber Tax Info Pack.
When and How do I Pay the GST?
You need to pay GST to the ATO on a quarterly basis. This is done via a Business Activity Statement (BAS). On your BAS you’ll declare your income and expenses and the GST on each of those amounts as we calculated above, and then you’ll pay the net GST amount to the ATO. For more detail on how this works, visit our Ultimate Guide to BAS for Rideshare Drivers.
Saving For Your Uber Tax Bill
How Is My Taxable Income From Uber 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
Our Ultimate Guide to Uber Taxes explains more about how this calculation works, and 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 My Uber Tax Bill?
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.
|2019 & 2020 Financial Years|
|Taxable Income||Marginal Tax Rate *|
|$0 – $18,200||0%|
|$18,201 – $37,000||21%|
|$37,001 – $90,000||34.5%|
|$90,000 – $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 each quarter or year when your Uber tax bill arrives, the funds will already be there, ready to go.
Setting Up a Savings Account for Uber Taxes
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.
Once you’ve worked out what percentage of savings of your Uber earnings is right for you, all you need to do is log into your internet banking each time you get paid from Uber, and transfer your savings amount from your regular bank account to your Uber savings account. Then, when it’s time to pay your tax bill, just transfer the amount you need back into your regular bank account in order to make the payment. Easy!
Learn More About Saving For Your Uber Tax Bill
This article covers the bare essentials of saving for your Uber tax bill. If you’d like to learn more, you may be interested in our Understanding Uber Taxes online course. Through a series of 30+ video lessons and tutorials, you’ll learn exactly how to calculate your Uber tax bill, how to monitor your tax bill as you go and always save the correct amount, the FULL version of the DriveTax Bookkeeping Spreadsheet which will take care of all the tax calculations for you, video tutorials on how to lodge your own BAS’s and tax return and much more. Visit our course information page to find out more.
Thoughts? Questions? Leave a comment below and I’ll respond shortly! – Jess
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.
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 13 years, and has been specialising in tax for Australian Uber Drivers for the last 5 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.